How you can use the 80/20 principle to quickly improve your practice

by | Sep 3, 2014 | Blog

The 80/20 principle, also known as the Pareto principle can be essential to optimizing your business, getting rid of time-wasting, money-wasting tasks, expenses, and creating space for profitable actions.

The principle states that 80% of the results come from 20% of the causes. This isn’t the case with just business, but life, and in nature around us. Now it’s a rough estimate, sometimes it’s 70/30 or even 90/10 but the idea is the crucial element. If you’d like to know more about how to apply this beyond just your practice, I highly recommend reading Tim Ferris‘ book “The 4-hour Work Week“. It’s all about optimizing your life and business to get the most time, profit, and happiness from the least amount of input.

But let’s dive right in. You’re a naturopath, massage therapist, acupuncturist or other, and you need to know how to use this principle to optimize your business and essentially make more money for the effort you put in.

80/20 principle, causes and results, business, marketing, pareto principle, pareto law

Starting with the big issue: Customers

Focus on the 20% of customers that give you 80% of your profits. In your case these are often going to be your repeat customers, or the customers that buy multiple services or products from you. This is the single most impactful thing you can do right now for your business.

Let’s take some banks for example. You think when you walk into the bank and swipe your card they don’t know exactly who you are, how often you use their services, and how much profit you generate for them? Yup, absolutely. Some banks, and many other companies use some sort of customer rating system. You’re either an A, B, C,  or D customer. The A customers, maybe they get 4 or 5 during the day, and they equate to 60% of the overall revenue, and they get 500 D customers that provide maybe 3% of their revenue.

Their whole goal in this situation is to spend as little time with the D customers as possible; in and out. However, when it comes to A customers, the attention is ALL ON THEM. Time is no factor, nor are resources, and it needs to be an amazing experience. Because a loss in just a few of those customers means the business loses a huge portion of its revenue.

You need to find out the 20% of customers that provide you with 80% of your profits. These are your IDEAL customers. You want to adore these, glorify them, satisfy them, and find more of them. That’s not to say you ignore the other 80%, but you simply do not tailor your business to them. Your marketing messages, where you advertise, how you price your service will be based around these 20%.

Just stop for a second and think, what do these customers look like in your business? Write it down in your notepad right now or anytime if you think of commonalities amongst these subset.

Maybe you’re a massage therapist and most of your long-term clients are business or office professionals who are having issues with tension due to sitting at work all day long. These are on-going clients that provide revenue time and time again. They should be treated above and beyond any other client you get. It might even be beneficial to completely focus part of your business’ niche around these clients if they are that profitable for you.

It’s about intensional analysis. Find out WHO these 20% are, and then you can decide strategy based on what they do, their preferences, where they hang out, and how to satisfy them more. Marketing is all about finding needs or problems and satisfying them.


Outsource your stress

This is a very cool application to the 80/20 for small business owners.

Simply figure out what business aspects create the most stress, headaches, and time consumption, and get someone else to do it. You might have to pay, but it can be more than worth it.

If you’re not methodical, yes this does seem like a costly idea, but keep reading.

Picture this, you just spend 8 hours at work, you’re tired, sitting in the car for your 45 minute commute because it was raining and the roads are backed up today. The pile of paperwork that is on your desk at home is sitting in the back of your mind like a pile of dirty socks your spouse told you to throw in the laundry 2 weeks ago. It nags at you. You dread that next hour after getting home that you need to fill out your expenses spreadsheet. Even so much you put it off for another hour after getting home, so now the feeling will be with you for 2 hours!

For simply the reason of getting rid of the hair pulling agony of some of your most hated tasks, paying someone to do it is already worth it. If that’s not enticing enough, just look at the dollars.

The value of your time. If you make $60 an hour, and you’re spending an hour after work doing paperwork, you can pay someone less than half of that to do it for you. They won’t mind because they’ve decided it’s what they do, and they’ll be faster at it because it’s their focus. You can relax after work, not stress about that mundane chore, or you could even work for an extra hour in that day and make more than you would doing that data entry.

This can happen anywhere in your business too. The thing you hate could be responding to email, writing content, create a flyer, accounting, marketing… anything. Eliminate your stress causers at the source.

If you’d like to find out about hiring a Virtual Assistant, Chris Ducker is the man. He started Virtual Staff Finder and has consulted countless individuals on outsourcing tasks over the internet.


80/20 for Customer Questions

Want to save time and effort while at the same time creating a better customer experience?

80% of the questions you receive will be on the same 20% of topics. Consider tracking these questions/concerns and compiling a list of the most common.

Maybe you’re getting asked something about extended benefits coverage, or a specific symptom question. Take these popular questions, and depending on the scope of information needed to answer it and whether it has to do with your personal business use one of these options:

  • Create a FAQs page on your website (that is a “Frequently Asked Questions”) if they’re simple or specific to  your business.
  • Create a pamphlet to hand out on the topic if you often get the questions in person
  • Compile a list of articles/resources on a topic and post them on your website to reference to customers
  • Create templates to respond to repetitive questions through email(make them sound as genuine as possible, and customize each a bit before sending if applicable).

We need you to have as much time and energy as you can to run your business as well as work in your business, so let’s try to eliminate some of the time consumers that come from your customers and clients.

Pareto’s Law isn’t designed to be a mathematical equation, but rather a guideline to how cause and effect relationships work in nature and business.

“The idea is to be intentionally analyzing your business to make it as efficient and effective as possible.” Tweet this

Feel free to share some of your stresses and time-consumers in the comments section below and how you plan to combat them

Joel M Harrison

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