Pareto Cost Analysis

Cost analysis with Pareto chart excel template feature image
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Analyze the costs of your business with this professional template, showing the data on a Pareto chart to give a quick assessment of where most of the money is going and where changes can have the greatest impact.

What is Pareto Analysis ?

Pareto Analysis is a concept that is used in business decision making based on the 80/20 rule. It is a decision-making technique that statistically separates a limited number of input factors as having the greatest impact on an outcome, either desirable or undesirable.

Idea behind Pareto Analysis: 80% of a project's benefit can be achieved by doing 20% of the work or conversely 80% of problems are traced to 20% of the causes.

Steps of Pareto Analysis

By applying the 80/20 rule, problems can be sorted based on whether they affect profits, customer complaints, technical issues, product defects, or delays and backlogs from missed deadlines. Each of these issues is given a rating based on the amount of revenue or sales, and time lost, or the number of complaints received. A basic breakdown of the steps could involve:

  • Identify the problem or problems
  • List or identify the cause of the issues or problems noting that there could be multiple causes
  • Score the problems by assigning a number to each one that prioritizes the problem based on the level of negative impact on the company
  • Organize the problems into groups such as customer service or system issues
  • Develop and implement the action plan to solve the problems by focusing on the higher scored problems first
Not all problems will have a high score, and some smaller problems may not be worth pursuing initially. By allocating resources to the high-impact issues or higher scores, companies can solve problems more efficiently by targeting the issues that have a major impact on profits, sales, or its customers.
Free Pareto Cost Analysis Excel Template Information
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File Type :Icon
Generic Tags :Free Excel Template, Excel Dashboards, Excel themes, Excel pre-built templates
Last Updated :March 29, 2021
Template Version :1
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