Why the Pareto Principle is a Useful Tool for Freelancers
Summary: In a certain sense, the 80-20 Rule is useful to freelancers, because it makes them think about a future where they can achieve more with less effort.
My corporate-warrior dad made me avoid business management terms like the plague. So I had no idea what the Pareto Principle was all about, until Debbi Mack guest posted on The Golden Pencil. Apparently, some people believe that “20 percent of our efforts result in 80 percent of the benefit received”.
I do think that the Pareto Principle makes sense, despite what Debbi writes. The people I consider successful make most of their income from a few choice efforts. Yet I imagine that Debbi was talking about those starting out, where hard work and constant practice are required for any kind of success.
I can’t imagine working constantly, pushing yourself to your practical and mental limits, only to end up with a future that requires the same amount of activity to put the same amount of bread on the table. I’m not saying that freelancers (or anyone for that matter) should avoid hard work like the plague, nor they should they actively seek for that magical 20% that supposedly grants 80% of the rewards (I suspect on these two points Debbi and I would also agree with each other).
My point is that the Pareto Principle could be a valuable goal for freelancers, because it forces to them to think about the future. A future where their acquired skill, experience, and distinctiveness can command higher prices for what’s essentially the same amount of work. In other words, the 80-20 breakdown may be wrong, but the implication behind it is a powerful idea: work for less, get more returns. There’s nothing wrong with dreaming of—and working towards—a setup where our efforts our significantly maximized.
Image from searchenginepeople.com
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POSTED IN: On Freelancing
9 opinions for Why the Pareto Principle is a Useful Tool for Freelancers
Anne Wayman
May 14, 2008 at 11:31 am
lol, I had no idea what the term meant either… but I find I agree with her… 80/20 is hardly useful, at least given the way I think… otoh, you’ve got a point too. sigh. ;)
Kristen King
May 14, 2008 at 12:11 pm
I’ve been aware of this for some time, but it didn’t really click with me until I read Four-Hour Work Week. Great post and excellent reminder about how important it is to look forward in business.
Ren Garcia
May 14, 2008 at 6:05 pm
Pareto works best if your 20% that generates the 80% covers all your recurring obligations / expenses. Otherwise, you’d have to scrounge around every month.
Rico
May 15, 2008 at 8:49 am
Anne: Well, I do agree that the traditional concept of the Pareto Principle (as far as I understand it), isn’t a good guide for freelancers. Especially for unorthodox peeps like us ;)
Kristen King: Thanks Kristen! I really should read that book…
Ren: I guess that’s one way of looking at it. Perhaps the challenge is finding ways to achieve that kind of setup?
Debbi
May 15, 2008 at 9:29 pm
I can’t imagine anyone who wouldn’t want to work less and get more. :) It’s the notion that it can be achieved with a simplistic formula that I disagree with.
If you’re wasting time on trivialities, practice better time management. If you feel you deserve a better hourly rate, charge more. I highly recommend a book called “What to Charge: Pricing Strategies for Freelancers and Consultants” by Laurie Lewis. Great advice on how to price projects and get paid what you’re worth.
Rico
May 15, 2008 at 9:40 pm
You’ve got a point there Debbi, the formula is seductive and may cause people to concentrate on the wrong things. I’ll check out the book ASAP, thanks for the recommendation! :)
Daniel DiGriz
May 18, 2008 at 5:32 pm
Here’s an 80/20 project: a group of orphans needs to buy food sources that will keep producing food all year long (chickens, plants, fish, etc.). But what funds come in at such a slow rate, spread out over time, that they’re forced to eat them in them in the form of rice (only rice) as the funds trickle in. If they could get funded all at once, it would change their ability to feed themselves.
How much do they need? $1000. Yep, a thousand dollars for the whole project. So, if 20 people sat down and figured out the cost of one night out: dinner/movie/coffee/dessert, and gave that amount this week, the project would be funded immediately, and these kids would be able to learn with full bellies, and keep on producing their own food. We’ll never get 100 people to give $10 each. But if we can get 20% of those people (20 people) to give $50 each, they’re funded.
Here’s the project. I know it well, and have given to it before. Care to join me? http://www.givemeaning.org/project/newfutures
or http://www.givemeaning.org/project/newfutures
Oh, and pssst. Pass it on.
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