If you want to be a successful entrepreneur, there’s one key ingredient you can’t do without—leverage. Leverage is what separates the little guys from the big shots, and if you want to get ahead in life, you need to know how to use it.
In this blog post, we’ll explore what the power of leverage is, how to get it, and how to use it to your advantage. So whether you’re just starting out or you’ve been in business for a while, read on–this post is for you!
What Is Leverage?
Leverage is often touted as some kind of magical elixir for small businesses. Just a few drops of this potent concoction, and voila! Your business will grow and scale like never before. But what exactly is this strange leverage stuff, and how does it work?
In its simplest form, business leverage is a technique that allows you to grow or scale your business without having to put in all of the additional work yourself.
Leverage can come in many forms, such as using automation or delegation to free up your time, partnering with other businesses or experts in your field, or using borrowed money to invest in your business.
It is important to remember that leverage is a tool—it can be used wisely or poorly. Used wisely, leverage can help you achieve amazing things. But used poorly, it can quickly lead to problems.
The Different Types Of Leverage
Four main types of leverage can be used in business: financial, human, physical, and informational.
1. Financial Leverage
Financial leverage is when a small business uses OPM to grow their business. In other words, it’s using OPM (other people’s money) to level up your business.
There are a few different types of financial leverage that small business owners can use to grow their businesses:
- Debt financing: This is when a small business takes out a loan from a bank or other financial institution to grow their business.
- Equity financing: This is when a small business sells a stake in their business in exchange for capital from investors.
- Crowdfunding: This is when a small business raises capital from a large number of people, typically through an online platform.
All of these methods of financial leverage can be used by small business owners to grow their businesses. However, it is important to remember that with great power comes great responsibility. Financial leverage can help you level up your business, but it can also put your business at risk if not used wisely.
2. Human Leverage
Human Leverage is using other people’s time, skills, and resources to grow your business. As a small business owner, you can leverage the talents and abilities of others to level up your business. There are three main types of human leverage:
- Employees: You can hire employees to help with tasks you don’t have time for or are not good at. For example, if you’re a great salesperson but horrible at accounting, you can hire an accountant to do the books for your business.
- Partnerships: You can partner with other businesses to share resources, customers, and knowledge. For example, if you own a small boutique, you could partner with a local salon to offer complementary services to your customers.
- Contractors: You can hire contractors to complete specific tasks or projects. For example, if you need help with website design, you can hire a contractor to build a new site for your business.
Using human leverage is a great way to grow your business without having to trade time for money. When you leverage the talents and abilities of others, you can focus on the tasks that you’re good at, and that will help your business grow.
3. Physical Leverage
Physical leverage is the use of machines or other physical objects to amplify the force exerted by small business owners to level up their business. In other words, it’s using technology and automation to do the hard work for you so that you can focus on what you’re good at.
Some great examples of physical leverage are:
- Let’s say you own a car wash. Physical leverage would be using a machine to wash the cars instead of doing it by hand. The machine would free up your time so that you could focus on other aspects of the business, such as customer service or marketing.
- Or let’s say you own a small restaurant. Physical leverage would be using a dishwasher to clean the dishes instead of doing it yourself. Using the dishwasher would free up your time so that you could focus on cooking or interacting with customers.
- Another scenario might be, let’s say you own a small online store. You can use physical leverage by investing in automated shipping equipment so that you can fulfill orders faster and with less effort.
- Or, let’s say you’re a freelance graphic designer. You can use physical leverage by investing in a high-quality laptop with a large screen so that you can work more efficiently and produce better results for your clients.
There are endless possibilities for how physical leverage can be used to grow a small business. The important thing is to identify areas where physical labor is currently being done and explore ways to use automation or simplify those tasks. By doing so, you can level up your business and take it to the next level.
4. Informational Leverage
Informational Leverage is when a business uses information to make more money. For example, if a small business owner knows that her product is selling well in her local market, she can use that information to level up and grow her business by expanding to new markets.
Or, if a business owner knows that his competitors are struggling, he can use that information to gain market share. In short, Informational Leverage is all about using information to grow your business. And there are three main types of Informational Leverage that businesses can use:
- Market Leverage: This is when businesses use information about their target market to make more money. For example, if a business knows that its target market is growing, it can use that information to make increase cash flow by expanding its product line or selling more of its existing products.
- Competitor Leverage: This is when businesses use information about their competitors to make more money. For example, if a business knows its competitor is struggling, it can use that information to gain market share.
