What is 80/20 for Business?
How businesses find untapped profits already hiding in their organization.
Fast Growth doesn't come from More Effort—but From Your Team Using Your Data.
If you feel your team is working harder than ever but not seeing the results, 80/20 is the most important business principle you will ever apply.
Growth shouldn't feel this hard. Yet for many leaders, scaling the business introduces more friction, more firefighting, and more complexity, without a proportional increase in profit.
The default assumption—that all customers, all products, and all hours have the same value—is what keeps businesses stuck.
The 80/20 Principle, also known as the Pareto Principle, provides the strategic compass to cut through that complexity.
It’s a simple, undeniable truth visible in nearly every business: a small percentage of your activities drives a massive percentage of your profits.
- 80% of your profits come from 20% of your customers.
- 80% of your sales revenue is generated by 20% of your products.
- 80% of your team's firefighting is caused by the same 20% of recurring problems.
Understanding this is the foundational step that makes every other growth strategy more effective.
80/20 is The Upgrade Your Business Needs for Faster Growth.
80/20 is more than a theory; it's a new operating system for your entire company. It’s an end-to-end process that provides a set of tools to see your business in a completely different, more profitable way.
To truly grasp the concept, it helps to hear from leaders who use it every day.
80/20 is The Simple Math of Maximum Profit
Bill Canady, Founder and CEO of The 80/20 Institute, explains how 80/20 is a simple, mathematical way to segment your business, find your "critical few," and focus your resources where they will have the greatest impact.
See the simple math that segments your business and finds your "critical few."
80/20 Eliminates Complexity
Michael Mostek frames 80/20 as a process to eliminate unwanted complexity, allowing you to redeploy your best people from low-value tasks to the most profitable areas of your business.
Learn the process to eliminate complexity and redeploy your best people.
80/20 Empowers Your Entire Team
Joe Michels describes how 80/20 cuts through the noise of financial statements to empower everyone, from the CEO to the front lines, to recognize what good business looks like and make better decisions instinctively.
Empower your entire team to instinctively make more profitable decisions.
The 80/20 Mindset
is a Radical Focus on Performance
The real power of 80/20 comes from a radical shift in focus. It’s not just about what you choose to do; it’s about what you bravely choose to stop doing. It's about getting the whole organization to recognize where you add the most value—and where you don't.
The Power of Strategic Quitting
Aligning Your Team on Real Value
When you adopt this mindset, you stop asking, "How can we get more done?" and start asking, "What is the 20% of our effort that will deliver 80% of the results we demand?"
When you consistently apply the 80/20 principle, the impact is profound. It’s not just about incremental improvement; it’s about creating step-change results in profitability, productivity, and organizational alignment.
Focus at Every Level:
For Individuals, Teams, and the Company
Joe Michels explains how 80/20 provides clarity for every person in the organization, aligning teams on the biggest opportunities and driving company-wide profitability and growth.
See how 80/20 creates clarity for individuals, teams, and the entire company.
The Ultimate Profit Generator
A Tripling of EBITDA
Michael Mostek shares a powerful case study, detailing how an 80/20 implementation tripled a company's EBITDA by optimizing pricing, reducing overhead, and focusing people on scalable growth.
Hear the case study of how one business tripled its EBITDA with 80/20.
Discover how 80/20 builds the confidence needed for a successful turnaround.
See the data-backed approach to turn a struggling business into a success story.
How to Start Thinking in 80/20
Applying this principle is about identifying your "vital few"—the high-impact assets and activities—and pouring your resources into them. At the same time, you must strategically minimize, automate, or eliminate the "trivial many" that drain your resources with little return.
Here's how this looks in the most important areas of your business:
- Marketing: Instead of spreading your budget thin across ten platforms, use data to find the two that deliver 80% of your best leads. Double down on them.
- Sales & Products: Analyze your offerings. Which 20% are your bestsellers and, more importantly, your most profitable? Focus your innovation, inventory, and sales training on those winners.
- Customers: Identify the top 20% of clients who generate most of your revenue. What are their common traits? How can you find more people like them? How can you deliver an exceptional experience to keep them loyal?
- Productivity: Look at your own to-do list. What 20% of the tasks will create 80% of the progress toward your goals? Prioritize doing those first, every single day.
When you adopt this mindset, you stop asking, "How can I get more done?" and start asking, "What is the 20% of my effort that will deliver 80% of the results I want?"
The Real-World Benefits of 80/20
When you consistently apply the 80/20 principle, the impact is transformative. It creates clarity, reduces costs, and builds a stronger, more scalable business.
Key benefits include:
- Increased Profitability: By focusing on the most valuable products and customers, you naturally increase your margins and overall profit.
- Greater Productivity: You and your team stop wasting time on low-impact tasks and redirect that energy toward activities that truly move the needle.
- Reduced Complexity & Stress: Eliminating or automating the "trivial many" simplifies your operations, reduces firefighting, and creates a calmer, more controlled work environment.
- Enhanced Customer Satisfaction: By focusing on your best customers, you can serve them more deeply, leading to greater loyalty, more referrals, and higher lifetime value.
- Sustainable Growth: 80/20 builds a strong foundation, allowing you to scale your business intelligently instead of just adding more complexity.
To see these benefits in action, the following video explores them in greater depth.
Frequently Asked Questions
While the principle applies to any business, its power is magnified in complex environments like manufacturing and logistics. Here, we address the specific questions we hear most often from leaders like you.
