Dan Okwiri
Penning my Journal, there’s a “Magic Rule 72” I use everyday that will help you quickly calculate how long you will take to recoup your capital in any investment you do!
Many of us start businesses but we don’t have a clue on how soon we will get our capital back. We make investments but don’t know how fast we will get our capital back.
Mathematics is a mouthful especially for many, we don’t like figures for reasons I have yet to understand.
Today I wish to discuss one simple rule that guides Wuod Baba’s life. It often makes me look like a genius yet it is ludicrously simple.
It will change your world in how you calculate every investment you make, for we all want to know how soon we will get our capital back in everything we do? Today I will answer that for you.
The great thing about this magic rule is it doesn’t really need a head for figures. It’s called the “magic rule 72”. By the way don’t ask me why the figure 72 is used just use it. Don’t reason why, just accept that it is the figure 72 that does the trick.
*Note the rule assumes that you will plough the profit back into the business, and the business will grow at the same rate*
If you invest in anything the only thing you need to know is your margin of return?
Suppose you invest in a business and you put in a capital of Kes 1,000,000 and every month you get a profit of 12,000.
To calculate your margin of return for the year you take your monthly profit of 12000 x 12 months = Kes 144,000 a year. You then divide 144,000/1,000,000 = 14.4% is your profit margin.
Now if your business is growing by 14.4% and you re-invest all your money back into the business, we all want to know how long it will take us to re-coup our initial capital of Kes 1,000,000.
*Now this is where “magic rule 72” kicks in**
Just divide 72/ 14,4 = 5 years (this is the time it will take you to recoup your capital of Kes 1,000,000). It is as simple as that, always divide 72 by your profit margin.
If your profit margin is 7% for another different business venture, you again take 72/ 7 = 10.2 years to recoup your capital for that business.
Is this not amazing? 72 is an amazing number always edge it in mind in anything you do.
By the way I didn’t invent “magic rule 72” someone else did!
#okwirimy journal, my thoughts, my walk…
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