Three practical rules anyone could benefit from are the 80/20 rule, the rule of 72 and the rule of 150. Alone or together these rules provide an easy way to make better business decisions.
The 80/20 rule was developed by Pareto. An Italian economist who observed that 80% of income in Italy went to 20% of the population. Today, this rule is widely applied. When in doubt it is a good rule of thumb. For example, 80% of sales comes from 20% of the customer base.
Rule of 72 is a financial investment rule. Perhaps the most important rule when it comes to understanding the power of compounding interest and investments. It is powerful for its simplicity, yet quickly gives you a good grasp in understanding your money.
The rule of 72 simply states that if you invest your money at a certain rate of return, you figure how many years it will take for your money to double, by dividing 72 by the rate. For example, if you are getting an 8% return on your investments then your money ought to double in 9 years (72/8). It also works if you want to know what rate of return you need in order to double your money. For example, if you want to double your money in 6 years you will need a rate of return of 12% (72/6). Please note this assumes that the rate is consistent throughout the life of your investment.
The Rule of 150 states that the optimal size for a group is 150. Humans could only properly maintain proper relationships in a group no bigger than 150. Perhaps the best example of the use of this rule is Gore Associates, the maker of Gore-Tex fabric. When asked when do they know to build a new plant, the answer is simple, when all 150 parking spots are full.
Three simple, practical business management rules that help.