The 80/20 Rule: Focus on the Money Makers and Limit the Time Wasters

Using the 80/20 Rule to Maximize Your Business Profits

I’m a numbers geek.  I like to look at excel spreadsheets and earnings reports and dive into the numbers to see if I can find a pattern of where most of my sales are coming from, what types of products sell the most, and what marketing efforts and websites lead my customers to my products in the first place.

These statistics can be a valuable asset to your business, no matter what type of small business you run.  In looking at my stats from the past year, it’s very clear to me that the 80/20 rule is alive and well and applies to my online business activities.

What’s the 80/20 Rule?

The 80/20 Rule (also called the Pareto Principle) is a principle which basically says that 80% of the results will come from 20% of the causes.

Here’s some great examples from Wikipedia:
“The distribution is claimed to appear in several different aspects relevant to entrepreneurs and business managers. For example:

80% of a company’s profits come from 20% of its customers
80% of a company’s complaints come from 20% of its customers
80% of a company’s profits come from 20% of the time its staff spend
80% of a company’s sales come from 20% of its products
80% of a company’s sales are made by 20% of its sales staff

Therefore, many businesses have an easy access to dramatic improvements in profitability by focusing on the most effective areas and eliminating, ignoring, automating, delegating or retraining the rest, as appropriate.”

How does the 80/20 Rule Apply to Me and You?

What does that mean for me and you? It’s means that if we can find out what the 20% of things are that make us 80% of our income, we can focus our efforts on those tasks, and explode our business earnings.  We can maximize our profits by not worrying about the 80% of things that only make us 20% of our income, and only focus on the 20% of the things that make up 80% of our income.  We can FOCUS ON THE MONEY MAKERS and limit the TIME WASTERS!

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Personally, one of my challenges is that I like to start new projects, which means I get easily distracted and waste a lot of time reading about how to do something new.  And while this can increase my bottom line a little bit by diversifying my income across different sources, it also takes up my most precious asset….my time.  I tend to spend a lot of time looking at different ways to make money, reading other people blogs for new ideas, and wasting time looking at stats and trying to decide what to do next.  While these activities do occasionally lead me to new software or tools that make my business run smoother, most often it results in me just frittering away my time, and only adding a small amount of additional income.  It might take 80% of my time, and only result in a 20% increase in my income.  For me, these are my TIME WASTERS!

By contrast, I know that there are specific tasks that I do that will almost without fail, increase my revenue, sometimes drastically.  For me, these MONEY MAKERS includes creating new products for Zazzle.  However, it is also the hardest task for me, because it actually takes concentration and work. First I have to be creative and think up new designs, then make the tedious effort of uploading them to Zazzle, writing boring descriptions, and thinking of appropriate tags before I can publish them.   It’s boring.  So I probably only do this 20% of my time. But it makes me 80% of my revenue.  To be more specific, I ran royalty reports from Zazzle for all of last year, which after opening them in an Excel spreadsheet, and sorting by product types, it showed me that nearly 3/4th of my Zazzle revenue comes from a specific niche.  So what I really need to be concentrating on is creating more products in that small niche, because that is where I see most of my revenue.

How can YOU apply to the 80/20 Rule to YOUR Business?

To see how this can apply to you, I encourage you to run some traffic and sales reports from the last year for your business.  Is there a specific way of marketing that is producing the most customers? Do you get most of your customers from Facebook? From Twitter? From direct mailing? From Pinterest?  Your stats may show you a clear winner!  Focus your time on what works for you and your business!  And these results will most likely be different for everyone, because everyone has a different product they are selling and a unique customer base.  Instead of dividing your time evenly among various marketing avenues, try spending 80% of your time on the one that gives you the most results and only 20% of your time on the ones that only return marginal amounts of new customers or sales.

If you sell products and have different product lines, take a look at your sales reports and tally up how many of each product type you sold. You might be surprised by what you see.  Sometimes we think something is a best seller just because we like it, but in reality another product line, one that we never even pay attention to, might actually be the top seller.  And don’t just look at the number of sales, but look at the revenue it brings in.  You may see a trend that although product line A had 100 Sales, it may have only resulted in $400 income. While product line B had only 50 Sales, but resulted in $600 income.  Therefore, Product Line B is a much more profitable item.  If you focus your efforts on marketing and selling product line B, you’ll have a higher return on your time.

Cut the Losers, and Expand the Winners

As a small business owner, you only have a certain amount of time and energy.  You can maximize your profitability by cutting products and services that drain your most precious resource…your time.  Is there a particular product or service you offer in your business that just makes you cringe every time someone requests it?  Do you hate having to deal with this product or service because it is time consuming and a pain.  Then why are you offering it?  If you have a product or service (or customer type) that takes up 80% of your time, but only results in 20% of your revenue, then cut it out of your business.  I know what you’re thinking…you think you need that 20% revenue, right?  How would you possibly survive without that 20% of revenue.  But the question you really need to ask yourself is “How can your business survive when you are giving all your time and effort into this one area that gives you only meager returns?”.  You will easily be able to make up the difference in the lost revenue when you get 80% of your time back and can focus it on the other products and services that you offer.