Operations & Manufacturing Questions
By analyzing the causes of downtime or defects, you will find that 20% of the reasons cause 80% of the lost time. Is it a specific machine? A certain raw material? Focusing your process improvement on that "vital few" 20% yields dramatically faster results than a broad, unfocused efficiency drive.
Absolutely. A classic 80/20 application is analyzing inventory. You'll find ~20% of your SKUs generate ~80% of your sales. This allows you to optimize stocking levels, reduce capital tied up in slow-moving inventory, and simplify your supply chain by focusing on the suppliers critical to your "vital few" products.
The goal is not to oversimplify, but to bring potent clarity to complexity. It doesn't ignore the "trivial many" activities; it helps you strategically manage them (automate, systemize) so you can liberate focus and resources to pour into the "vital few" that truly drive growth.
This is a common hurdle. The best way is with data. A pilot project focusing on one area—like analyzing the root causes of product defects—can provide a clear, undeniable win. When you can show that fixing just two of ten causes eliminated 80% of the problem, managers quickly see the power and become champions for applying it elsewhere.
Yes. By analyzing your QC data, you'll find that the majority of defects or customer returns are linked to a small number of root causes. This allows you to apply your QA resources with surgical precision for the greatest impact.
Sales, Customers & Product Questions
Not at all. It's about strategy, not just elimination. For your less profitable customers, the answer might be to serve them through a more efficient, lower-cost channel, adjust your pricing to reflect the value you provide, or transition them to a partner. It's about aligning your service cost with each customer's value.
This is a common fear, but the data usually shows that the vast majority of your core customers are buying your core products. The low-volume, complex products are often sold to a small, fragmented customer base. We help you manage this transition strategically, often by offering a better, alternative product or partnering with another supplier for niche needs.
It provides a powerful strategic filter. Instead of chasing every idea, you can ask: "Does this new product serve our top 20% of customers? Does it have the potential to become one of our top 20% of products?" This ensures your R&D and innovation efforts are focused on creating high-potential winners, not more complexity.
Strategy & Implementation Questions
It starts as a project but delivers its greatest value when it becomes an ongoing cultural mindset. The initial analysis provides the big wins and creates momentum. The long-term goal is to embed 80/20 as the "operating system" for the business, where everyone from sales to the shop floor is constantly asking: "Is this a high-value, 20% activity?"
The initial data analysis and strategic insights can be completed in a matter of weeks. Businesses often see tangible results on the P&L—from pricing adjustments on unprofitable accounts or initial product simplification—within the first 90 days. The more significant, structural changes naturally take longer but deliver exponential returns.
With the data. The 80/20 process removes opinion and replaces it with objective facts about profitability. When you present a clear, data-backed case that shows exactly where money is being lost to complexity and provides a clear roadmap to higher profits, even the most skeptical stakeholders become champions.
Every business leader feels their company is unique, and it is. However, the principle of imbalance is universal. We've seen it apply across dozens of industries. Your "20%" will be different from anyone else's, but it's there. Our process doesn't apply a generic solution; it uses the 80/20 lens to find the unique, high-leverage opportunities inside your specific business.
Financial & Investment Questions
It impacts the P&L in several key ways. Gross Margins increase as you focus on your most profitable products and customers. SG&A (Sales, General & Administrative) costs often decrease as you eliminate the complexity and internal "firefighting" that was previously required. This combination leads to a significant, sustainable increase in Net Profit.
Yes. By clearly identifying your most profitable and scalable product lines and customer segments, 80/20 provides a clear guide on where to invest for the highest return. It stops you from spending capital to support unprofitable complexity and directs it toward true growth engines.
It is an incredibly powerful due diligence tool. Applying the 80/20 lens to a target company can quickly reveal if their stated growth is profitable growth. It uncovers hidden complexity and "profit drains" that a standard financial audit might miss, giving you a much clearer picture of the company's true health and potential.
Data Questions
This is precisely the problem 80/20 was born to solve. Instead of looking at all data equally, we use the 80/20 lens to hunt for points of extreme imbalance. We help you isolate the 20% of data points (e.g., top customers, most profitable SKUs, most efficient production runs) that reveal where 80% of your success is truly generated. It turns data overload into a clear, actionable roadmap.
While the principle is simple, the analysis for a large business can be complex. You can start with a single data set, like a list of customers ranked by annual profit. The pattern will emerge. However, a guided analysis is often the fastest way to get a reliable and comprehensive picture without diverting your internal teams for weeks.
For manufacturers, the most powerful KPIs to analyze are: profit by customer, profit by SKU/product line, sales by region, machine downtime causes, raw material costs by supplier, and scrap/rework reasons. Analyzing these reveals the vital few inputs disproportionately driving your profitability and efficiency.
Yes. An 80/20 analysis is often the catalyst that breaks down those silos. We typically start with the most reliable data (usually financials) and then pull in data from operations and sales. The powerful insights from the initial analysis create a compelling business case for integrating data more effectively.
Your Next Step
Speak to Our Experienced Team
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Bill Canady
CEO & Leadership Advisor
Bill has led more than 20+ 80/20 Implementations, including Arrowhead & OTC within the Genstar portfolio. Also, the author of The 80/20 CEO, Panic To Profit, and founder of PGOS (Profitable Growth Operating System).​
Monique Verduzco
Strategy Coach
Monique Verduzco is a global strategy and M&A consultant specializing in guiding consumer-focused businesses through growth, transformation, and successful sale.
Joe Michels
80/20 Implementation Leader
Joe Michels is an experienced 80/20 practitioner with a deep background in implementing 80/20 principles within private equity and publicly traded companies.