12/12/2023 0 Comments 80 20 principle examples![]() ![]() The 80/20 rule really applies to everything, such as: That always leads to the lowest cost.Īpplication in project & resource planning Therefore, make sure you can serve more customers without additional complexity. Additional services and customisation usually lead to additional costs that are not always visible. If you sell services that require additional services or custom work, then that additional revenue might seem to be more of the same, but that’s not the case. Sure, you have annoying customers who take disproportionate amount of time, but often the reason for this lies in the complexity of your services, because complexity takes time and time is money. ![]() You need to investigate why these customers contribute so little. Should we then say those other 80% of customers are not good to have? No, that’s too short sighted. It therefore seems that you can get a lot more results with a lot of fewer customers. By recruiting more of these types of customers or increasing your existing sales with these customers, you will double the turnover in the shortest period of time, with relatively little effort compared to the other customers. This shows that if you continue to focus on the imbalance, you quickly realise that a handful of customers make up half of the revenue. If we pass it again, you will see that less than 1% of all customers provide 50% of the revenue.įigure 2: Continue to apply the 80/20 rule So in the example of the most valuable customers: 4% (20% of 20%) of the customers account for 64% (80% of 80%) of sales. The beauty of the 80/20 rule is that you can continue to apply it, because within the 20% there is also a disparity. The figure below shows the imbalance within the 80/20 rule.įigure 1: The imbalance that the 80/20 rule exposes By determining which components causes this disparity, we can focus more on those components that produce the most and the components that contribute the least. The 80/20 rule states that there is a disparity between effort and results. Before we analyse some concrete examples, we must first consider some principles of the 80/20 rule. We can then take that into account with our planning. The idea is that we can analyse which hours provide for a large contribution and which lead to less contribution or are even wasteful. In this blog post we will deal with service providers who work project based and where ‘hours’ is the primary asset used. ![]() In this blog post we’ll look at how to use the principle within the 80/20 in regards to project & resource planning. Thus, by giving more attention to a small group of customers this leads to disproportionate revenue. Everyone knows about the example where 80% of all sales are a result of 20% of the customer base. The 80/20 rule, also known as the “Pareto principle”, asserts that 80% of all outcomes are a result of 20% of the effort. Achieve as many results as possible, in as few hours as possible. ![]()
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