Today we’re going to talk about the concept of compounding.
Maybe you’ve heard this idea already, and you already understand how powerful compounding can be.
But I urge you to continue reading because I also thought I “understood” the power of compounding, and had heard it “many times” in the past…
But until I realized it’s staggering effects, did my behavior start to change.
It’s one thing to know something intellectually, it’s entirely another thing to do so.
So maybe this post will help to drive those grooves in deeper, or simply be an eye-opening insight.
Albert Einstein is quoted as saying that the “compound interest is the 8th wonder of the world.”
Today I’ll share how you can leverage the law of compounding in 3 ways as a sales professional of some sort to benefit YOU.
Here we go – the law of compounding as it relates to:
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Let’s dive right into the first point –
This is more of a traditional lesson in the power of compound interest as it applies to our finances.
The effects of compound interest can be most evidently seen with money, as it’s something that can be counted in a quantifiable amount.
As I mentioned, I had always “understood” how powerful the law of compounding was, as I had heard it in math classes, and heard people always talk about it.
I’m sure just like you.
But it wasn’t until actually just a few short months ago that I came across an online calculator of net worth and compound interest.
I used this one here from Dave Ramsey’s site.
I started playing around with it and plugged in some numbers.
Let’s say you’re currently 25 years old, with a grand total of $10,000 in the bank.
But you’ve since gotten into sales, and are committed to living frugally and commit yourself to put aside $2000 every month from the commissions you earn.
Assuming you invest your money in an index fund that mimics the S&P 500 (which over the last 30 years has returned 12% on average)
Your initial investment of $10,000 and your diligent discipline & goods habits will net you a total of $31,436,735 by the time you’re 67.
That’s some SERIOUS gains there.
I encourage you to play around with the calculator yourself.
You’ll be able to quickly see how MASSIVELY compound interest works to stack on top of itself.
And just how huge of an impact there is by starting early, and making as many sacrifices early on to invest as much as possible in the beginning.
In other words…
Make the power of compound interest your ally early. Start right now if you haven’t.
Just by starting, you begin to make it your ally just by every single day that passes.
Conversely, by not starting, you’re not making it your ally, and instead, it’s working against you.
So make it your ally, and start now if you haven’t!
And even if you might be further down the journey of life, you’ll still be able to see that the more contributions you make to your financial investments now, the larger they will snowball to overtime.
This is an absolutely key concept to understand in life!
It’s also known as delayed gratification.
Our society, especially with the advent of the internet and social media…
Has conditioned a generation of kids to be accustomed to instant gratification.
Think about it, if we want to be seen by our “friends and family” we hit a button and post a photo.
If we want to order a piping hot pepperoni pizza or a mouth-watering Chinese takeout, we simply tap our thumb.
Shoot – people have even looked to their phones and digital apps to try to find their soulmate in life, and in 60 seconds you can swipe through close to 100 potential partners! (Don’t ask me how I know that)
Point is, our culture has conditioned us to reward and focus on instant gratification.
But it really is in delayed gratifications that our greatest rewards and gifts bear fruit.
It’s an incredibly important concept to understand, and in finances, it’s the most clearly visible because again, we’re talking about quantifiable dollars here.
But I want to take this same concept and bring it to a totally different area of life.
It’s no secret that sales is not always a stroll in the park.
In fact, if you’re reading this, I’m sure you know very well just how much of a grind this profession can be—whether you sell directly for your profession, or do more indirect forms of persuasion.
But you gotta love it.
And in order to love it, you have to get good at it. Or at the very least, you have to get proficient at it.
Almost without exception, the top performers in sales are students of the craft.
In other words, they are committed to learning.
They are lifelong students.
The reason why I brought up the idea of compounding and how it applies to money first, is the importance of seeing just how compounding works.
Another thing you must understand is if you apply the power of compounding to your own education and personal development,
Those results compounded over time can be astronomical as well!
“How do you compound knowledge over time?” You might ask?
Well, just like how you might have a process for your finances like automatically invest 10% of your income to an IRA without ever seeing it…
You also want to systematize your process for self-education.
An easy way to do this is simply committing to a small amount of education that you’ll do each day.
An example of this can be reading 10 pages per day, or reading 30 minutes a day.
In fact, that’s exactly what I shared with my friend when one day he came over and saw all the books in my apartment.
He asked me, “Dude, how do you manage to read all those books? I get bored and zone out after reading a while”
I told him to just commit to reading 10 pages per day because anyone can find the time to read just 10 pages of a book per day. I then asked my friend if he read 10 pages per day, “How many would that be in a month? And in a year?”
And he told me it’d be 300 pages or about a book a month. And over the span of a year, that’d be 12 books!
And THEN, I asked him, “How much do you think your life will change if at the end of this year you read 12 new books on personal development, business, sales, and leadership? And how much will it impact your life if you did that for the rest of your LIFE?”
I then immediately saw something click in him—as if a lightbulb turned on.
He said he “got it.”
And since he’s been reading almost every single day, and has personally shared with me how huge of a difference this has made in his life.
It’s small wins compounded daily overtime.
So just like how money compounds on itself over time, so does knowledge and education.
Being in sales or running a business, where our job is to influence and “make things happen,” we can use all the competitive advantages we can get.
And one surefire way to build a competitive advantage for yourself is to commit to feeding your mind for 30 minutes a day or reading 10 pages a day.
Building a simple habit like this is a surefire way to develop the habits of a long term winner.
Now, we come to the actual sales side of things.
How does all this apply to sales in practice?
Well, when you’re starting up a new sales job, chances are that for the first months to a year or so, you’re going to be spending the bulk of your time building “pipeline”.
What does this mean?
This simply means, you’re doing the groundwork of prospecting and generating new opportunities,
So you’ll have a “pipeline” full of good healthy opportunities that will lead to deals for you.
Well, the takeaway here with the power of compounding, is that if you work hard and keep up that activity…
…soon with the power of compounding, you’ll have a pipeline so full that you’ll be OVERFLOWING with deals soon.
Wouldn’t that be a good problem to have, huh?
The mistake many people make is that once they have a few opportunities in the pipeline, they take their “foot off the gas” so-to-speak.
They get lazy and complacent.
If they were able to keep up that activity consistently over time, instead of just working hard when they had to, they would be bringing in so much more revenue.
So here ya go!
3 ways for you to leverage the law of compounding in your own life!