The Compounding Effect

Before you read further, answer the following question for yourself:

If you had to choose between the following 2 options, what would you choose?

1. 3 Million Euros cash, delivered today
2. 1 Eurocent that doubles each day for 31 days (just one month)

And be honest. Would you choose the one cent, or do you want to become a multimillionaire instantly if this was a real choice?

Let's imagine

Suppose you think it will pay off to choose the 1 Eurocent and your neighbour chooses the 3 Million Euros. After 5 days your cent has become 16 cents and your neighbour, who is now a multimillionaire, throws his first party. After 10 days, you now got €5,12 and your neighbour receives his brand new sportscar that he bought. IT TAKES THE FULL 31 DAYS to see its full effect! After 31 days you'll have €10.737.418,28 (that's over 10 Million Euros!) and your neighbour only has what's left from his 3 Million Euros.

The Compounding Effect

That's what we call the compounding effect. In the financial world it is reinvesting your profit to make more profit over time. And little things can add up. Here's a new question:

You get a starting capital of 1.000 Euros on a bank account. Which of the following scenarios would you prefer?

1. The account makes 1% profit a day
2. The account makes 35% profit a month

Since there are no more than 31 days in a month, you might tend to say that 35% per month profit is a better deal. Now is it? When you can't touch the accounts, that 35% per month would have turned the 1.000 Euros into €27.143,85 in a year. Not bad, is it? However, the 1% per day would have turned that 1.000 Euros into €37.409,34 in that same year! That's 10K more!

So little changes in the beginning can have a major impact at the end. When you go into the details, you'll see that the 1% account would have crossed the 27K mark on day 333, so that would have been November 29th. So the additional 10K is only made in the last month.

Small changes with big impact

Now apply the compounding effect on your business. By now you should know that those little changes can have a big impact, as long as you make those frequently. Take a ship that sails from Amsterdam to New york. The tiniest deviation at the start can make the ship end up in Miami. It's the same with doing business. You can wait for a big deal that will make you successful over night, or adjust your strategy towards your goals one step at a time.

Suppose you would change one tiny thing in your business every day, how would your business change in a few months? You would have a totally new business! Each choice you make will have its impact. So be aware of that. Take the first step today and change/optimize one thing today in your business. Change that text on your website, make that call, do that administration, invest in yourself, do that training, listen to that podcast, whatever.

Maybe you don't know what to change each and every day. That doesn't mean you can procrastinate. Like I said, start with a little thing. Start with changing one thing a week, get used to it, make it a habit, and when your focus has changed, start adding changes to the process.

Where to start?

That's where most people procrastinate. They don't know where to start. But that's not important. It is important THAT YOU START. Just do it. Start with the first step and build some momentum. And before you know it, you own a totally new business. Do you still think it's hard? No problem, that's why I'm a coach. to help you transform your life and your business. Just contact me for a free strategy session and let's find out how I can help.

About the author

I'm Erwin Wils, I'm a mindset coach and business strategist. I transform Tech Experts into Entrepreneurs, enabling them to become the person that achieves their goals, and beyond. With my technical background, 21 years of experience in the corporate world and my specialisation in the mindset, I have all the tools and skills to transform you as well as your business. Contact me or connect with me if you want to know more.

#entrepreneurship #Technology #inspiration