How much more business does the number one business in a category get than the 2nd place business?
You’ve heard of the 80/20 principle or the Pareto principle right? Pareto showed that 80% of the land in Italy was owned by 20% of the people. Then people discovered that this ratio was everywhere. In fact, most business owners have heard that 80% of sales come from the top 20% of your customers.
According to the Washington Post, the wealthiest 1% of American households now own 40% of the country’s wealth.
Some people are claiming that technology skews the 80/20 principle to 90/10 or 95/5. Look at Google and Amazon. These two businesses tip in favor of the 1% owning the lion’s share.
Because I wanted to learn more about this principle, I read these 3 books:
- 80/20 Sales and Marketing by Perry Marshall
- The Star Principle by Richard Koch
- Simplify: How the Best Businesses in the World Succeed
These books opened my eyes.
Guess what? The world does favor those at the top. Whether it’s the top 5%, 10% or 20%, I don’t know. I haven’t done the research.
In my world, I see it all the time. Daily I’m working on getting business owners better search engine rankings. And I see this principle in action all the time.
In almost any major city, a few businesses own more of the search results on Google’s first page than the others in their industry. A few smart business owners invest to own the prime Google real estate for their niche.
These business owners are investing in the leverage that technology can give them. They are getting the lion’s share in their neck of the woods. You can too.