I still remember the day I realized that most of my stress was coming from just a few problem areas in my business. It was during a quiet afternoon, reviewing customer feedback over a cup of tea. Out of 200 comments, the majority of complaints came from just two product lines. That “aha” moment was my first encounter with the Pareto Analysis—also known as the 80/20 rule.
This principle suggests that in many situations, roughly 80% of results come from just 20% of causes. In business, that can mean 80% of revenue comes from 20% of products, or 80% of complaints stem from 20% of issues. Learning to identify and act on these “vital few” factors can transform how you prioritize time, money, and energy.
I do this the of analysis all the time, including here in Tuppennys Fireplace. Although my ad revenue is very well distributed, there are a handful of articles that make the difference. That also applies to any type of business.
focusing on that 20% that excels and brings you the better results is what you have to care the most.
But not only that, have you noticed that the tasks that take you the shortest and the least amount of effort come out with the better results? Well, that’s how our guide on how to run a Pareto analysis for your business starts.
1. What the Pareto Principle Really Means for Business
Origin Story: Named after Italian economist Vilfredo Pareto, who observed that 80% of Italy’s land was owned by 20% of the population. Quality expert Joseph Juran later applied it to business quality control.
A Heuristic, Not a Law: Sometimes the ratio might be 70/30 or 90/10—it’s about identifying disproportionate impact, not sticking to exact math.
When It Works Best: Customer complaints, production defects, revenue streams, inventory issues, and even employee productivity patterns.
2. Why Businesses Should Care
Companies that focus on high-impact problem areas can see cost savings just by focusing their efforts on those high-impact areas.
Benefits include:
- Better resource allocation.
- Faster problem-solving.
- Clearer decision-making.
- Improved customer satisfaction.
One of the main advantages, according to Slimstock, is the optimisation of resources; the company can focus its efforts on a specific pinpoint.
3. How to Run a Pareto Analysis Without Getting Lost in Data
You don’t need advanced statistics software to get started—just a clear process, like the one below:
Step 1: Define Your Goal
Decide whether you want to reduce complaints, increase sales, cut costs, or improve efficiency.
Step 2: Gather Relevant Data
Choose a time frame that makes sense (e.g., last quarter’s returns, last month’s website inquiries). Make sure you have enough data to do the analysis; the last two weeks or last month won’t be enough. Ensure your data is clean, categorized, and consistent.
Step 3: Identify & Categorize Causes
Group issues into logical categories (e.g., “Shipping Delays,” “Defective Parts,” “Billing Errors”). Avoid making the list so long that patterns become hidden. If it does, then you can start taking out those who are not relevant already, and this will clean up your list since the beginning.
Step 4: Rank by Impact
This could be frequency, cost, time lost, or customer dissatisfaction score. Remember step 1 to focus on your objective.
Step 5: Focus on the Vital Few
Plot your data on a Pareto chart in Excel (bars for individual categories, a line for cumulative percentage). Identify the top contributors to your goal.
4. Turning Insights into Business Improvements
Running the analysis is just the beginning—the real value comes from applying the results and starting to run actions.
Example Adjustments Based on Findings:
- If 80% of shipping complaints come from two suppliers → renegotiate contracts or switch providers.
- If a small number of products generate most returns → review design, quality control, or discontinue them.
- If most revenue comes from a few products → increase marketing spend and inventory for those items.
See how you can start taking action without being a statistical expert?
5. Expert Tips for Making the Most of Pareto Analysis
Update regularly:
Business conditions change—review quarterly or monthly.
Combine with Root Cause Tools:
Use the “5 Whys” or fishbone diagrams to dig deeper into why those vital few issues exist.
Don’t Ignore the Small Stuff:
Sometimes “trivial many” issues may carry hidden strategic risk.
Make it Cross-Functional:
Include voices from sales, operations, finance, and customer service. They are your ears to your customer.
Tie Actions to KPIs:
Track before-and-after metrics to validate your changes.
Conclusion: Your 80/20 Opportunity
The Pareto Analysis isn’t just a data exercise—it’s a decision-making compass. If you want to combine efforts analyzing your company and bringing up ideas for your business, see this article to see the power of innovation. Which, in combination with this analysis, can boost your business.
By focusing on the few things that make the biggest difference, you can free up resources, improve results, and reduce stress. The question is, are you ready to find your 20% and act on it?
Last Updated on 14th August 2025 by Emma
