Compound interest and its impact on exponential growth

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Furthermore, we tend to consider ourselves rational and view projections of large numbers as magical thinking. Paradoxically, we perceive these projections as intelligent and we don't want that to happen to us. This cognitive bias leads us to be conservative in our estimates and to not fully exploit the growth potential of our businesses.

Compound interest is a financial concept that describes how interest earned on an investment is reinvested to earn more interest. In the context of a SaaS business, this translates to how recurring revenue builds up and generates more revenue over time. This compounding effect can lead to exponential growth, where revenue grows at an increasingly faster rate.

To illustrate this point, let's consider a business that has a turnover of 20k at the end of the first year and grows 35% in turnover year after year. At the end of year 10, this business would be billing approximately 370k. This exponential growth is difficult for most people to visualize and project, since we are used to thinking in a linear fashion.

Compound interest is a powerful tool for growing a SaaS business, but it requires a long-term mindset and a deep understanding of how exponential growth works. It’s important to educate entrepreneurs and business owners about this concept so they can fully leverage its potential.

Anchoring and bias in the present
Anchoring is a cognitive bias that leads us to rely too heavily on the korean friends whatsapp number first information we receive when making decisions. In the context of a SaaS business , this can lead us to underestimate growth potential by focusing on initial numbers and not properly considering the cumulative effects of compound growth.

For example, if a business starts out with modest revenues, it's easy to get stuck on those numbers and not adequately project future growth. This bias can lead to conservative decisions and failure to fully exploit growth opportunities.

To overcome this bias, it is important to adopt a long-term mindset and consider the potential for exponential growth. This requires a deep understanding of how compound interest works and a willingness to challenge our assumptions and cognitive biases.

The perception of rationality and magical thinking
Another factor that contributes to our difficulty in projecting future numbers is the perception of rationality. We tend to view ourselves as rational beings and view projections of large numbers as magical thinking. This leads us to be conservative in our estimates and to fail to fully exploit the growth potential of our businesses.

To overcome this bias, it is important to adopt an open mindset and be willing to challenge our assumptions. This requires a deep understanding of how exponential growth works and a willingness to consider both optimistic and ambitious scenarios.

In addition, it is useful to learn from successful examples and study business cases that have experienced exponential growth. This can help us better visualize the growth potential and adopt a more ambitious and proactive mindset.

What is Matrix 78?
The 78 Matrix is ​​a model that maintains that if you manage to gain new customers on a sustained basis and they do not churn, you will have a very interesting business in the future. This model is based on two essential pillars: gaining new customers on a sustained basis and minimizing churn or customer loss. Recurring payments are what make SaaS businesses extremely attractive, as they ensure constant income and facilitate long-term planning and projection.