By Rhett Doolittle

The Business Compounding Effect

The secret to business is the business compounding effect or getting compounding interest to work in all aspects of your business. Before I get into the massive impact “the compounding effect” can have on your business growth, I’ll break it down really simply for you. It’s just like a snowball.
When a snowball first starts down the mountain it barely covers any ground with a full rotation, it bounces around in a zigzag path because it’s edges aren’t smooth and it’s a question on whether it’s even going to keep going. As the snowball tumbles down the mountain it picks up more snow with each rotation. As it picks up more snow, it covers a more ground with each full rotation and picks up speed. It looks as if the snowball might actually make it all the way down to the bottom. It hits a mound in the way and throws it off course and now you have no idea if it will ever get back to where it needs to be.
It’s easy at this point to see the relationship between a snowball and business. Your business barely makes it in the beginning, not taking the straight path to success, picking up speed and getting thrown off course…that’s the easy connection. The key is that the snowball only survives if it’s able to pick up more snow along the way and turn into an actual ball.
As the snowball picks up more snow it is able to cover more distance with each rotation. If it were going the same speed it would cover more distance with one full rotation. However, it’s NOT going the same speed. It’s going faster than it was before and it’s covering more distance because it’s picking up more snow as it goes. (Compounding…) Additionally, as it grows in size more of the snowball is touching the ground, so it picks up more snow at one time. Lastly, as it gets heavier and more round it rolls in a straighter path down the mountain. This is compounding growth.
Every action you take to improve your business compounds on top of each other. The key to massive growth isn’t making huge changes, but it’s small incremental improvements over time that compound on top of each other to have a huge long-term effect.
Let’s take the cycle of advertising for example. You pay to advertise somewhere like Facebook. Let’s assume you’ve never advertised on Facebook before or haven’t had much success there, so your Cost Per Lead is super high and it’s a struggle to get a significant amount of qualified leads out of it. Luckily, you get enough expensive quality leads to convert into some new customers. Most businesses stop right there and probably never see a real ROI from Facebook Advertising or any advertising for that matter. The revenue from those customers just isn’t enough to cover the cost of the advertising.
However, if you’re following the Bluume Battle Plan you would make the extra effort at the time of the sale to create a connection with your customers. You will be able to collect valuable information from your loyal customers and capture their email addresses. The next best group of businesses stop here when they collect some emails from their customers, but:
–       Most don’t do anything with them
–       Some send them a useless monthly newsletter
–       Very little put them into an email marketing campaign
Here’s the special ingredient that separates the insanely successful from the rest of the world. These are the giant snowballs that roll on forever and have the potential at creating other snowballs. If you know who your loyal customers are then you need to retarget them and create campaigns to target customers just like them.
One easy way you can target new customers that are just like your loyal customers is by creating a look-a-like list in Facebook. You enter your loyal customer email list into Facebook and Facebook will do the work for you. It looks for common characteristics between those loyal customers and then puts your ads in front of other people with those same characteristics.
Now your advertising will be more effective because your ads are shown in front of other people that are more likely to turn into customers. Returning customers are easier to get now because you’re retargeting them, so you don’t need as many new customers as you did before to do the same amount of revenue. Or, if you continue to get the same amount of new customers then your will have an increase in revenue because of the addition in your returning customers. Additionally, this won’t be the first time you or your agency has run an ad for you, so the advertising campaign will get better. Now your complete advertising campaign is compounding as time goes on. Your Cost Per Lead goes down, revenue will increase or your advertising costs will decrease, returning customers increases and this never ending cycle will keep growing as long as you keep improving.
The power of “the compounding effect” isn’t just for snowballs or advertising campaigns. It applies to everything you do in life and every aspect of your business. Every little incremental improvement you make piles on to the last one and gains momentum as long as you’re focused on it. Just like the snowball everybody is going to get thrown off course at one time or another, but the businesses that pick up the most along the way and have the most momentum are able to get back on course and have a massive impact at the end.
Rhett Doolittle
About Rhett Doolittle
Rhett Doolittle was the founder and President of a company that reached #18 in the Inc. 500 Fastest Growing Companies in the United States. As the CEO of Business Warrior, Rhett is leading the charge on the vision and development of their software to help small businesses acquire more customers and increase profits.