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The Pareto Principle

The Pareto Principle

Italian Economist Vilfredo Pareto founded what most people call The 80/20 Rule in 1906. His observation that 20% of Italy held 80% of the wealth and the remaining 20% of the wealth was held by the 80%. The Pareto Principle was established that 20% were the vital few and the 80% were the trivial many. When a leader applies this principle to his team, productivity goes up. A good leader recognizes which team members are in the vital few and which are in the trivial many. Knowing this helps the leader to allocate time spent with each group accordingly. In other words spend 80% of your time and resources on the 20% vital few to help them continue to grow. Spend only 20% of your time and resources on the 80% trivial many.

This is very true when studying sales teams. Whether it is insurance sales, real estate sales or any other commission sales teams, the Pareto Principle is vital to success. Human nature is to want to coach or bring some of the trivial many up to the selling level of the vital few. This is a waste of time and resources. Time is better spent coaching, inspiring and helping that 20% vital few.

As a sales leader, take a look at where your money comes from off of your sales team. You will see that 80% of your income comes from 20% of your team of vital few salespeople and 20% of your income is derived from the trivial many salespeople. Having this knowledge, the successful leaders know exactly how many successful salespeople it will take to make their goals by hiring or contracting five times as many salespeople as they need. In other words, by adopting the Pareto Principle or 80/20 Rule, you can predict your own success of how many agents or reps you need to have on your team. Then cater your energy appropriately to your vital few, 20%. It doesn’t matter whether there is a team of 10 agents or 1,000 agents, the 80/20 rule applies. No matter the size of the team, the product or service, the “cream rises to the top” in every case.

Go out this week and build your team to five times what you need to be successful and take advantage of The Pareto Principle.

80 percent of output is produced by 20 percent of input.”—George Zipf

Image by Stuart Miles at www.freedigitalphotos.net

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Tim Wilhoit is owner/principal of Your Friend 4 Life Insurance Agency in Nashville, TN. He is a family man, father of 3, grandfather of 2, entrepreneur, insurance agent, life insurance broker, employee benefit specialist, salesman, sales trainer, recruiter, public speaker, blogger, author and team leader with over 31 years of experience in sales and marketing in the insurance and beverage industries.

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