The 80/20 Rule of Profit

Most businesses are busy, not productive. The 80-20 rule, also called the Pareto Principle, explains why.

Eighty percent of your results come from twenty percent of your work. The other eighty percent of effort only drives twenty percent of your outcome. That means most of your week is spent doing things that don’t move the needle. Low-margin jobs, time-wasting customers, and busywork that keeps you occupied but not profitable.

If you want to double your profit, you have to stop mistaking activity for progress.

Finding the Drag

Start by identifying what is dragging your business down.

Look at your numbers by department, service type, or customer segment. Which areas eat up time, crew hours, and working capital, but barely add profit? Those are your anchors.

In the trades, new construction is often the culprit. Imagine a $10 million company split evenly between service and new construction. On paper, both sides look equal. In reality, service might produce 80 percent of the total profit while construction consumes cash flow and energy.

You have to face that imbalance directly. Until you name what’s holding you back, you’ll keep pouring effort into work that looks good on paper but feels like running in mud.

Cutting the Waste

Once you know what’s not working, you have to be ruthless about removing it.

That might mean shutting down a department, exiting a contract, or firing a customer who takes up too much of your team’s attention. It’s not easy, but it’s necessary.

Every time you eliminate a low-margin distraction, you free up time, capital, and focus for the work that actually makes you money. The goal is to reverse the ratio: spend 80 percent of your time on the part of the business that drives 80 percent of your profit.

That is how you multiply the impact of every hour and dollar you invest.

Doubling Down on What Works

After cutting the waste, put systems around what’s left.

Look at your most profitable department. What would happen if you gave it more attention, better processes, and clearer leadership? Most owners spend their best time fixing the parts of the business that don’t work instead of fueling the ones that already do.

Shift that energy. Optimize scheduling, staffing, and marketing around the work that produces the best margins. Measure every job, track conversion rates, and find ways to raise average ticket size and recurring revenue.

Your best department is already a blueprint for growth. Treat it like one.

The Path Forward

Here’s how to apply the 80-20 rule to scale profitably:

• Audit every department by both revenue and profit contribution
• Identify the 80 percent of effort that produces only 20 percent of results
• Eliminate or outsource that work entirely
• Reinvest time, talent, and capital into your highest-performing services
• Keep measuring so you don’t drift back into busywork

The 80-20 rule is not just a mindset. It’s a management framework. When you focus your best people, best tools, and best time on your most profitable work, your business grows faster with less effort.

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