Using The 80/20 Rule To Increase Business Income

One of the best ways to boost your business income is to figure out what’s working and do more of that. Sounds simple enough, doesn’t it? The problem is often finding out exactly what’s working and what isn’t.

You’ve no doubt heard of the 80/20 rule: the principle that 80% of your profits often come from 20% of your business activities. But it’s not always easy to see how that works. The best way to do it is to track everything. Then look at your data and make a plan for what you should and shouldn’t be doing going forward.

Using The 80/20 Rule To Increase Business Income

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Your first step will be to decide what to track, and how to do it. This will be a little different for everyone depending on your business model and what you do on a daily, weekly, and monthly basis. A good place to start is to look at income and expenses, products, or different income streams, and of course where you spend most of your time.

Let’s say you start to track where your income is coming from. If possible, go back and look at the last six to twelve months of financial data. Did you make money selling your own products? Did you get large affiliate commission checks? Did you sell advertising on your websites?

Next you want to look at expenses related to that income. You’ll have some fixed expenses like hosting your website for example, that you should ignore for the purpose of this exercise. Instead, look at costs directly related to each source of income. For example, in order to launch your products, you may hire a graphic designer, a virtual assistant, and pay for your shopping cart software. You may also be paying commissions to affiliates promoting your products. Subtract those costs from the income you’ve made to get a good feel for your actual profits. Other sources of income will have little to no expenses. Once you’ve adjusted your income figures to reflect the profit you’ve made, you can start to compare.

Last but not least, look at the amount of time you’re spending to generate the income. It may take you a full month of working twelve hour days to launch a new big course. On the other hand, you may be able to put together a short eBook or fresh membership content in a day or two by leveraging content you’ve already written or buying pre-written content. Look at the time it takes for each type of product and compare this to the amount of money you expect to make from the launch and going forward. This will help you decide what’s the most profitable way to spend your time.

With all the information at your fingertips, it will be easy to decide what you should be doing more of, what you should be doing less off, and what you should stop doing. Focus most of your time and energy on the most profitable products and income sources. Work on it for a good six months and look at how much your profits went up. Sometimes this one strategy alone can allow you to double, or even triple, your income.


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2 thoughts on “Using The 80/20 Rule To Increase Business Income

  1. I spent my early career working with a large US corporate that trained us religiously in the 80-20 rule. The problem is to truly adapt, utilise and deploy it you have to:

    1 – Really, and I mean REALLY understand it.
    2 – Live by it, even when it seems like a silly thing to do (maybe no ALL silly)

    Some great marginal gains stuff here, but to unlock the full potential of the 80-20 rule, you have to get quite a bit deeper.
    James Adams recently posted…Effective Communication – The Ultimate GuideMy Profile

  2. Hi James,

    I’m the first to admit that there’s a lot more to it than I was ever going to cover in my 600 word blog post, but hopefully I’ll have given a few readers a few ideas. I’ll also admit that it’s much harder than it seems to live by the 80/20 rule (and yes it can seem like a silly thing to do, sometimes). I’m still working on optimising my online business, and my life. I hope there’s some benefit, to some people, that I’m sharing my thoughts on it.
    Karen recently posted…How To Move More Than One Email List From Mailchimp to MailerliteMy Profile

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