I discuss the “80/20 Energy Rule” frequently with my coaching and consulting clients, so I thought it was about time to write a proper introduction to the concept for the PetBusiness101 readers. I believe this topic is fundamental to every petrepreneur – to every human being – so if you have never heard of Pareto’s 80/20 Principle, please read on and absorb everything I’m about to tell you, it could potentially change your life, like it has mine!

The “80/20” part of the “Energy Rule” sounds like a statistic and in reality it is, but to use the concepts effectively in your life all you need is a basic understanding of the principles – NOT THE MATH. Yes it has foundations in economics, and yes, it was “proven” using statistical analysis by an Italian economist, but it is not meant to be understood (or more importantly USED) only by economics professors.

Here’s is the Wikipedia definition of the 80/20 concept:

The principle was suggested by management thinker Joseph M. Juran. It was named after the Italian economist Vilfredo Pareto, who observed that 80% of income in Italy was received by 20% of the Italian population. The assumption is that most of the results in any situation are determined by a small number of causes.

I was first exposed to the 80/20 Rule by my entrepreneurship professor at Arizona State University, but I never fully grasped the impact it could have in my life until well after graduation. It wasn’t until I was in my local Border’s bookstore and I picked up a copy of Living The 80/20 Way by Richard Koch. Koch took the 80/20 Rule and made it his own by writing a series of books on the topic. Living The 80/20 Way fit me well because it discussed living life productively and fell inline with my objectives of working less, earning more and focusing on my passions.

At the time I picked up this important resource I was struggling with 80 hour workweek’s, burn-out and a sense of helplessness. After my initial read of the book I realized I was wasting hours and hours of my most precious resource, TIME, on ultimately meaningless activities, I have since studied the book from cover to cover and have tweaked several ideas based on what has produced outstanding results for myself and my coaching clients.

What Exactly Is The 80/20 Energy Rule?
The numbers hold true, in a very rough sense, for me that 80 percent of your outcomes come from 20 percent of your energy inputs. However, in practical application I have found the ratio to be much higher – 97/3 has been closer to reality for my life and work.

It really doesn’t matter what “statistics” are applied, the important thing to understand is that in your life there are certain activities you do (your 20 percent) that account for the majority (your 80 percent) of your happiness and outputs.

You may have expected me to say that 3 percent of my activities produce 97 percent of my financial rewards, and that has held basically true for my businesses, however I believe your overall happiness and satisfaction are even more important variables to focus on. Money certainly plays an important role in your happiness and your money is influenced by these “80/20 Energy” relationships, but ultimately it is only one of the components that leads to your overall well being, which should be your primary concern.

Real Life “80/20 Energy Rule” Examples
There are many macro-economic situations, for example the distribution of wealth and resources on planet earth, where a small percentage of the population controls the biggest chunk, which clearly demonstrate the 80/20 Rule as uncovered by Pareto. There are business examples such as 20 percent of employees are responsible for 80 percent of a company’s output or 20 percent of customers are responsible for 80 percent of the revenues (or usually even more disparate ratios). These are averages, not hard rules, not every company will be like this and the ratio won’t be exactly 80/20, but chances are if you look at many of the key metrics in a business there are definitely a small number of inputs creating the vast majority of output (profits, sales, work…).

At an individual level just by looking at your daily habits you can find plenty of examples where the 80/20 (in my case the 97/3) Energy Rule applies. If you’re like me you probably make most of your phone calls to a very small group of the people you have contact information for. It’s likely you spend a large chunk of your money on few things (rent or mortgage payments, food, and/or travel). There is a good chance that you spend most of your time with only select group of friends from the entire pool of acquaintances.

I’ll show you how I have applied the 80/20 Energy Rules to my life and how I have used the concept, although most often unconciously – it’s just the way I have designed my life (for maximum pleasure!) -to improve the efficiency of my output and enhance my overall lifestyle.

My 97/3 Life
In my life I’ve noticed plenty of “80/20” energy ratios and generally they relate to my core competencies and passions. I really enjoy coaching (both business and my kids sports teams), trendspotting, creating passion income streams and blogging. In terms of rewards, the two-to-four hours or so per day that I spend on these activities (when I’m in my peak energy state and my best work comes out almost effortlessly) is my money time. My resource guides and blog posts work hardest to generate income for me, create coaching and other business opportunities that allow me to focus my energy in a fulfilling way. I get a great amount of financial and intrinsic satisfaction from this time.

I expect you might see some significant similarities. During the times you are caught-up in the moment, enjoying yourself, your output is at its peak. Your passion activities (let’s say doing something with your pets…) probably don’t pay your bills at the moment, which unfortunately means that you can’t sustain your life by indulging only in what you enjoy. I’ll talk more about transforming your passion for pets into a financially stable and personally fulfilling 80/20 format later in this blog post.

There are time in my life where I still struggle and waste time performing activities I don’t enjoy or I am not good at. For example proofreading is not high on my fun list. I don’t always like managing my Google Adwords campaigns because I lack the discipline needed to thoroughly test the variables and track the numbers. The same can be said for things like my website stats. These activities are more numerical in basis, given a choice I would rather leave these tasks, along with other activities like coding html, graphic design and accounting to other people, the specialists who enjoy them (or more likely my wife who does enjoy several of these detail orientated tasks).

Another chunk of my time is spent procrastinating or working inefficiently doing activities that provide very little benefit. This often occurs early in the morning, when I am still groggy or below peak physical condition. I sometimes lack the mental throughput to motivate myself to be productive (and boy, my financial (and emotional) results stink when this happens!), but with the help of my wife and kids, I’m working on it and getting much better at reducing time wastage. When I’m in this state it’s smarter for me to workout, or play a game with the kids, because I’m not capable of producing quality business output and the time spent playing a good game with a 3 year old really puts into perspective my non-business 3%.

Running an 97/3 Business
When I look at one of my online pet food businesses, PetsPreffered.com it’s very clear that a small handful of continuity customers account for most of the income. The customers who become longterm users, who’s pet’s gain the most from the products and fit well demographically and socially with the business model, are key. They provide upwards of 90 percent of the value but only represent 10 percent (actually much less) of the overall people that try the holistic products. My job (and yours too as a petrepreneur) is to determine the best way to attract and convert more pet fanatics into longterm users.

With blogging I have uncovered (and teach in my Pet Blogging Profits Report) that there are a handful of steps that I must complete for every blog I start and when I do, they produce outstanding results. Breaking things down further, there are usually a key 3-10 percent of key elements within an individual blog post (think headline, call to action, linking structure) that have the most dramatic affect on results. The numbers, of course, don’t fall exactly match an “80/20” ratio but there are definitely dominant factors at play.

In a business sense, finding your key 80/20 ratios is crucial for maximizing performance. Find the products or services that generate the most income (the 20 percent) and drop the rest (the 80 percent) that only provide marginal benefits, usually with significant headaches. Spend your time working on the parts of the business that you can improve significantly with your core skills and leave the tasks that are outside your best 20 percent to other people. Work hardest on elements that work hardest for you. Drop the bad clients and focus on improving service and upselling to your best clients.

In part two of this series we will look at how to apply the teachings into your business, give you an actionable blueprint for your pet business and your life and address some of the FEARS associated with this Lifestyle.

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