Third Profit Secret of Entrepreneurs
This is the third article in a series on Profit Secrets of Entrepreneurs. The first profit secret of entrepreneurs was “hope for the best, plan for the worst.” The second installment in the profit secrets of entrepreneurs was to tightly target your niche market. Now, in this, the third installment of the Profit Secret of Entrepreneurs we’re going to talk about the great equalizer: Time.
THIRD ENTREPRENEUR PROFIT SECRET:
TIME MANAGEMENT IS KEY
I’m sure you’re familiar with the Pareto Principle or the 80/20 rule. According to Wikipedia,
“The Pareto principle (also known as the 80-20 rule, the law of the vital few and the principle of factor sparsity) states that, for many events, 80% of the effects come from 20% of the causes. Business management thinker Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed that 80% of income in Italy went to 20% of the population.”
The Pareto principle is a commonly accepted truth in business, especially when it comes to TIME MANAGEMENT.
When you start thinking about the 24 hours you have available each day, and the 7 days you have in each week… then we begin to delve into a realm where the 80/20 rule truly comes into it’s own.
You only have so many hours in each day. As an entrepreneur, time is by far your greatest asset. You can always raise more capital, get more funding, sell more product or stock to get more money. The one thing you can’t beg, borrow or steal is more time.
Keep the 80/20 rule in mind as you build your business.
Using the 80/20 rule for time management means focusing your time on the most profitable activities for your business. 80% of your effort will be spent on activities that produce 20% of your income and conversely, the other 20% of your time will be spend on activities that contribute to 80% of your income.
Try to look at your daily activities through this lens. The purpose of this is to reveal what activities are most profitable for your business and for you to devote your time and energy to those activities.
If this sounds like BASIC BUSINESS 101, consider the story of the Big Mac. The Big Mac is a hamburger created by the fast food chain McDonald’s. in 1975, Charles Rosenberg, Creative Supervisor of the Dan Nichols team at Needham, Harper and Steers, Chicago came up with the catchy and popular “pre-rap” way to describe the burger.
“Two all beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun.”
It was catchy and became a complete phenomenon that is still remembered 30 years later. However, there’s something you might not know about the Big Mac: it’s the least profitable item on McDonald’s menu.
Talk about the 80/20 rule coming back to bite you! Probably the most successful and enduring ad campaigns of the 20th Century was written to promote the McDonald’s version of a loss leader.
I’m not sure the 80/20 rule is a “physical law” but it’s a great mental exercise to keep you focusing on the most profitable activities and products in your business. Focusing on the top profit producing activities and products is the best way to deliver profits to your business!
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