Find your Ideal Customer

Looking at your sales in the past, do you have a specific type of customer that routinely buys from you? A customer who whenever you market to them, they buy? A customer that is easy to work with and they only take a small amount of your time?  This type of customer may be a specific gender, people who participate in a certain type of forums, moms, dads, or people who all have a common goal.  Look at your customer base and try to find similarities between your best customers.  Then focus your efforts on attracting and selling to that type of customer. Design more product types that appeal to that specific customer base.  Market your products in places that this particular ideal customer would be.  This ideal customer is the easiest to work with and is the most likely to buy from you.  This ideal customer probably only takes up 20% of your time.  Focus on expanding the type of products or services that this “ideal customer” would buy.

What if my business is too small to see any 80/20 trends yet?

Even if your business is too small to see any significant variation in product type sales or traffic from specific sources, you can still apply this principle by doing a simply log of your activity. For one week (or longer), write down on a piece of paper how you are spending your “work” time.  If you only have a few hours in the evening a couple days a week to work on your side business, then this is even more important.  If you have committed to working from 7-9 pm, then log everything you did during that timeframe.  What you will see is a pattern of activities that are either MONEY MAKERS or TIME WASTERS.

For example, have you ever hopped over to Facebook, really quick, just to check on any updates from your friends, only to finally snap out of it 30 minutes later to realize that you haven’t even started working on your blog post yet? And now you only have an hour and a half of “work” time left. Exactly! Log your activities and time spent. Then make sure you are spending at least 80% of your time on things that make a difference to the bottom line of YOUR business. These MONEY MAKERS are activities that are essential to YOUR business getting new customers or selling products. This may be calling new prospects in your direct marketing business, working on the next chapter of your Kindle ebook, writing a new blog post on your website, creating and posting new products on Zazzle, writing new content for an autoresponder series that your customers receive, or making a new YouTube Video that directly leads to new customers or new sales.   Focus on the MONEY MAKERS, and limit the TIME WASTERS!  After you have logged your activities, make a column and label each activity as either a money maker or a time waster.  The next time you sit down to work, focus on the money makers.  You can even use the timer on your phone or a kitchen timer to set specific minutes where you only work on ACTION items.

With all that being said, I know that when you are brand new to something, it will take you longer to accomplish a task, simply because you haven’t mastered that skill.  So creating something may actually take a ton of time.   This doesn’t mean its a time waster.  You will eventually get faster as you get more experienced.  As long as it’s an activity that directly results in you making more money, I call it a money maker.   I simply consider time wasters to be the things we do in order to procrastinate from starting on the things that we NEED to do!

What time wasters do you struggle with the most in your business?  Leave me a comment below!


I LOVE ZAZZLE!

14 comments on “The 80/20 Rule: Focus on the Money Makers and Limit the Time Wasters

  1. Kim,

    Another great blog post. It’s always nice to have a bit of direction for where to spend your time.

    For me that’s entirely on Zazzle, (when i’m not doing uni work) but understanding where to split this time is valuable.

    My Zazzle store has been open for around 3 weeks now. Unfortunately no sales yet but i’m pleased with how the products look and i’m up to 1800.

    Is there anything you think i could specifically improve on?

    Thanks again

    http://www.zazzle.com/shuttersnaps

    Tim

    • Hi Tim,
      I like your photos! Keep on working! Since you don’t have any sales yet, pay close attention to your “product views” to spot any trends. You can find this in your account under products, then you can sort by popularity, newest, or daily views, weekly views, etc. Sometimes you can see an item with a lot more views. Then try to figure out if it’s because it’s priced lower, it is of a subject matter that people just seem to like, or maybe you shared it on social media and you didn’t share the others, etc. Then try to replicate what is working. Upload more of those type of designs, etc.

      Also, I have found Pinterest to be very valuable in sharing new products and at least getting “views” on them. And although Zazzle doesn’t share with us their algorithm for how they determine marketplace ranking, I suspect that things like views, sales, price, and maybe even social media shares, effect the marketplace ranking. This is pure speculation on my part from my experiences seeing how my products move through the marketplace.

      But I can tell you for sure that once your products get on the first page for their “ideal search term” you will see many more sales on them. With that being said, pay attention to your pricing for your niche and subject matter. Sometimes when I introduce a new product I will price it lower to help it along in the marketplace, then once it has some sales I will increase the price to my preferred price point. Once it has some sales behind it, it can maintain its marketplace ranking much easier. But prior to sales the only thing I can control is the price and I can help along the views by sharing it on places like Pinterest.

      On Pinterest, I would suggest setting up boards around your photography themes. Maybe a board for “Animal Photography Gifts” and another for “Travel Photography Gifts” etc. If it were me, I would use my Jaaxy keyword research tool (http://fivegreenlizards.com/JaaxyKeywordResearchTool), to find what phrases have the most people searching for them, and use those phrases to title my boards. I have many Pinterest boards that show up in Google search results because I researched my keywords before making my board name.

