First, let’s understand what the 80/20 rule is.  Vilfredo Pareto was an Italian sociologist, economist and philosopher who lived from 1848-1923.  In 1906, Pareto observed that 80% of the land in Italy was owned by 20% of the population.  An avid gardener, he also noticed that 20% of the pea pods in his garden produced 80% of the peas.

As an economist, Vilfredo studied the patterns of financial wealth and income in nineteenth century England and again found these same 80/20 proportions in how wealth was distributed: 20% of the population had 80% of the country’s wealth.  Through further observation he found that everywhere he looked a similar pattern emerged.  That is, roughly 80% of effects come from roughly 20% of the causes.  What he had found was that nature was predictably unbalanced.

“We tend to assume that 50% of causes or inputs will account for 50% of results or outputs.  There seems to be a natural, almost democratic, expectation that causes and results are generally equally balanced.  And, of course, sometimes they are.  But this “50/50 fallacy” is one of the most inaccurate and harmful, as well as the most deeply rooted, of our mental maps.  The 80/20 Principle asserts that when two sets of data, relating to causes and results, can be examined and analyzed, the most likely result is that there will be a pattern of imbalance.  The imbalance may be 65/35, 70/30, 75/25, 80/20, 95/5, or 99.9/0.1 or any set of numbers in between.” – from The 80/20 principle

Let’s look at some ways the 80/20 rule manifests itself in the real estate world:

-    20% of sales reps make 80% of all sales commissions
-    20% of your clients deliver 80% of your income
-    20% of the time you spend on your business yields 80% of your income

Here is the flip side of the above:

-    80% of sales reps makes 20% of all sales commissions
-    80% of your clients only deliver 20% of your income
-    80% of the time you spend on your business only yields 20% of your income