The Compound Effect

If you understand the Compound Effect, it can really help your business.

Basically the compound effect means that small changes done consistently over a prolonged period of time can lead to great results and great profits. A lot of people don’t understand that, which is why give up so quickly.

If you ask people if they rather have a million dollars or a penny doubled over 31 days, most people would choose the million dollars. Why? One reason is that a penny double does not seem like much after a few days. A penny doubled is $0.02 after one day. After two days it is $0.04, then $0.08 and then $0.16. It does not seem like a lot of money, so most people figure it’s better to take the million dollars.

However, these people who chose the million dollars don’t have understand the power of compounding. Because of compounding, the dollar amounts get bigger and bigger. After 17 days you will have $655.36 if you keep doubling the money. After 23 days you will have $41,943.04. After 31 days your penny doubled will be $10,737,418.20. If you chose the $1 million, you would have $9 million less than if you took a penny doubled.

The compound effect works in all facets of life. If you want to lose weight, you won’t lose it in just one day. If you consistently eat good quality food, cut down on calories and exercise, you will lose weight over time and your health will improve as well because of the compound effect.

Conversely, if you junk food and fatty food, you won’t notice any difference the first day or two. After many months and years, if you continue eating the junk food and the fatty food, your weight will increase a lot, and you may develop health problems. This is all because of the compound effect.

The same applies to your business. If you work your business hard and do many of the little things most people won’t do, and you do it day in and day, you may not see results immediately, If you continue doing those same good things and work hard consistently over a certain period, you will start seeing great results, and you will start making money.

If you want to be successful in the long-term, take advantage of the Compound Effect. A great book that discusses this is “The Compound Effect” by Darren Hardy. I highly recommend it.

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