80-20 Rule

October 4th, 2009 by Alex Leave a reply »

I’ve been thinking a lot about the Pareto Principle as it applies to my business, and it’s certainly been one of the harder things to learn in my first high tech venture. The Pareto Principle says that for any activity that you need to complete, you can get 80% done in 20% of the time. It’s the last 20% of any activity that takes 80% of your effort, so in effect, if you were just to get to the “good enough” mark, then you are saving a phenomenal amount of time.

In any company like this, there are only two shortages- time and money, and it seems like every day is a race against the clock. At first, our team was striving for perfection, and we wouldn’t release a product until it was perfect. Learning where that “good enough” mark is was a struggle, but I think we are slowly getting better.

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  • http://www.the9to5alternative.com/ Alan

    Nice reflection.

    Remember, though, that the 80/20 principle can be applied to more than just “time.” What about revenue, cost, resources, customer relationships, etc.

  • http://www.aneris.us Alex

    The interesting thing is, in all my experiences it only applies to time. I’ve tried this calculation personally based on the two different businesses I’ve owned.

    In my first business, 80% of the revenues came from 65% of the customers (costs were more or less similar). I haven’t broken out my current job’s revenues precisely, but because we are on a SAAS model and everyone who pays, pays about the same amount, I can’t imagine that its anywhere close to 80/20.

    Have you had experiences with 80/20?

  • kingzing1

    The interesting thing is, in all my experiences it only applies to time. I've tried this calculation personally based on the two different businesses I've owned.

    In my first business, 80% of the revenues came from 65% of the customers (costs were more or less similar). I haven't broken out my current job's revenues precisely, but because we are on a SAAS model and everyone who pays, pays about the same amount, I can't imagine that its anywhere close to 80/20.

    Have you had experiences with 80/20?

  • http://www.aneris.us Alex

    The interesting thing is, in all my experiences it only applies to time. I've tried this calculation personally based on the two different businesses I've owned.

    In my first business, 80% of the revenues came from 65% of the customers (costs were more or less similar). I haven't broken out my current job's revenues precisely, but because we are on a SAAS model and everyone who pays, pays about the same amount, I can't imagine that its anywhere close to 80/20.

    Have you had experiences with 80/20?

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