Normally the concept of business leverage refers to how much debt you are using to start and run your business. The idea many promote is to use as little of your own money as possible, count on a good economy and under control inflation to increase your profits.

This is NOT what I’m talking about. Truly profitable business ideas don’t need debt. Remember my warning against being a Debt Slave. Debt increases your risk significantly. You are much better off not going there.

So what am I talking about? We’re looking for creative and profitable business ideas. Let’s look at some other types of business leverage that can work well for you.

One type of leverage in a service business is to avoid getting paid only for your time. There is a limit to how many hours you can work. You should look for opportunities that will allow you to leverage your time. There are many ways to do this.

Failure to leverage your time will make you a wage slave. Don’t just do something where you only get paid for YOUR time. You need leverage to build value. Can you hire people and train them to do what you do at a lower cost and then leverage that?

In family businesses, sons and daughters can be this leverage with the further future benefit of a transition of the business to them. There are many opportunities to leverage your time. Spend the time now to determine how to do this in your business.

Another valuable type of leverage is in your customer relationships. It is said, and rightly so, that it is much easier and less expensive to keep an existing customer than to find a new one. In my business it costs 11 times as much to get a new customer as to keep an existing one.

That being the case, are there other products or services you could sell or bundle together to increase your sales per customer. Perhaps it would involve adding value to what you are already doing. Brainstorm ideas in this regard.

Leverage through technology has always been another great way to go. Today there are many more options available. You can “automate” away a lot of tasks through the use of specialized equipment or software. You can also “automate” lower end tasks through outsourcing.

Outsourcing has become a key cost reduction strategy in many larger organizations. Small business has begun to participate in outsourcing either in selling outsourcing services or buying outsourcing services. Buying outsourcing services allows you to maintain your pricing structure while reducing costs making your business more profitable. Look for ways to take advantage of this.

The last area of leverage I’ll discuss is looking at the things your company will own that may be under utilized. It might be cash reserves in the bank that are earning no interest. It might be a piece of equipment that is only being used four hours a day. It could be excess space in a building that isn’t being used. How can you take advantage of those under utilized assets to generate further profits? This may take some brainstorming, but the first thing is simply to identify the under utilized asset.


by Steven Schlagel – June 20, 2009