The 80/20 rule goes by a few names and has a few different applications. You may have heard it referred to by such honorifics as, “The Law of the Vital Few,” “The Principle of Factor Sparsity,” or you might know it as the “Pareto Principle.” In any case, the 80/20 rule states most simply that 80% of results derive from 20% of all efforts. For example, 20% of your clients make up 80% of your sales. In the case of spend management, the 80/20 rule suggests that typically, 80% of a company’s spend in a particular category is with the top 20% of the suppliers. Conversely, this also means that 20% of the spend is spread out across the remaining 80% of suppliers.