Why I use the 80/20 principle to examine more than business.
I spend a lot of time thinking about where resources are going. In business, that’s pretty normal. We look at which customers are driving revenue, where the team is spending its time, which investments are producing results and where we’re putting energy without getting much back. Over time, you start to recognize that a relatively small number of customers, decisions, people or problems are often responsible for a disproportionate amount of the outcome.
At some point, I started wondering why I was willing to examine my businesses that closely but wasn’t always doing the same with my life.
Twice a year, I do what I call a semi-annual life review. I work through 17 questions that help me take an honest look at where I am, what’s changed and whether the way I’m spending my time and energy still aligns with where I believe God has called me.
One of the questions I keep coming back to is an 80/20 review of my life.
The 80/20 Review of My Life
When I do this personally, I’m looking for patterns more than percentages. I’m thinking about what keeps showing up as a source of stress, anxiety or frustration, but also about the relatively few people, experiences and parts of my life that account for so much of the joy and energy in it.
The stress side is important, but I’m not trying to identify everything that’s difficult and eliminate it. That would be missing the point. Marriage requires something from me. Parenting requires something from me. Leadership can be hard, and building businesses comes with problems. Some of the most important responsibilities in my life are going to require sacrifice, and I don’t want to confuse difficult with unnecessary.
The better question I’ve found is:
Does this deserve what it’s requiring from me?
Sometimes the answer is absolutely yes. Other times, I realize I’ve allowed one commitment, unresolved problem or relationship to consume far more of my time, attention or emotional energy than it probably should. Once I see that pattern, I can decide what I want to do about it.
But the 80/20 review isn’t only about identifying what I want less of. I also want to pay attention to what I want more of.
Relationships are a big part of that for me. There are people who breathe life into me, challenge me, encourage me and genuinely want the best for me. If those relationships are responsible for a meaningful part of the joy in my life, I don’t want to assume they’ll take care of themselves. I want to call them, put dinner on the calendar, plan the trip and actually make the time.
What Does an 80/20 Review Look Like in a Business?
The more I’ve done this personally, the more I’ve realized the same kind of review can be useful in business. Most business owners already understand the 80/20 principle. We have plenty of data that can tell us where revenue is coming from, which products are selling and where margins are strongest.
But I think some of the more interesting questions go beyond what’s sitting neatly on a P&L. If I were doing an 80/20 review of a business, I’d want to understand where a relatively small number of customers, people, decisions or problems are having an outsized impact on the organization, for better or worse.
That’s where I’d start looking more closely.
Start With the Customers
The obvious question is which customers are responsible for most of the revenue, but I’m not sure that’s enough. I also want to understand which customers are driving a disproportionate amount of profitable growth and which relationships are creating opportunities, fit where the company is going and are worth investing in further.
Then I’d look at the other side. Which customers require an enormous amount of the team’s time? Where are we constantly making exceptions? Are there customers who pay slowly, compress margins or repeatedly pull the organization away from the work we actually want to be doing?
A large customer can look incredibly valuable on a revenue report and still be much less valuable once you understand everything required to serve them. I’ve become much more interested in understanding the relationship underneath the revenue rather than simply looking at the revenue itself.
Look at the People Creating Leverage
I’d ask a similar question about the people inside the organization: Who is creating a disproportionate amount of value?
That isn’t necessarily the person with the biggest title or the largest team. Sometimes it’s the person who consistently solves problems, the leader who makes everyone around them better, or the employee who carries the culture into conversations you aren’t in. It may be the person you can trust with more responsibility because they’ve demonstrated they know what to do with it. Those are the people I want to recognize and invest in.
But there’s an uncomfortable side to this too. Where are we spending a disproportionate amount of leadership time compensating for one person, one role or one recurring personnel issue?
I’ve made the mistake before of assuming that more leadership or more people would solve a problem. Sometimes adding more isn’t the answer. It’s worth looking more closely at how the people we already have are being used.
Where Am I Creating the Most Value?
This may be one of the harder questions for me as an owner. If I look honestly at my calendar, which part of what I’m doing actually requires me? Where am I creating leverage that someone else can’t? Which relationships need to be mine, and which decisions genuinely require my experience, perspective or responsibility as an owner?
There’s an opposite side to that question too:
What am I carrying that someone else should own?
Those two categories can start to blur when you’re building businesses. You step into a problem because it needs to be solved, take responsibility because someone has to, or stay involved because you know the history and it’s faster to handle it yourself. Sometimes that’s exactly what leadership requires.
But something being necessary for a season doesn’t automatically mean I should still be carrying it six months later. That’s part of why this review is useful. It forces me to look honestly at whether my time is going toward the places where I can create the most value, or whether I’ve simply accumulated responsibilities along the way.
Which Problem Is Creating All the Other Problems?
Businesses can have dozens of problems at the same time, and when you’re in the middle of them, they can all feel equally urgent. Usually they aren’t.
One unresolved hiring issue may be creating problems across three departments. A broken process may be behind a disproportionate number of customer complaints. One cash-flow constraint may be affecting five other decisions, or a disagreement about strategy may be keeping an entire leadership team from moving in the same direction. Trying to fix everything at once can mean we don’t actually solve much of anything.
A question I want to ask more often is:
Which problem, if we actually solved it, would make several of the other problems smaller?
That’s another version of the 80/20 review. It isn’t about ignoring everything else. It’s about identifying where our attention can create the most leverage.
Not Everything Deserves Equal Attention
That’s probably what I appreciate most about this exercise. It forces me to confront something that’s easy to ignore in both business and life: not everything deserves equal attention.
Some relationships deserve more investment. Some customers deserve more attention. Some employees are ready for more responsibility. Some problems need to finally be solved, while other responsibilities need to be delegated. And some commitments probably deserve an honest conversation about why they’re still there.
The hard part usually isn’t identifying them. It’s deciding what I’m going to do differently once I see them.
That’s why I don’t want my semi-annual review to end in a notebook. If I identify someone I want more time with, I need to make the call. If I recognize work where I can create disproportionate value, I need to protect space for it. If one issue is consuming an unreasonable amount of attention, I need to understand why and decide what to do about it.
Being Intentional With What I’ve Been Given
I’m not interested in optimizing every minute of my life. I don’t want to turn marriage, friendships, faith or family into another efficiency exercise, and I don’t think every part of a business should be reduced to an efficiency calculation either. Some of the most meaningful investments we make, in people, relationships and businesses, take time before we see a return.
But time, capital, attention and energy are all finite. Every six months, this review gives me a reason to stop and look at where mine are actually going and whether that still reflects what I say matters most.
For me, the 80/20 principle isn’t really about percentages. It’s about being intentional with what I’ve been given and recognizing when the way I’m spending those resources no longer lines up with what I say I value.
At the end of the review, I’m usually left with two questions that apply just as much to my businesses as they do to the rest of my life:
What deserves more of me?
And what have I allowed to take more of me than it deserves?
At TKW Capital, we work with business owners and entrepreneurs navigating the intersection of business, capital and long-term stewardship. If you’re thinking through what’s next for your business, we’d be glad to have a conversation. Schedule a call with us.