subject: The 80-20 Principle - Are You Applying It To Your Found Money Business (and Your Life)? [print this page] Have you heard of the 80/20 principle? It's a brilliantly simple concept popularized by Italian economist Vilfredo Pareto in 1906: a small fraction (one-fifth) of your effort will produce a large portion (four-fifths) of your results. Taken literally, this means that 20% of the time you spend working will produce 80% of your revenue, client base, or products. Or we could say 80% of consequences come from 20% of causes, or 80% of outputs come from 20% of inputs.
Think about it for a moment. If you have a job, does this ring true for you? Does 20% of your time get spent doing 80% of what's important (with the remaining 80% spent doing tasks that add much less value)? Expand your thinking a little. Would you say 20% of the employees in your company, or 20% of your coworkers, produce about 80% of the value? You'll find this simple little division runs rampant all around you.
In your home: 20% of your furniture gets 80% of the wear. 20% of your clothing gets worn 80% of the time. 20% (or less!) of the tv channels you have available get watched 80% of the time. In the world at large: 20% of criminals commit 80% of the crimes. 20% of drivers cause 80% of the accidents. 20% of people who marry comprise 80% of the divorce statistics. And when it comes to wealth, we know a tiny percentage of people control a huge percentage of the wealth.
Why is this important to you (as a found money pro, or in any other line of work)? One word: efficiency. If you want to become wealthy, you've got to be efficient. So the first step you need to take is identifying which activites fall into the 80% that only produces 20%, and eliminate or minimize (or delegate) them as much as possible. Your objective should be to have as close as possible to 100% of your time filled with "20% activities."
In the found money business, this could mean eliminating work on all small amounts, and focusing only on big amounts. Then again, it could be the flipside. Maybe you're spending a lot of time chasing big claims, when 80% of the time you're getting paid on the small claims. It's really of matter of what your experience is.
You'll find the 80/20 Principle (also known as the Pareto principle) everywhere. Trying to lose weight? In most cases, 80% of your weight loss is going to come from curbing your diet, not time you spend on cardio machines. In your growing your business, you'll find 20% of the avenues you're exploiting are bringing in 80% of new clients.
This is not to say there aren't some important/essential small tasks. The idea is not to eliminate every task that doesn't produce a huge result - only to keep your mind aligned with efficiency, and to help keep you focused on what is most important. Knowing this, and applying it, will help you effortlessly create the most valuable commodity: time.
This concept both excites control freaks like me, and ruffles our feathers. It's difficult to let go of those "80% tasks", that is, those that only bring in 20% of the results. We like to exhaust all avenues and the job just doesn't feel complete until we do. However, that mindset is a stumbling block: if you can learn to focus on the tasks that bring forth the most results, you'll see a turnaround in your productivity and efficiency sooner rather than later.
