#146 – The 80/20 principle and how to find your most profitable work

Show notes from Episode #146 of the Sweaty Startup Podcast.

What is your wheelhouse?

What work are you doing that is driving growth and profitability in your business, and how can you put more effort into focusing on it?

The 80/20 rule is one of Nick’s favorite principles, and like many philosophies it’s equally applicable to your life as it is your business. Simply put, it states that a small group of inputs accounts for a large set of your outputs; 80% of your results come from 20% of your effort, 80% of your headaches come from 20% of your activities, 80% of revenue comes from 20% of customers.

Nick’s brother talked about this in Episode 119, when he took time to step back he realized that his lawn care company made 80% of its profit from upselling weed control and fertilization. These services made them more per hour than their other work, and he’s begun to shift his business to reflect that.

At Storage Squad, Nick realized that 80% of headaches came from 20% of their service offerings. Offering shipping had become a huge problem for them despite making up less than 20% of revenue, so they eventually cut the service.

Early on, you’ll need to cast a wide net of services and activities to see what sticks. However, each year you should reassess what’s working for you and what isn’t, and identify your wheelhouse activities that are delivering value for your business. 

20% of your customers will produce 80% of your profit. Find out who these customers are, where they are, what they have in common, and how to sell to them.

20% of your customers will cause 80% of your headaches. They probably won’t be the same customers driving profit for you. Fire these customers, and stop targeting your services to them.

Nick applied this principle when choosing a new city to live in too. When they had their first child, he and his wife chose to move out of Boston. Together, they identified the 20% of activities that brought them 80% of their happiness; this included craft beer, hiking, yoga, restaurants, sports, and live music. Combined with affordable housing, they made a list of towns that met their criteria, visited them, and happily moved to Athens, Georgia.

Spend more time doing the things that are high value to your life and your business. Quadrant 2 activities will fit this framework. If you invest 20% of your time in high value work, it will pay off in the long run.

It’s easy to start a service and wake up in 10 years still on the truck, not having crossed the gap of becoming a scalable business. The Sweaty Startup is here to give you the tools and push you to work on activities that are valuable, that other businesses aren’t doing, and to scale your business and live the life you want.

Hungry for more great content? Check out Episode 82 on how to frame a sales interaction!

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About Me

I started the Sweaty Startup in December of 2018 because I believe the Shark Tank and Tech Crunch culture is ruining the real spirit of low-risk entrepreneurship.