The previous ‘dirt-world’ retail business I managed had a large turnover, a very high profit, and less than 100 lines. Early in 2001, I was contracted to manage another business. This one carries over 800 different lines, yet has a turnover of only about a sixth of the other business, and a lower profit margin. They both have a comparable amount of traffic and credibility in the market, so how can it be that the results are so different?The explanation starts with Vilfredo Pareto, Pareto Lawrence
an Italian economist and political sociologist who lived from 1848 to 1923. He devised the law of the ‘trivial many and the critical few’, better known as Pareto’s Law, or the 80:20 rule. This rule says that, in many business activities, 80% of the potential value can be achieved from just 20% of the effort, and that one can spend the remaining 80% of effort for relatively little return.Old Vilfredo might have lived a century ago, but he was spot on. I’ve been in business a long time, and I can confirm the almost universal truth of the 80:20 rule, in many forms.- When Sales Manager of a Realty office, I had 19 sales staff working to me. About 85% of the business was written by the four top staff.