As a business owner, you really only have two resources at your disposal to run your business. The first is time and the second is money.
But both of these resources are in limited supply. Just like everyone else, you only have 24 hours in a day. You can only allocate so much time and energy to your business because you also have a personal life and other commitments. And you can’t throw an unlimited supply of money at your business. Expenditure needs to be kept under control and to a minimum in order to generate profits.
Given that these resources are limited, you have to work out how best to allocate and prioritise them so that you’re able to reach your goal. In other words, you’ve got to know how to get the most ‘bang for your buck’ with the time and money you have available.
You might be aiming to spend less time working in your business so you can spend more time with your family or on your hobbies. Whatever your goal, if you want to succeed in reaching it, you need to have a way of identifying and focusing on the high-value activities that will have the greatest positive impact.
This is absolutely fundamental to your success, because it’s the difference between a busy fool wasting time and money randomly working through a to-do list and a smart business owner who knows exactly where to allocate and prioritise his limited resources. The smart business owner will undoubtedly hit his goal much more quickly and expend a lot less energy in the process.
It’s no secret that my goal has always been to have highly profitable and stress-free businesses that take up very little of my own time to run, so I can spend more time doing the things I love outside of work.
One of the main ways I’ve been able to achieve my goal is by applying a very simple, yet extremely powerful principle that I developed some years ago. It’s helped me find and take action on the high-value activities that make the most difference. This one principle has had a profound impact on my business and personal life and has allowed me to achieve my end goal much more quickly and easily than would otherwise have been possible. I call it the Vital First Principle.
The 80/20 rule
I adapted my Vital First Principle from the ‘law of the vital few’, which was developed by management consultant Joseph M. Juran in 1941. He had himself been inspired by the work of economist Vilfredo Pareto and his 80/20 rule, first published in 1906.
The 80/20 rule – also known as the Pareto Principle – essentially states and proves that there is an 80%/20% relationship between most things. For example, 80% of the land in the world is owned by only 20% of the people; 80% of a company’s profits, more often than not, comes from just 20% of its customer base or products. Of course, it’s not always exactly 80/20 and doesn’t necessarily add up to 100 (e.g. 15% of the people in some countries could easily own 95% of the land), but the rule demonstrates and evidences an imbalance between an input and an output, two factors, more or less along the 80/20 lines.
In all sets of factors, some are more important than others
Building on the 80/20 rule, Juran went on to prove further that everything is not of equal importance – that things are not distributed equally and some are much more important than others. For example, if there are ten bugs in a piece of software, two of those bugs will be more critical and beneficial to fix than the other eight combined.
Juran’s business thinking was that, in a global economy where efficiency (i.e. more output from less input) is a core driver of profit, you need only focus on the ‘vital few’ elements that will make the most difference. In other words, work out which things (usually just 20% of all inputs) will have the largest impact (account for 80% of the output) and work on those. To this day, the most successful businesses in the world use Juran’s law to make better decisions about prioritising the resources available to them and focusing on those areas that yield the greatest results.
My Vital First Principle takes the main discoveries of both the 80/20 rule and the ‘law of the vital few’, but makes two adaptations in their real-world application for smaller business owners.
1. Focus, don’t multitask
First of all, I think it’s easier and more beneficial to identify the most ‘vital first’, i.e. the one thing that will have more impact on you achieving your goal than any other, and take action on implementing or improving that one thing, rather than trying to tackle two or three ‘vital firsts’ at the same time. There are two main reasons for this.
- Firstly, small business owners are usually individuals or a husband-wife team that don’t have the staff to help them. They’re simply not able to delegate and work on multiple things at the same time, in the way that the large corporations Juran’s work was aimed at were able to do.
- Secondly, working and focusing your attention on just one thing at a time is a far faster and more effective path to success than working on two or three things and constantly shifting your concentration. Every time I focus purely on one problem or challenge, without fail I’m able to get greater clarity, which leads to quicker and better results. Multitasking is not an effective way to get more done. It’s an effective way to take more time to get less done, to a poorer standard. If you prioritise properly, there is no need to multitask.
2. Keep working the ‘vital first’ principle down through your business
The second adaptation I’ve made is that I don’t think you should stop once you’ve fixed the things you initially identified as the ‘vital few’. If your resources permit, you should keep looking at the remaining things that could be improved for longer-term benefit and carry out another ‘vital first’ analysis to identify the most important thing to focus and take action on next – look for the next 80/20 split. Don’t simply ignore those things that didn’t make the first cut, because some of them could still make a significant and meaningful difference over time (see blog post: Butterfly Effect).
Ideally, keep going until there is nothing left to work on, although it’s important to work sensibly within the constraints of the time and money you have available. The large corporations at the centre of Juran’s work didn’t need to worry about the odd extra 15-20 hours or £500-£1000 worked or wasted here and there every month, because it was insignificant in the grand scheme of their multi-million-pound enterprise. However, to a small business owner, these amounts can be anything but insignificant.
I’ve used the Vital First Principle for many years now, to help me decide where to prioritise and allocate the resources of time and cash across my businesses. It’s helped me focus and take action on the high-value activities – the activities that will always matter the most – so I can achieve the maximum possible success relative to the time and money I have available.
A Principle for life
This Principle isn’t just for business. It works just as well for everyday life decisions too and has helped me withstand stress and be much more productive in every aspect of my life. I’ve used it to help my children improve their exam grades to great effect and have even used it in the gym to help with my strength training!
If you have a goal that you’re working towards, you can harness this powerful principle for yourself.
Trust in the laws of nature
Most business owners I’ve seen trying to improve a certain aspect of their business, whether it’s increasing profitability or reducing time-consuming activities, operate on a ‘you win some, you lose some’ basis. Hats off to them for taking action and trying to make improvements but attempting to tackle every task in a random sequence, with no regard for its overall importance or degree of impact on the business, is total madness – it’s a ‘strategy’ that’s flawed from the outset. As I’ve said before, busy fools rarely succeed!
Many business owners will not be brave enough to pursue the Vital First Principle strategy, but you can’t argue with the logic. The 80/20 rule and the Law of the Vital Few aren’t just theories, they’re as real as gravity – proven and predictable certainties of nature. And although a huge number of people still fail to see this reality, for me, they’re one of the greatest prioritisation truths I’ve ever discovered.
In essence, it’s not about working smarter as a business owner, it’s about working smarter on the right thing first that will yield the biggest and best results in the shortest time. I’m hoping that now, armed with the power and knowledge of the Vital First Principle, you will be able to work the laws of nature to your benefit and accelerate your business success to achieve your goals far sooner than you expected.