PEOPLE often associate compounding with investing, where reinvesting both your principal and interest at positive rates can lead to exponential growth if done over a long period of time.
Compounding can actually be a powerful concept for entrepreneurs; it’s about making consistent, incremental improvements over time, leading to significant advancements in your business’ operations, processes and overall success.
Compounding improvements: At its core, compounding in business means continuously looking for ways to improve every aspect of your operations, no matter how small. Small adjustments done consistently accumulate. As small investments grow into large sums, small improvements in your company’s processes can lead to significant gains in efficiency, productivity and profitability.
One of the most critical aspects of compounding in business is to learn from mistakes. For example, in my new four-month-old business, we scaled quickly, opening eight branches in rapid succession. Such aggressive expansion led to several costly mistakes. However, instead of panicking, our team adopted a mantra of “continuous improvement.” We accepted that mistakes are part of the process so long as they’re used as learning opportunities. If there’s a mistake, there’s a gap. So, identify the source of the problem, take accountability and modify processes to avoid repeating the same errors over again.
Last week, I caught my staff leaving the selling area unmanned while retrieving items from the production room, a violation of our standard operating procedures. This mistake was a learning moment for myself, the staff and the entire team since we used this incident as a training point, prompting us to revise our protocols to ensure lapses won’t happen again.
Now, imagine gaps like these are corrected little by little over time. Today, it’s teaching the staff how to properly clean their surroundings. Tomorrow, it’s training them how to engage with customers to give them a happier buying experience. If we take every gap as a genuine corrective experience, our business can only grow stronger over time. Even if new competitors enter, they won’t stand a chance, all thanks to the many incremental changes you’ve made throughout the years.
Compounding brand building: Brand awareness is the same; it grows through consistent, regular brand-building efforts. Every small action you take to promote your brand — whether it’s through social media, networking or delivering exceptional customer service — adds up over time. These efforts compound, leading to greater visibility, stronger customer relationships and an enhanced reputation in the market.
Our competitor enjoyed significant growth last year after booming on TikTok. The brand has already been in the Philippines for eight years, but customers thought they were new. Many didn’t even notice them when they began. However, they patiently built their brand. They invited food bloggers to sample their menu. They built their TikTok account and started creating interesting content. They persistently made small efforts until a famous TikToker made them viral, and people started lining up. Brand building takes time. If you trust the process and keep on improving your marketing efforts, you’re bound to succeed one day.
Compounding business acumen: Despite studying business in college and having considerable experience in the corporate world, my first year in business sucked. Apparently, succeeding in business requires a different set of skills than those needed in a corporate environment. Corporate roles often came with built-in support systems and resources that mask inefficiencies. In contrast, entrepreneurship demands hands-on learning and the ability to adapt quickly to new challenges.
I forced myself to learn something new daily. I treated every expensive mistake as my “tuition fee.” I paid P60,000 for not writing “SEA” on a package containing steel. The heavy package was shipped by air. I paid P220,000 for not checking my ledgers regularly. My assistant managed to steal that amount by “borrowing” daily.
Over time, I compounded my business knowledge and learned from experience, both positive and negative. Every mistake became a lesson, and each lesson contributed to my growth as an entrepreneur. This cumulative learning process is what ultimately transformed me from a novice business owner into a more seasoned entrepreneur.
Think about the tortoise and the hare. The hare, with its speed, has an obvious advantage. However, it’s the tortoise’s consistent, steady progress that ultimately wins him the race. In business, it’s not always how quickly you achieve success, but how consistently you work toward improvement. Those who embrace the discipline of compounding can outpace competitors who may initially seem faster, but lack the same long-term focus.
Tina Khoe Ang is a retail entrepreneur, managing 30 branches in Metro Manila, and a master franchisor of an American frozen treat brand with eight shops. She is a moderator at the Philippines HR Group on Facebook, and a co-host at The HR Cafe: Usapang Trabaho, Buhay, Atbp webshow every Sunday afternoon. Read her blog at https://tinainmanila.com/. Her email is [email protected].
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