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Pareto Principle Makes Business More Efficient

The Pareto principle was discovered by an Italian economist, Vilferdo Pareto in 1906. The Pareto principle itself is a theory that states 80% of the consequences or results that arise, actually derived from 20% of the cause. He discovered this idea when he discovered that fact 20% of Italy's population owns 80% of the land in the country. Not only that, he also found other facts, that 80% of healthy peas in plantations, come from 20% of peas.

When it comes to business, the general picture is like this: You have a culinary business, 80% of your sales come from 20% of your customers. If concluded, you better focus on selling to your customers who are 20%, so that the profit you get will be more leverage.

From this 80/20 rule, you can associate the Pareto principle to various aspects of life, such as:
  • 20 percent of customers generate 80 percent of operating revenues
  • 80 percent of customer complaints come from 20 percent of your business products or services.
  • 20 percent of the time we spend each day correlates to 80 percent of our productivity results

The Pareto principle can also be done if you have an online business. For example you sell women's accessories.

According to the Pareto principle, 80% of the profit you get comes from 20% of the products you sell. While the remaining 20% profit comes from 80% of the products sold.

After you share, you have to find out 20% of the best-selling products. If you already know what products contribute to the biggest sales, you can focus on these products.

Both in terms of innovation or product availability. This is so that these products will still contribute 80% of the total income you get.

After that, with the benefits that you will get after using the Pareto principle, you can also take your business to the next step. Like, innovation or business expansion.

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