The Pareto Principle
Do you know this man? His name is Vilfredo Pareto. He was born in Italy in 1848 and studied engineering , sociology, economics, political science and philosophy. He made several important contributions to economics, particularly in the study of income distribution. In 1893, he was appointed a lecturer in economics at the University of Lausanne in Switzerland where he remained for the rest of his life. In 1906, Pareto noticed that 80% of Italy’s land was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied. This observation lead to further testing of probability and sociology and ultimately became known as The Pareto Principle which today we have come to know as the 80-20 Rule.
So why am I talking about this economists theory? Well, it was part of my topic today at our Monday morning meeting. In previous articles I wrote about what makes a good and successful agent. Today I thought I would come up with the top 10 reasons why agents fail. As luck would have it, I stumbled across a story about classic business mistakes. I took that article and adapted it to real estate and then boiled it down to the Top 10 failures. Here they are;
1. Realtors don’t understand their target market. Or don’t have one.
2. Realtors spend more money then they bring in. They don’t have a handle on their cashflow either.
3. Realtors make faulty assumptions about their business model, they procrastinate, and are slow to effectively change their strategies.
4. Realtors fail to communicate their message to the consumer. ie; what their value proposition is.
5. Realtors don’t know their competition. What are others doing to distinguish themselves.
6. Realtors don’t charge accordingly for the services they offer.
7. Realtors spread themselves to thin. They confuse their customers.
8. Realtors don’t continue to generate leads.
9. They only work part-time.
10. Realtors spend too much time on the little jobs and not enough time on the high payout activities.
So what does understanding failure have to do with Vilfredo Pareto? Simple. His theory went beyond the recognition that 20% of the people owned 80% of the land in Italy. He found that for many events, roughly 80% of the effects come from 20% of the causes. It seems logical that by simply reducing the number of reasons for failure you will succeed. Rocket science and real estate collide.