Understanding Compounding in Business

Compounding is a key concept in building successful businesses, focusing on either selling products that generate repeat purchases or establishing a network that continues to sell on your behalf. A prime example of this is Coca-Cola, where a single purchase can lead to lifelong consumption. Additionally, companies like Facebook capitalize on their user base by selling advertising space, leveraging their existing customers to maximize profit. The goal is to create a compounding asset where businesses do not merely focus on acquiring new customers each year while losing the previous ones, but instead retain customers, building a loyal base that contributes to ongoing sales.