Here’s a Cool Way to Choose a Niche.
Pick a niche..using the Pareto (80/20) Effect.
Ok cool...So….what is the Pareto effect??
The original observation of the “Pareto Principle” was linked to the relationship between wealth and population… 20% of the population has 80% of the wealth. (The numbers are definitely a little more skewed now *sigh* but bear with me.)
Stories claim that Vilfredo Pareto originally noted what would later be coined the Pareto Principle (or effect) while examining his garden. He saw that 20% of his pea plants produced 80% of the healthy plants.
(I have grown Peas. They’re definitely jerks, and the big guys do take over.)
This inequity led him to consider this disparity in other aspects of life.
He observed that 80% of the land in Italy was owned by 20% of the population. After surveying a number of other countries, he found the same applied abroad.
He began investigating industry, and found 80% of production came from 20% of the companies.
He concluded that 80% of “results” are achieved through 20% of the effort.
The Pareto Principle became the observation that things in life are not always distributed evenly. And although it isn’t always a precise ratio, it is generally pretty accurate.
20% of customers account for 80% of profit.
20% of patients account for 80% of health care expenditures.
20% of an employees time accounts for 80% of their output.
Team projects? 20% of the members are absolutely doing 80% of the work!
And so on.
The Pareto Principle can be applied in a wide range of areas such as manufacturing. Management. Productivity. (Definitely productivity! I would argue 80% of our best work comes from 20% of our efforts.)
It can also be applied on a personal level.
*Where do you spend the bulk of your time at home? Likely only in a small percentage of the whole house.
*Clothes? I definitely do NOT make use of my whole closet. I have my favourites, and I go to those more often than not. 10 sweaters? I will go back to 2 or 3 or my most-loved.
*What about your phone? How many apps/screen saves do you have, and how many do you use on a regular basis?
Can this apply to choosing a niche as well? ABSOLUTELY.
If you are a freelancer or entrepreneur, there are strong arguments to be made for finding your most desirable clients rather than generalizing. Whether this means they are found in a narrow area of expertise, or most closely tied to what you love to do, applying an 80/20 mindset to making a decision upon where you will dedicate your time and energies will:
Simplify your processes
Free up wasted time
Help you stay focused
Prioritize tasks
Determine where your talents are most needed
Realize the most profit
I am a big believer in the Pareto effect. It trims down “busy work”. It focuses your energies and goals. It is an advantage to those you serve, because you focus on those you can serve the most effectively.
Grab a piece of paper, or open a spreadsheet. Make a list of:
-Your clients and their genre,
-your offerings,
-problems you can solve,
-your skill set,
-what you love to do/who you love to serve,
-what pays the most for your time spent
-and what work is being requested the most frequently.
If you are trying to niche down, you may realize that 80% of your work comes from 20% of your clientele.
Or that 80% of the joy you get from your work comes from 20% of your customers.
There will be a disparity, and it will be clear when you map it out.
And if you concentrate your efforts on those people, building relationships, nurturing and providing as much value as possible, you become an expert in your space. You will find that your time is better spent. You will hit your goals more quickly. Your income is higher. And you will likely be happier.
Quality over quantity.
And ultimately? If it isn’t a good fit, it is a valuable lesson learned and you niche again. It is a tough decision to make, but by using observable data in your favour as opposed to just going with your gut, you are FAR more likely to have a positive outcome.
Need help with nailing down your niche? We should chat!