- Customer Leverage: This is when businesses use information about their customers to bring in additional revenue. For example, suppose a business knows that its customers are loyal and have a high lifetime value. In that case, it can use that information to generate income by investing in customer acquisition or retention.
The Benefits Of Leverage
When it comes to business, leverage is key. With the power of leverage, entrepreneurs can achieve exponential company growth and success. There are many benefits of business leverage, including the following:
1. Increased Productivity.
When you have business leverage, you can get more done in less time; This is because you can leverage the time and resources of others to help you achieve your goals.
2. Greater Reach.
With business leverage, you can reach a larger audience than you could without it; This is because you can tap into the networks of others to expand your reach.
3. Increased Profits.
By using leverage, you can generate more profits than you could without it; This is because you can leverage the resources of others to create a more efficient and effective business.
4. Greater Flexibility.
With leverage, you have more flexibility in operating your business; you are not limited by your own time and resources. Instead, you can use the resources of others to achieve your goals.
5. Increased Opportunity.
When you have leverage, you have more opportunities to succeed. Why? Leverage provides the freedom and flexibility to pursue other ways to scale your business.
The Risks Of Leverage
Leverage sounds like a great way to grow your small business, doesn’t it? After all, what’s the harm in using a little more debt to scale up your business operations? Unfortunately, leverage can come with some serious consequences and risks that every small business owner should be aware of. Here are the three most significant risks of using leverage to grow your business that you need to be aware of:
- You could end up saddled with too much debt that you can’t repay.
- You could lose control of your business if either you can’t meet your loan obligations or you trade away too much equity.
- Your business could fail if you leverage too much and can’t manage the resulting growth.
So, there you have it: the three biggest risks of using leverage to grow your small business. Of course, you could also argue that leverage is essential for any business looking to scale up. But at the end of the day, it’s critical to weigh the risks and benefits before making any decisions about using leverage in your business.
How To Get Started With Leverage
Let’s face it – as a small business owner, you can’t do everything yourself. You need the power of leverage, the expertise, and resources of others to get ahead. But how do you get started using leverage to grow your business?
Here are five steps to get started:
1. Identify Your High-leverage Points.
What areas of your business have the potential to generate the most growth? This could be a new product or service offering, a key marketing initiative, or something else entirely. Once you’ve identified your high-leverage points, you can start to focus on them and get the most out of them.
2. Create A Game Plan.
Having a clear plan of action is essential for any successful business venture. But it’s even more critical when you’re trying to leverage your resources. What steps do you need to take to achieve your goals? What resources do you need to procure? Map out your plan and get ready to execute it.
Big tip… Keep your plan flexible and adaptable. As your business grows, your leverage points will change. So you need to be prepared to change with them. What worked yesterday might not work tomorrow, so stay flexible and be ready to adjust your plan as needed.
3. Take Massive Action.
Now that you know what you want to do and how you will do it, it’s time to take action! Implement your plan and see what happens. The key here is to take massive action; don’t be afraid to go big!
4. Reflect On Results.
After taking action, reflect on what worked and what didn’t. Stay focused on results. What key performance indicator(s) are you trying to hit? What goal(s) are you aiming for? In other words, how will you know if you’re successful? Keep your eye on the prize, and don’t get distracted by shiny objects.
As the data rolls in, adjust your plan accordingly and continue moving forward.
Big tip… Don’t expect results overnight – it takes time to see the benefits of using leverage in your business. Be patient and keep taking action, and you’ll eventually see your business grow exponentially.
And oh—don’t forget to celebrate your successes along the way. This keeps you inspired to leverage more and more!
5. Rinse And Repeat!
Keep taking action and making adjustments until you reach your desired results. Then, start the process all over again and see how much further you can take your business!
Final Thoughts On Leverage
Leverage is the secret sauce of successful entrepreneurs. It allows them to do more in less time and with less effort. By using leverage, you can achieve your goals faster and easier than ever before.
In this article, we’ve outlined the different types of leverage and how they can benefit you. In addition, we’ve discussed the risks associated with leveraging your resources and provided you with some tips on getting started.
So, what are you waiting for? Start using leverage today and see how it can help you reach new heights in your business!
Want some help tapping into the power of leverage? Check out our coaching programs, where we teach entrepreneurs and small businesses how to use leverage to their advantage. Through our step-by-step processes, you’ll learn everything you need to know about this powerful tool and how to use it to take your business to the next level!