Compounding to get better in life


I was having a discussion with my marketing manager the other day on the plans for the new financial year. How her team was expected to meet their targets, how her team was to help get the sales team to be producing results and how my overall team of different functions would get to double their turnover.

The moment you think of doubling something, it throws up resistance in the mind of everyone involved.

JAY ABRAHAM has a very simple equation for sales – which uses the concept of compounding – Total Value of sales = number of new clients*number of times existing clients buy*value of sales – if you need to double the total value of sales you don’t need to increase everything 100% – if you just work on increasing each of the three parts of the equation by about 30% – the total growth is double.  If you don’t believe just multiply 1.3*1.3*1.3 = 2.197.  For a further explanation on this you could read his book “Getting Everything you can from All you’ve got” . Its an awesome book on scaling a business.

Now for someone even increasing each item in the above equation by 30% could seem like a lot.  But each item above is made up of multiple processes.  Like getting new clients could involve improving the database by 10%, improving the quality of calling by 10% and improving the quality of proposals by 10%.  Just improving each of these processes by only 10% will increase the process of getting new clients by 30%.  You can go further in breaking down each process.  the process of improving the database could further be broken down into attending 5% more events and in each customer meeting try to build connections with 5% more people and so on. Once you can start looking at each process minutely and keep improving the task of doubling any item is relatively very easy.

Verne Harnish in his book, Mastering the Rockefeller Habits talks about how Michael Dell would continuously want to monitor issues in processes that were being followed in his company because he believed that once he got those eliminated the overall benefit to the organisation in the long run would be enormous.

Japanese have a method called “kaizen” which is to look for continuously doing small improvements, in the process or in the product.  The logic is that if you were to do very small improvements continuously you could compound to have very large benefits over a period of time.  If you were to improve just 1% every day of the year, by the end of the year you would be 36.5 times better than you were at the start of the year.  Not 36.5% better but 3650% better.  That’s the power of compounding.

Compounding can go down to each level and still the same rules will apply.  Its fractal.  Like 80/20.  In every 80/20 there is an 80/20 and in every second level of 80/20 there is generally a third level of 80/20 and so on.

The same law will keep applying.  And its so simple.

But don’t get fooled by its simplicity.  What is simple may not be easy to do or may not be easy to want to do.

I have started getting a very strong belief as I get older that people don’t believe in things which are simple. A lot of times while I am talking about this, I am also guilty of getting carried away with shiny objects which look complex.  People like to address tasks which are complex, because simplicity seems too good to be true. Or maybe people don’t get the thrill when they do simple things.  May be it doesn’t seem heroic.

To Simplicity…..




…..use the content from Verne Harish on page 72 & 73…..also use Jay Abraham’s equation of 3 ways of increasing  something….

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