Applying the Pareto Principle: The 80:20 Rule

In the late 1800s, an Italian economist named Vilfredo Pareto observed that, in Italy, a small group of people held nearly all the power, influence, and money, which they used to create a significant advantage over the rest of the population. He theorized that, in most countries, about 80% of the wealth and power was controlled by about 20% of the people. He called this a “predictable imbalance,” which eventually became known as the 80:20 rule.

Over the 1900s, researchers realized that the theory of a “vital few and trivial many” – 20% of the participants accounting for 80% of the results – applies across many fields of expertise. Most certainly, it is true when it comes to time investment, and here’s what that means to you:

• 80% of your results will be generated by 20% of your efforts. Conversely, 20% of your results will be generated by 80% of your efforts. In other words, one-fifth of your time-consuming activities will deliver four-fifths of your gross sales or gross commissions.

• You can increase the productivity that results from your time investment by assessing which activities achieve the highest-quality results. Too many Agents allow their time to be consumed by activities that generate a mere 20% of their revenue. The moment they shift their time investment into higher-retu
activities, they see dramatic income results.

The 80:20 rule holds true across a spectrum of life activities. Whether you’re investing in your career, relationships, health, wealth, or personal development, 20% of your efforts will deliver 80% of the results you seek. The secret is to learn which activities deliver the highest-quality returns and invest your time accordingly.

My son, Wesley, loves to play games, read books, and cook in the kitchen. I’ve learned that an hour spent baking cookies with him gives him real joy and contributes greatly to our relationship. It’s a minor time investment, clearly fitting into the 20% category, yet the results are significant in proportion.

Do you make time for the few activities that return the most significant results? Or are you, like most people in the world, giving your time to the time-gobbling 80% of activities that deliver a meager return?

Top performers in nearly any field quickly learn which actions account for the greatest majority of results, and they weight their time toward those activities, performing them with great regularity and intensity.

Following is the list of the half-dozen important activities that I share with all of my real estate coaching clients:

1. Prospectingn2. Lead follow-up
3. Listing presentations
4. Buyer interview presentations
5. Showing property to qualified buyers
6. Writing and negotiating contracts

If you dedicate yourself to the above six activities, you’ll see high returns on your time investment. I’ve studied the time allocation of Agents for more than 15 years. I know for certain that, on average, real estate Agents spend fewer than two hours a day engaged in the activities on the above list. Instead, they work long hours, often putting in more than ten hours a day, spending 80% or more of their time on activities that generate less than 20% of their revenue. Flip the principle to your advantage. Begin spending more and more of your time on the activities that are proven to deliver results and refuse to be crushed by the weight and waste of those that don’t.