Pareto’s Principle or the 80-20 rule
80% of the results flow from 20% of the causes
This theory can be applied to
- gardening – 20% of pea pods produce 80% of the peas
- land owning – 20% of the population own 80% of the land
- software – 20% of bugs create 80% of crashes
- global wealth – 20% of the world’s population owns 80% of the wealth
In business the theory would be (Richard Koch, 2004 Living Life the 80/20)
- 80% of your profits come from 20% of your customers
- 80% of your complaints come from 20% of your customers
- 80% of your profits come from 20% of the time you spend
- 80% of your sales come from 20% of your products
- 80% of your sales are made by 20% of your sales staff
Application to crowdfunding
The research is that the majority of your donations come from your close social networks.
If the theory holds true approximately 80% of your funds will come from 20% of donors – who will be well known to you. It may also be the case that only 20% of your entire social connections will be donors to your campaign – a sobering thought.
Who then are the 20% who are willing to support your campaign or invest in your business. Map these people out before you launch and involve them from the start.
Your potential donors will be
- closely connected to the team
- have a long history of connection
- existing customers or service users
- be passionate about the cause or idea
The key 20% of all your social connections will show one or more of these characteristics. The ones who tick all the boxes are the ones you focus on. Once you have connected with these potential donors, bring them into the campaign early so they believe in it and want it to succeed. Continually engage them. Focus your energies here. If they bring in 80% of the funds then the 20% is more likely to follow.