Success: How the Pareto Principle Increased my Income by 207% in 18 Months

In a previous post, “Success: How I Broke Through My Glass Ceiling“, I mentioned that I increased my income by 207% in just over 18 months. One thing I didn’t mention was how I did that.

Here’s how: I applied ‘the Pareto Principle’ to my business.

What is the Pareto Principle you may ask?

I discovered the Pareto Principle in Richard Koch’s international best selling book, “The 80/20 Principle“. It states that a minority of causes, inputs, or effort usually lead to the majority of results, outputs or rewards.

If you take it literally, this means 80% of sales or profits come from 20% of products or customers. But don’t take the 80/20 figure literally. The percentages don’t even have to add up to 100%. You could have 95% of profits come from 15% of customers or 65% of sales come from 5% of products.

The Pareto Principle was discovered in 1897 by Italian economist Vilfredo Pareto. His discovery has been called many names, including the Pareto Principle, the Pareto Law, Pareto’s Law, the 80/20 rule, the Principle of Least Effort, and the Principle of Imbalance.

So what did Vilfredo Pareto discover?

He happened to be looking at patterns of wealth and income in 19th century England. He found that most income and wealth went to a minority of the people in his sample. Pareto’s other finding, one that really excited him, was that this pattern of imbalance was repeated consistently whenever he looked at data referring to different time periods or countries.

I applied the Pareto Principle to my own business and discovered that 70.7% of sales came from 17% of products. As a result of this new found knowledge, I refocused the majority of my promotional efforts and budget on those top selling products.

The results were dramatic: within 4 months sales from the top selling products increased by 91.7%, and overall sales increased by 71.6%.

I have followed the Pareto Principle ever since. I am so thankful I picked up a copy of Richard Koch’s excellent book, “The 80/20 Principle” at Amazon.com. I rate it amongst the top 5 most influential books of my life.

You don’t need to read Richard’s book to understand the Pareto Principle and apply it to your business. But if you do read it, you will have a better understanding of how you can apply it to different areas of your business, your career, and even your life.

This post is not meant to be a review. But to give you an idea of how highly I rate this book, I give it 2 thumbs up and a score of 9/10.

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