In business, the "80/20 Rule" means that 80 percent of your profits come from 20 percent of your efforts. Find out how to spend that 20 percent through strategic testing.
Building a successful business, keeping it alive and growing… these things are not easy. They’re hard. Sure, it’s easy to find dozens of examples of businesses and entrepreneurs who are on continuous winning streaks. Some people have a natural knack for business, others are just lucky. But there’s a another group, and it’s where I fall. If you’re reading this, you probably fall into, it too.
The Strategic Testing Entrepreneur
Nearly all of the successful ventures I've worked with believed in risk tolerance. Risk tolerance allows even mediocre entrepreneurs have tremendous success.
I surround myself with highly skilled programmers, Big Data cowboys, detail-focused project managers and effective direct response designers. I can lean on them because they’re some of the best in their field of expertise, but when it comes to my field of expertise, marketing, my biggest asset is my risk tolerance.
Maybe you’ve heard of Pareto’s Principle. It’s the 80/20 Rule. You can apply this general rule to unlimited applications. It was first used in Economics, stating that 80 percent of consequences stem from 20 percent of causes.
In business, we can apply the 80/20 Rule to say that 20 percent of your team is vital where as 80 percent are trivial. Twenty percent of a businesses SKUs account for 80 percent of the total units sold. Twenty percent of your time in a given day gives you 80 percent of your work output.
Specific to the Strategic Testing Entrepreneur, we can use the 80/20 Rule to detail a path for success:
It take 80 percent of the labor to get us 20 percent of the results. The remaining 80 percent of results are then from only 20 percent of labor.
Said another way, it takes a lot of work to get something built. But building your platform, your service, your business may only lead to 20 percent of the end result to you.
I have a client who built out a technically in-depth software tool. It’s cost him tens of thousands of dollars. His results so far have been meager. He has actualized about 20 percent of the potential in the software and is frustrated. He predicts the correlation to be linear; he wanted to have 80 percent of the reward (total revenue) now that he has 80 percent of the development complete. This false understanding of how 80/20 applies to his business has caused him (and his developers!) a lot of frustration.
If we instead look at the technology built as 80 percent of the labor, we can see that we need to test in order to improve the revenue. Assuming it took 1,000 hours of labor to produce the product, we can assume 250 hours are needed to maximize the results from the tool (20 percent).
I see this across the board with other clients. One came to the Tech Guys team with a fully functioning webinar. He had email campaigns, autoresponders, a sign-up page, a webinar, an offer and people to staff the different pieces. He did a lot of heavy lifting to get that far, but his results were low and slow. By focusing a small amount of effort in improving the campaigns, we are getting tremendous success. Had he threw in the hat and stopped the campaign due to its ineffectiveness, he would have thrown away all the work. Now, his Facebook ad campaigns are bringing him a 10X ROI. For every $1 he spends on ads, he is getting $10 in profit. And this only took 45 days!
If you’re an entrepreneur and you’re not unbelievably lucky… if you don’t have a gut that’s always right… you need to test. Don’t get frustrated when your first offer doesn’t hit big at the first go. Be risk tolerant. Take time. Invest in testing. Don’t throw it all away just because you didn’t strike gold at first dig.
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