The 80/20 principle states that 80% of your results come from 20% of your efforts. For new business owners, this means identifying which small portion of your work produces most of your success. The principle comes from Italian economist Vilfredo Pareto, who noticed that 80% of Italy’s land belonged to just 20% of the population.
In business terms, the 80/20 principle helps you find the activities that actually matter. Peter Murphy Lewis, founder of StrategicPete, applied this principle when he identified a specific market gap. As detailed in our StartUp Story, Peter spotted that mid-sized businesses making $5-15 million needed sophisticated marketing leadership but couldn’t afford a full-time Chief Marketing Officer. By focusing on this need, he created a “fractional CMO” service that provides high-level marketing leadership on a part-time basis. As he puts it, “I realized my clients needed me to get in and get out as quickly as possible and set up strategy with a team of operators.”
Business Planning Applications
When planning your business, the 80/20 principle becomes your filter for making decisions. Most new business owners spread themselves too thin trying to perfect everything at once.
The principle applies to market research too. Instead of surveying hundreds of people with lengthy questionnaires, focus on talking to 20 potential customers who match your ideal client profile. Their feedback will likely represent 80% of what you need to know.
For your business plan, concentrate on the few sections that will most influence your success:
- A clear problem statement (what specific issue are you solving?)
- Your solution (how exactly do you solve it better than alternatives?)
- The revenue model (how will you make money?)
- Initial customer acquisition strategy (how will you get your first 10 customers?)
These four elements will answer 80% of what investors, partners, and even you need to know about your business.
Time Management for Founders
Your time as a new business owner is limited. The 80/20 principle reveals which activities deliver real progress.
To apply this to your business, track everything you do for two weeks. Note which activities led to actual progress—customer conversations, product development, or sales. Then identify which activities consumed time but led nowhere—excessive planning, perfectionism, or low-value meetings.
Many new business owners find that these specific activities yield 80% of their results:
- Direct conversations with potential customers
- Creating and improving your core offering
- Building relationships with key partners or suppliers
- Activities that directly generate revenue
Everything else—endless research, perfecting your logo, organizing your workspace, attending general networking events—often produces minimal returns despite consuming most of your time.
Putting the 80/20 Principle to Work
Before you register your business or spend money on inventory, apply the 80/20 principle to your pre-launch phase:
- Focus on validation: Spend 80% of your effort confirming that people will pay for your solution. Talk directly to 10 potential customers and ask specific questions about their problems. Their answers matter more than months of market research.
- Simplify your offer: Identify the one core product or service that solves the most painful problem for your target customer. Launch with this single offering instead of trying to please everyone with multiple options.
- Prioritize revenue-generating tasks: Create a to-do list of everything you think you need before launching. Then mark only the tasks directly connected to bringing in your first customer. Do these first and postpone everything else.
When evaluating business ideas, apply the same principle. Ten small conversations with potential customers will tell you more than hours spent refining your concept alone. One paying customer teaches you more than any business plan.
The most successful new businesses start small but focused. They identify what matters most to customers and deliver that extremely well, rather than offering an average version of everything.
Your first version doesn’t need to be perfect—it needs to solve a real problem better than existing alternatives. What one problem will your business solve better than anyone else?
