finance
Rule of 72
Quick mental math: divide 72 by the growth rate to estimate years to double.
Definition
The Rule of 72 is a quick mental math shortcut: divide 72 by an annual growth rate (or interest rate) to estimate years to double. A business growing 12%/year doubles in 6 years. An investment compounding at 8%/year doubles in 9 years. It's an approximation (not perfectly accurate for high rates) but close enough for back-of-envelope thinking. Useful for: estimating growth trajectories, evaluating investments, comparing compounding scenarios.
In your business
- →Use it for quick mental modeling - 'we're growing 20%, that doubles us in 3.6 years'
- →Apply it to costs too - inflation at 4% doubles costs in 18 years
- →It's an approximation - for precise math use a real calculator