The most beneficial exponential growth happens when the whole becomes greater than the sum of its parts.

Have you ever been asked the question, “What would you rather have, $1 million, or a penny doubled every day for 31 days?” Those that chose the penny doubled came out ahead by over $10 million. Here is how exponential growth works its magic:

  • Day 1    $ .01
  • Day 2    $ .02
  • Day 3    $ .04
  • Day 4    $ .08
  • Day 5    $ .16
  • Day 6    $ .32
  • Day 7    $ .64
  • Day 8    $1.28
  • Day 9    $2.56
  • Day 10  $5.12
  • Day 11  $10.24
  • Day 12  $20.48
  • Day 13  $40.96
  • Day 14  $81.92
  • Day 15  $163.84
  • Day 16  $327.68

Over halfway through the month and still nothing significant happening. Right?

  • Day 17  $655.36
  • Day 18  $1,310.72
  • Day 19  $2,621.44
  • Day 20  $5,242.88
  • Day 21  $10,485.76
  • Day 22  $20,971.52
  • Day 23  $41,943.04
  • Day 24  $83,886.08
  • Day 25  $167,772.16
  • Day 26  $335,544.32
  • Day 27  $671,088.64

Here is where the magic happens on day 28:

  • Day 28  $1,342,177.28  (day 28 surpasses the $1,000,000 you either took or passed up)
  • Day 29  $2,684,354.56
  • Day 30  $5,368,709.12
  • Day 31  $10,737,418.20

So, to this point, a penny saved may very well be worth more than a penny earned. However, you  won’t really see this kind of exponential growth unless you go from one restaurant to many and it takes reinvesting those pennies into either something that will give your restaurant a tremendous boost or growing to 3, 5, 20 more locations. Leveraging your growth faster may come in the form of franchising or taking on investors. If you’re looking for funding, reach out to me. I have access to those that can help.

Likewise, a penny saved may be less than a penny earned. Inflation can grow faster than your money can earn. In this scenario you are better off spending that penny rather than saving it. I heard someone once say that money is just a piece of paper until it’s spent. Then, it’s worth whatever you traded it for. So, either way, a penny saved is most likely not a penny earned. Lastly, saving your money may come at an opportunity cost. Sometimes it’s better to reinvest your money into growing the business.

I believe the most beneficial exponential growth happens when the whole becomes greater than the sum of its parts. And the only time I have seen this is if our exponential growth is the cause of pouring into our people. Saving a penny on labor or training never proved to earn you anything but heartache and stress. Instead, invest in your people. Spend the money to properly train them. Spend the money creating a great culture. Spend the money properly building your team so that the whole is greater than the sum of it’s parts. Again, saving a penny can often hurt you when it comes to your people and your guests. For instance, if you under pay your people as we mentioned in an earlier column article, we will spend more money because we didn’t retain them. Or if they stayed, they weren’t maximizing productivity.

For the guest, saving a penny on labor will mean you are staffing at levels that will not allow your line cooks to keep up with production, dishwashers properly cleaning dishes, hosts seating guests quickly, SAs flipping tables quickly, and servers providing a poor experience and not having time to build the check. Saving money often means your pie gets smaller instead of bigger. As operators we can’t think like that. We can’t think there are limited growth opportunities. When we do, we actually reduce the chance of growth. Every dollar spent should be focused on creating a bigger pie. Every dollar saved may very well send you spiraling down in sales which ultimately leads to closing your restaurant. Focus on growth. Focus on investing that penny not saving it.

Editor’s note: This is the 20th article in a new column from restaurant expert Monte Silva. More on the series can be found here. The first story, on Why Underpaying Restaurant Employees is a Recipe for Disaster, is here. The second, on Why Marketing is Not Expensive, is here. The third, on people-centric leadership, is here. The fourth, on Why Working 70-Hour Weeks in Your Restaurant is Not the Answer, is here. The fifth, on How to Provide Hospitality in a High-Tech, Low-Touch World, is here. The sixth, on ‘The Convertible Culture’ in Restaurants, is here. The seventh, on Why the Old P&L Model Has Set Restaurants Up for Failure,’ is here. The eighth, on How to Scale Your Restaurant Business When There is Only One of You, is here. The ninth article, The Secret to Finding and Keeping Great Employees is Not Difficult, is here. The 10th, What Culture Do You Really Want at Your Restaurant?, is here. The 11th, on Your Restaurant Should Serve People, Not Product, is here. The 12th, on Don’t Let Shiny New Toys Distract Your Restaurant from What’s Most Important, is here. The the 13th, on Why Restaurant Value Shouldn’t Be Based on Price, is here. The 14th, on The Case for Hyper-Focused Menus, is here. The 15th, This is How Your Restaurant Will Survive Beyond 3 Years, is here. The 16th, on The Difference Between a Restaurant Coach and Consultant, is here. The 17th, What is a Restaurant Tech Stack, and How Do You Know if You Built the Right One? is here. The 18th, You Can’t Make Someone Accountable if You Haven’t Made Them Responsible, is here. And the 19th, Memo to Restaurants: Service and Hospitality are Not the Same Thing, is here.

Expert Takes, Feature