How Does the 80/20 Rule Apply To You?

Ah, the 80/20 rule. I am sure that at some point in your business or personal life, you have heard of it. Also known as the “Pareto Principle”, this rule says that for many events, roughly 80% of the effects come from 20% of the causes. We do use this rule here at Red Wing Software within our software products. When applied to product inventory, the rule says that 80% of your sales are from 20% of your inventory items. Knowing which items of the 20% are garnering the most sales can be crucial to growing your profits. That's where ABC analysis can come in handy. An ABC analysis within your accounting program can show you which items are most profitable. Our accounting software offers ABC analysis, which is an excellent tool for businesses.

But all science and math aside, have you ever noticed that the 80/20 rule can also apply to real life? As I think of my life, I can think of a few examples of where this rule might apply. For instance, about 80% of my free time is spent watching hockey and transporting my son to games. Yet when I originally signed him up, I would have thought it to be much less time consuming. My son’s hockey really only constitutes about 20% of the ways I love to spend my free time. Therefore, my surprisingly full and hockey-packed free time fits with the 80/20 rule!

What are some examples of the 80/20 rule in your life? Answers need not be serious or technical.

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