If your business isn’t growing, you need to get a handle on the way you’re running it. Many insurance agents tend to spend a great deal of time performing unnecessary tasks that contribute little to the growth of their business. The 80/20 rule, otherwise known as the Pareto Principle, teaches that only 20% of your actions should lead to 80% of your results. Get a handle on your business by putting the 80/20 rule into effect and identifying high-payoff tasks.
The 80/20 Rule (Pareto Principle) Explained
Developed in the early 19th century by Vilfredo Pareto, an Italian economist, the Pareto Principle was used to explain why only 20% of the population was responsible for 80% of the country’s wealth. It was later in the mid-1900s that the theory of the Pareto Principle was modified by Dr. Joseph Duran. When applied to cause and effect, he theorized that 20% of actions (cause) would produce 80% of the end results (effect). Because Duran’s theory expanded on Pareto’s original version of the 80/20 rule, Dr. Duran’s theory soon became known solely as the Pareto Principle.
What the Pareto Principle Means for Your Business
The 80/20 rule can be applied to pretty much any situation, but, it is especially beneficial when applied to business and finance (especially if you’re currently a one person show). The 80/20 rule isn’t just another ordinary time/business management method; when used effectively, it holds the power to drastically increase your income and free up valuable time, allowing your business to grow.
Perhaps it means that it is time for you to hire an assistant or virtual assistant to whom you can delegate low-priority tasks. Using the 80/20 rule to identify the high-payoff tasks within your business and automate the low-priority or non-income driving tasks will allow you the freedom you need to grow revenue.
Identify the High-Payoff Tasks
For the purpose of putting Duran’s theory into context, let’s say that 20% of your clients make up 80% of your product or services sales revenue.
To grow your business and success, it’s vital that you closely analyze your business model and examine which 20% of your actions are accountable for 80% of your results.
Put the 80/20 rule into action by focusing in on specific tasks that will result in driving sales and revenue. Instead of relentlessly prospecting for new clients, focus more of your attention on up-selling to your existing clients. It often takes up to 10 times the effort to get new clients to purchase from you as it does to up-sell to an existing client.
Review your product and service sales for the past two years. If you have products or programs consistently not selling, close them out at a reduced cost if possible or completely discontinue them. Identify the products or services (usually 20% of your stock) that consistently sell and then focus your energy on driving more sales to more clients.
If your business is struggling, you can use the 80/20 rule to identify high-payoff tasks. If you are currently working 10 hours or more each day, put the 80/20 rule into action to finally take back control of your life. By doing so, you’ll be able to move past the fruitless tasks that make up 80% of your business and take up most of your time.
Here are some resources for finding virtual assistants to help you in applying the 80/20 rule to your business:
Elance.com or Guru.com – Freelance community bringing buyers and providers together
AssistU.com – Popular virtual assistant website with entrepreneurs
Ivaa.org – The International Virtual Assistant Association: find certified VA’s through their member directory.