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I thought I’d share this graphic I created, which I found sort of illuminating.
It needs a bit of exegesis of course. What you’re looking at is the profit from every sale I’ve ever made. Each slice is the profit from a sale. Starting at 12 o’clock, my biggest ever profit on a single sale was $2200. By 3 o’clock we’re at $600 profit items, by 6 o’clock we’re at $200, and by 9 o’clock we’re at $90 profit.
Here’s the punchline. 9 o’clock is three quarters of the whole clock, so 3/4 of my profits came from items whose net profit was $90 or more. But those were only 29% of all sales, when I actually count them up.
Stated again, 3/4 of my profit came from about 1/4 of the work I did.
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Not really making any changes that I wasn’t planning already, I just thought it was a cool illustration of Pareto in real life.
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Cool graphic Simplicio – thanks for sharing. I wonder if you overlayed year of sale if you would see a pattern? It would need some smoothing, but I would guess you would find more recent years distributed more heavily on the 12 to 3 to 6 side vs. the 6 to 9 to 12 side.
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I ran a pareto chart of my 2018 sales. It tells a different story than yours for sure.
My bread n butter items $20-50 make up the bulk of my sales and work. The big ticket items are the outliers.
Jay, this is a standard pareto chart. The histogram is a count (use left vertical numbers for values) and the line charts the cumulative percentage (use the right vertical percentage values).
In a typical pareto chart, you would draw a vertical line wherever the 80% intersection is of the line and the bulk of your data would fall to the left. Depending on what you are tracking that could be good or bad.
What the gold standard would be for use would be if the $200 and up, and the $100-200 bars would be on the left and be very, very tall in reference to the others. Also, the 80% intersection of the percentage line would cut off between the $100-200 bar and the $50-100 bar. That would mean 80% of total sales were $100+ items.
In my work as an engineer, I use Pareto charts to identify bad actors. I could be looking for the equipment that is costing us the most money in maintenance and repairs. I also use a pareto chart to identify which department is costing me the most money in production (inefficiency study).
I then focus my attention on the “big bars” that are eating my lunch and the “small bars out past the 80% line are a waste of time to deal with.
Hope this helps!
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Cool, thanks for sharing. I noticed the $0-20 column is out of place though. Still, definitely tells the story of a volume seller!
Even in your analysis though, I see you had only about 20 or so sales over $100 (out of what, 1000 sales?) and yet those 2% of high dollar sales made up a good ~20% of gross dollars.
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I also (sometimes to my detriment) apply the 80/20 principle to most of my daily tasks.
Take for instance, cleaning a room. You can get the room 80% clean in 20% of the time. The majority of the time cleaning will be detail work. But a quick pickup and wipe down will pass the eye test all day when company comes over.
Most of us probably apply the 80/20 rule when listing too. I typically apply 20% of the effort or less that would go into a professional listing, and I’ll still get 80% or more of the sales price a pro listing would get.
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