The 80/20 rule also known as Pareto principal states that 80% of the effects comes from 20% of the causes. Vilfredo Pareto is an Italian economist. He noticed that about 80% land in Italy was owned by 20% of the total population in Italy. After this this rule, this was also used in business management for improvements in business strategies and in increase business profit.
Here maybe you have a question in mind that “How can it help in business?” Now I will show you with an example how can it help in your business decisions and you grow your business from this.
This is the link where you can see the 80/20 analysis of sales:
From the dashboard if you see the first two charts, then you will understand that the left chart is the Pareto chart and, in this chart, you see two reference lines. In these reference lines the horizontal line shows the percentage of products which is 20% and vertical line show the percentage of sales which is 80%. If you hover mouse pointer near 20% line then you see that
On tooltip just 17% products give 81% sales of total sales. And on the right-side chart you see the highlighted product name which shows that this product and all the above listed products give us the 81% sales. If you see the products count then you will have noticed that just 8 products have maximum sales. Like this if you see the other charts on this dashboard then you see the customers and vendors Pareto Charts.
After this type of analysis, you can easily take your business decisions like the 8 products which has maximum sales you can increase the production level of these products. And like this when you find the customers which purchase maximum products from you then you can try to make god relations with these products and provide good quality products which enhance your business.