Leverage, What is it and How to Use It

In the course of meeting with members, I have found many service providers have a challenge leveraging themselves. So I started looking at what leverage really means to a small business owner. There are a variety of ways to increase business or the bottom line with leverage.

Leverage in the pure sense deals with how a business utilizes borrowed money, (that’s referred to as OPM, other people’s money). Sometimes it is used for expansion, research and development, and in early stages for getting the business on its feet.

Then there is operating leverage, which is the impact of a change in business that can increase revenues without a proportionate increase in operating expenses. You see this when a product or service really takes off, the fixed expenses remain the same, adding to the overall profits.

You can also leverage your business and time by diversifying your income sources or adding product lines. What are your profit centers? Because all businesses have cycles, just as the economy has cycles, if you depend on but one product or service line, there will probably be up times and down times, that’s the nature of a cycle. Business Week just highlighted the challenges that American icon, Coca Cola is having as a new breed of coffee, juices and teas are attracting consumers away from sales of Coca-Cola products.

There are many avenues to leveraging your product or service so as not to be caught in a bad cycle. Cross-promotion has the potential for a big marketing payoff when 2 or more organizations/businesses partner to better reach or serve a mutual market. You can gain an inexpensive and credible introduction to more of your kind of customer more effectively than with the traditional “solo” methods of networking, advertising, or public relations. There is more Visibility and more Value, because it is perhaps the least expensive, most efficient, least time-consuming, and most-credible method for growing a business.

Also Partnering with someone by offering their product or service to your clients, adding affiliate programs to your web site, creating your own products like information products, hiring others to do some of the work or training independent contractors to do what you do and certifying them to market it as their business. All of these provide a growth opportunity for any organization, from the home-based, to the public sector, corporate, or franchise operation.

The Challenge: What other ways can you use to augment what and how you are already selling?