What is Leverage?

Leverage refers to the ability to scale quickly without increasing resources or inputs. Imagine yourself trying to move a large rock without any tools. Moving the rock would be difficult. However, with a crowbar and a leverage point, it is possible to effortlessly push it along. In short, leverage is simply getting more done with minimal effort and time input. 

In this article, I’ll show you exactly how to do that. You’ll learn:

• The different examples of leverage
• How to spot the different leverage opportunities in your business
• How to rate the idealness of your business’ leverage

Examples of Leverage

As an engineer, I learned the concept of leverage early in my career. Since then, I’ve applied the concept in both life and business. Below are examples of leverage that I have utilized as an entrepreneur.

Franchising

I franchised my property inspection business, Resicert, over a decade ago. This enabled national expansion to 25 operational units all over Australia without having to increase costs and working capital requirements. It also enabled me to work less than 4 hours per week on the business.

Comprehensive Online Learning Platform

When I started training franchisees, I ran in-person extensive classroom training. This has now been converted into a comprehensive online learning platform. This enables me to effectively train franchisees without spending any time in the process.

Utilization of CRMs

CRMs such as Ontraport are powerful automation platforms that enable high-level scaling without the need to increase team members. It can increase efficiency and productivity while reducing extra labour costs.

The Different Leverage Opportunities In Your Business

In my thirty years in business, I’ve discovered that leverage is something many entrepreneurs fail to implement in their companies. Hence, I’m going to outline below some of the potential opportunities for leverage that may exist in your business. 

Duplicate Yourself and Key Team Members

Typically, income is linked to the time a business owner invests in the business. However, following a “more time more income” approach isn’t a very leverageable model. 

Let me elaborate. I was originally doing inspections myself with Resicert. As I was doing this, it soon became apparent that growth was both slow and difficult. I started stepping back from the role after 1 year and ceased totally after 2 years. Within 13 years, we have grown to over 40 franchisees doing inspections across the country – highly leveraged. 

To duplicate yourself and key team members, here are some of the strategies that you can implement:

1. Implement the Time Matrix to identify where your time is often being spent.
2. Write detailed procedures for the roles you wish to extract yourself from.
3. Create documents and videos for training.
4. Put in place systems to track work outcomes to ensure quality is maintained.

 

Identify Unused Assets to Leverage

Often, there are many unused assets in a business that could deliver high impact and value. For example, in Resicert, we have over 40,000 clients and over 50,000 people who have enquired with us over the years in our CRM. This valuable asset could be leveraged to:

1. Solicit and develop more referrals for existing services.
2. Conduct market research to identify other problems you can solve for clients.
3. Provide an additional service or product that can serve as a natural extension of what your business currently does.

Identify assets in your business that may not have been fully utilized. List them out. If you look at your current systems in detail, you’ll notice that there’s more that you can get out of them at no additional cost. 

Establish Strategic Relationships and Alliances

It can take years of trial and error to put in place a network of competent and trusted suppliers and contractors.

 It’s difficult to find people who are aligned with you, get results, and makes your life easier. You know when you have this in place as the relationship is more of a partnership rather than a client-supplier arrangement.

Here are examples of strategic alliances: 

1. Expanding your offering based on the services or products that your existing suppliers can deliver
2. Forming a well-thought-out strategic alliance or partnership
3. Creating a potential referral source framework

The key outcome in the process is to develop win-win outcomes in which both parties can leverage existing assets to generate additional revenue. 

Leverage Other People’s Influences

When I started Resicert, I spent significant time carrying out interviews to identify our market’s needs and wants. Many of these interviews were done with Real Estate Agents who had a good understanding of property inspections.

Here’s one of the key things that I learned: It’s possible to get many referrals from these agents or brokers. Once I understood what their requirements and needs were from our process, I was able to effectively point out why we were their best option.

To leverage other people’s influences, engage with centres of influence. Unlike clients, centres of influence do not pay for your service, but they have the following characteristics:

1. They know your clients before you do.  
2. They know that clients need what you have to offer.
3. They can leverage their relationship with their clients to influence them to use your business. 

For example, Real Estate Agents know that when someone buys a house, they will need a property inspection. Hence, agents can direct these buyers to a business that they are aligned with to provide the service. 

With Resicert, the approach to engaging with centres of influence has been developed into a structured methodology that all Franchisees are trained on. As a result of this framework, Resicert generates over 50% of its revenue from centres of influence with usually no payment or referral fee taking place. 

To implement this brilliant form of leverage, the key is to consider the following:

1. Who is upstream of your service or product?
2. Who knows your clients before you do and knows they need your services?
3. What motivates them to refer clients to your business?
4. What problems can you solve for them when they refer their clients to you?
5. How can you then scale and grow this approach?

As you dig deeper, you will uncover some excellent centres of influence which can fuel revenue growth for your business.

Licensing or Franchising

When I built Resicert from scratch, I used zero capital investments. I didn’t even borrow money from the bank. But in just 5 years,  we were able to turn Resicert into one of Australia’s largest inspection businesses. This is because of the highly-leverageable ideal business model that we’re using – franchising. 

There is no question that franchising can be a great low-risk expansion model for any business. However, not all business owners should franchise. You must validate that the model is a fit for you and your business.

 To do this, we look at the following factors: 

• The model must fit you personally 

A clear and personal ideal scene enables you to know exactly what your business needs to look like to become ideal. Once you’ve identified your ideal scene, assess if franchising is a model that enables it.

• The model must fit your business model 

While it may look good in theory, the numbers must make sense. An important question to ask is this: Can franchising deliver your ideal business outcomes?

• The model must be better for your clients 

The market will decide on every part of your business. So before heading down this path, you have to be 100% certain that it will provide a better outcome for your clients. 

• The numbers must stack up for everyone 

Before franchising your business, it’s crucial to perform a comprehensive financial analysis beforehand. 

How Ideal Is Your Business Leverage?

 

Leverage is the ability to scale fast and grow quickly without increasing inputs. To achieve this, you must be capable of identifying leverage opportunities in your business. 

These opportunities can come in the form of maximizing unused assets, creating systems, establishing strategic relationships, or using leverageable business models. Effectively using leverage in all areas of business allows you to grow and expand with low risks, minimal costs and minimal efforts.

To further look at your business’ use of leverage, reflect on the following questions. 

• Do you fail to have automation in place for repeatable processes? 
• Do you fail to use licensing, franchising or any other leverageable business models?
• Do you have any idle assets in your business that could deliver value and benefit? 
• Is there any equipment or tools you have not fully utilized?
• Do you struggle to maximize relationships and networks? 
• Do you lack strategic alliance, partnerships and referral source framework? 

Once you’ve reflected upon these questions, rate how ideal your scalability is from 1 – 10. Take note that the more you’ve answered “yes” to the questions, the lower the score out of 10 should be. 

Then, ask yourself, what changes can you implement to increase the rating and improve your business’ use of leverage?

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