One of the things that you should keep in mind that will be powerful to you when you make financial and business decisions with regards to investments, and returns, is the power of compound interest. This is one of the main considerations why your passive income will grow and become significant over a long time, and is the source of much of the entrepreneur’s wealth.

If you make a decision, for instance, to invest in something that will return to you 10% per year, and you choose not to touch it for five years, you know you will be getting more than 50% return ( it is about 61% percent).

Some of these returns are not easy to compute, and I find the rule of 72 a very good rule of thumb. Simply put, if you consider a compounded investment giving you for instance x returns per year, 72/x is a fast way to know how long it will take for you to double your money. So, by this, it is easy to know that if the investment returns 10 percent compounded, it will take (72/10) 7.2 years for you to double, and at 7.2 percent return, it will take (72/7.2) in 10 years.

You can also use this to know, for instance, how long it will take you to double your sales. If your sales is growing at a compounded rate of 20 percent, then you know you can double your sales in 72/20 or 3.6 years. If you are growing at 15 percent, then you double in (72/15) 4.8 years.

This is also a good way to compute possible return comparison. A popular vehicle for investment a few years back was when some investment houses promised an investment that would double your money in 6 years. Using the rule of 72, it is easy enough to know that this investment therefore is giving you (72/6) 12% return per year compounded, and thus, gives you a better tool to gauge whether other investments are more preferable or not.