Daily Business Mentor Tip – The 80/20 rule of Leverage

November 29, 2011Post by Laura Humphreys

Everyone should be familiar with the old  80/20 rule as it seems to apply across most things in life.  In business it generally means that 80% of your income comes from 20% of your clients.  Or that 80% of your trouble comes from 20% of your clients, which is usually about right…

But I believe there is another 80/20  rule in business.  I believe that you should be spending 80% of your time working ON the business and 20% of your time working IN the business, eventually.  Notice I did add the word ‘eventually’ because the reality is that most small business owners do have to spend pretty much 100% of their time in their business for the first few years…. someone has to get in there and sell, sell, sell and then deliver on all the promises  made, right?   All of which of course leaves very little time or energy left for the all important jobs of business planning, research and development.

However, over time all business owners MUST shift this ratio to a point where I believe a business is most effective if the owner is spending 20% of their time working IN the business and 80% of their time working ON the business. So the question is this – how soon can you turn this ratio to the point where you’re spending all of your time working on the business and the actual functioning of the business is being done in some other way – either because because it’s automated or because it’s being done by other people?  How long is it going to take you to get there?

From the desk of liber8yourbusiness.  Small business mentors and experts in exit strategies.  Wellington, New Zealand.