      Also, for your tags and descriptions, add some more generic terms and words to your titles and tags. For example, on your Knysna Drink Coasters (http://www.zazzle.com/knysna_drink_coasters-163761488076556386?rf=238133515809110851&tc=FiveGreenLizards), someone who may be interested in buying this might be searching for “palm tree drink coasters” or “vacation themed coasters” or something for their beach house. Or even just “South Africa Travel Coasters”. Write longer descriptions that includes these types of words, add them to tags, and use more words in your title. Right now, this coaster is limited to someone who is specifically looking for a “Knysna” coaster. But there are many other customers would might want to buy it, but they are searching for “vacation gifts” or something like that and your product is not showing up because you don’t have those words in your title, description, or tags.

      I hope that helps!

      • I had another thought. Since you have a lot of travel photography, from specific places or countries, do some versions with words on them for the country or state or city or place. For example, for your Piazza Navona Poster (http://www.zazzle.com/piazza_navona_photographic_print-190781884369167095?rf=238133515809110851&tc=FiveGreenLizards), have one version that’s just the photo, like you have it. Then make another version with the word “Italy” across the top. And a third version with the words “Piazza Navona” on it. People like to buy things with words on them. And someone looking for an Italy poster would buy it with the words, but might not without the words.

        • Thank you Kim,

          Great advice as always. I never thought to reduce the price at first to “move it up” the popularity rankings. Great idea.

          And about the travel posters- again, very useful. It might be quite tedious having to go through each travel photo individually and adding titles but i’m sure it will help.

          I see that you have stopped disclosing your income from Zazzle. In my opinion, that means one thing- Congratulations, you’re obviously doing very well through it!

          Thanks again,

          Tim

          • You could always add the text onto the picture first with a photo editing software, in a spot that would fit on most products you are using in Quick Create, then save the photo with the text on it already. Then you could do a batch of quick create without the text (the original photo) and a batch with the text. I’ve done that before. The tricky part is putting the text somewhere where it will fit onto various shaped products, like a poster vs. an iphone case vs. a pillow.

          • Yep, will do. Thanks alot.

            I’m using Google Analytics and i’m not getting many views on my store (i’ve had 30 unique visitors since i started around a month ago now- not great?) and my product views are also pretty low (highest is 12, then 6,5…. etc)

            Do you think i’m doing anything wrong or will it just take time? I’ve tried to improve my tagging recently but maybe it can still be improved?

            Thanks again for your help.

          • The problem with looking at your Google Analytics or StatCounter stats is that it will only show stats for people who come to your storefront (which is rare). Most people will actually view and purchase your products through the marketplace, which never show up on Google Analytics. It’s really frustrating. So the only guesstimate of how many views your products have had is from the “daily views” or “weekly views” in your back office.

            Yes, it will take time. You can also go back and “edit” products and fix tags and descriptions. You can’t edit the image or design at all, but you can edit the tags, description, title, royalties, etc.

  2. I have a question, do you specify a certain amount to work on designs and PODs vs affiliates? Those are the “two” things you do to earn income only? (POD sites and Affiliates for them?)

    • POD and affiliate promotion for them are not the only things I do for income, but that has made up 81.6% of my revenue for the last six months earnings. And within that revenue, most of my earnings come from one small niche. I currently don’t schedule my time for when to design and when to promote as an affiliate. I sort of do what catches my interest at the time, which is a problem for me because I end up wasting a lot of my time. That’s a huge goal for me in 2014; to manage my time better and work on the 20% of activities that give me 80% of my income.

      When I first started on Zazzle, I started out just promoting other people’s Zazzle products as an affiliate. When I started making money doing that, and making more money than what I was making promoting other affiliate products, I focused my efforts on Zazzle. Then I started designing products myself. And I made more money designing my own products, than I did affiliating other people’s products, so I focused my efforts there. But I still do both things, because I enjoy promoting other people’s products. I haven’t tracked how much time I spend working on my own stuff vs. promoting other’s people items, so I don’t really have an answer for how much time I spend on each. Looks like I need to do that! :)

  3. I have a question. You have found that 20% niche which makes up for 80% of your sales. Do you leverage that niche also on other POD sites? F.i. I was thinking of Cafepress. Is it possible to replicate a succesful niche at Cafepress?

    • Hi Bert. I have tried Cafepress, but quite frankly I find their interface so hard to use that I haven’t tried to put up very many products for sale there. I simply get so frustrated trying to figure it out. But that is on my never ending “to-do” list. However, Cafepress doesn’t show up in Google search results nearly as well as Zazzle does, so I’m not sure if items for sale there would get the same exposure that items on Zazzle get.

      • Hi. Sorry for my late reply. I used an old Cafepress shop I created years ago and filled it with some of my better selling designs. For good measure I did the same with a Spreadshirt shop for the EU market. Now I wait and see, though only one sale on Cafepress.

        For now I don’t want to put too much energy in those 2 shops. Next experiment is to put my very poorly selling pattern designs in a separate Zazzle shop. I haven’t tried using different shop on Zazzle yet.

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