Compounding Growth

Albert Einstein famously suggested that the power of compounding was the eighth wonder of the world. He then proposed that those who understand it, earn it and those who don’t, will pay it.

In terms of monetary investments, clearly compounding is key. Having an investment that grows over time provides security towards retirement.

It’s crucial for an MSP business owner therefore to understand how compounding works because it doesn’t apply just in a monetary (i.e. interest) sense. There are many ways that compounding can help, which are worth looking at. For example, most MSP business owners get at least 80% of their new business from referrals. The average referral rate is critical here because if the number is high enough, then dramatic compound growth of the business occurs – a truly remarkable experience.

Famous examples of explosive compound growth include social-media companies such as Facebook. Nevertheless, on a smaller scale, some very successful MSPs have also achieved remarkable growth this way, i.e. by ensuring their referral-rate was high.

Of course, another universal law is that you only get out what you put in. You can use leverage and accelerate results when you use force-multipliers.
Force-multipliers in a business content could be such things as :

  1. Referral programs – incentivizing existing customers to refer new ones
  2. Strategic partnerships – leveraging the strengths of complementary businesses to reach new audiences
  3. Influencer marketing – partnering with influencers in the industry to promote the product or service
  4. Content marketing – creating and sharing valuable, relevant and consistent content to attract and retain target audience
  5. Event sponsorship – participating in industry events to build brand awareness and connect with potential customers
  6. Customer reviews and testimonials – leveraging the positive experiences of satisfied customers to build credibility and trust
  7. Email marketing – leveraging the power of email to reach and engage with target audience
  8. Social media marketing – using social media platforms to promote products, services and interact with customers
  9. Account-based marketing – targeted and personalized marketing efforts for key accounts and decision-makers
  10. Affiliate marketing – partnering with other businesses to promote products and services to their audience in exchange for a commission.

Some of these examples are more appropriate than others, nevertheless, for any of them to succeed, they will require time and effort. Yet one of the challenges with compound growth is that it can appear outwardly that very little is happening, especially within the early stages. To illustrate this, there is a famous example of water-lillies on a pond, which it has been said can double in area each day. The question asked was “If I start with just one water-lilly on my pond, at the end of two months, how big a pond could they cover?” The answer is in the order of an area twice the surface of the earth.

However fantastical this sounds, the fact is that after the first week, the area covered is still only around 1 square metre. This result seems ridiculously small in comparison to the earth and feels wrong. It would seem like the process isn’t working.

If you equate this to working on your business, you could work hard each day for a week expecting your results to be stellar and yet it’d appear that you’ve been unrewarded because your “lilly-pond” is still just covering one square metre, metaphorically. Which is why most people give up. There isn’t a linear effect with compounding, that’s the whole point and that’s also a problem for many people. It just doesn’t seem make sense to people on an intuitive level.

For the person that commits to investing some time into their marketing each week, even if it’s just a couple of hours, this means that in a year, around 100 hours has been invested on the business.
You can do a lot in 100 hours! Again, most people understand this cerebrally but they still don’t apply it – because the results inevitably take longer to reflect the work and people want quick results for their efforts.

So, the message is simple. Trust in the process, even if the results are slow to materialise. That’s not to say that you should keep doing the same thing week after week if what you are doing isn’t working, just that
by allocating and investing time each week – consistently – to working on your marketing (ideally to a testing-measuring structure of some kind) then you are much, much more likely to see significant compound growth than
leaving everything to chance or doing everything sporadically.

So, look at you diary, see where you can squeeze in two hours per week (or more if you can faithfully commit to it) and don’t let anything interrupt you, unless the house is on fire.

There you go – that’s the ‘secret’ ingredient to successful marketing that accounts for most of the enviable results you’ll ever see in the real world.

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Mike Knight