Leverage

Leverage

An Entrepreneur’s ability to use Leverage is the biggest factor in small business success.  As I reflect back upon the hundreds of small business owners that I have helped over the past 20 years, time after time, I witnessed small business owners who thought that their success was handcuffed by a lack of time and/or money.  Many had overlookedLeverage as a tool to overcome both of these bottlenecks.

The concept of Leverage related to a small business owner involves both money and time.

Financial Leverage

Financial Leverage is created when an owner uses debt to maximize the return on the owner’s investment in the business.  I wrote about financial leverage in a prior article called “Is Debt Bad?” located at if you would like to read more about the subject.  If the business model appears to be profitable but a lack of cash is constraining optimal performance, priming positive cash flows through the use of financial leverage can allow the company to resume growth.

Time Leverage

Leveraging time involves hiring other people or using systems and tools to free up valuable time of the owner.  Often, changing the mindset of the owner to realize the importance of leveraging time is the biggest hurdle to success of the company.  Owners often undervalue their time and work exhausting hours to try to keep up with the myriad of tasks required to run a successful small business.  Setbacks can often occur when immediate personal control of a process or task must be released to technology or other people in order to continue business growth.  The inability to properly leverage time to allow continued growth is exemplified in the book, “The E-Myth Revisited” by Michael E. Gerber.  I witnessed the scenario described by Gerber play out countless times in my career as a CPA.  I wrote about the dynamics of the E-Myth in my prior article, “Avoid falling into the E-Myth trap.” https://jayvarcoe.com/avoid-the-e-myth-trap/

Leveraging away Bottlenecks

The owners of small businesses are strapped for both time and money at various stages of growth for their business.  Initially, the budding Entrepreneur may be “wearing all of the hats” of the various tasks and jobs required to run the business.  In the initial stages, the small business owner may also be bootstrapping their business model with personal savings and surviving through financial scrappiness.  At this stage, growth may be restricted by available cash to spend toward attracting customers so this is where financial leverage might benefit the company.

As customers begin to become attracted to the products or services of the company, money begins to flow into the organization and perhaps the money bottleneck begins to move toward a time bottleneck for the owner.  The owner hires someone to take on one or more of those “hats”.  Hiring someone to perform some of the tasks necessary to run a business is a form of Leverage.  The use of another person frees up the limited amount of time available to the business owner. 

The bottleneck continues to move to another time or money constraint which may also be relieved by additional Leverage if applied correctly.

Spend Time to Make Time

Most small business owners understand and follow the cliche, “You have to spend money to make money”.  Initial stages of start-up businesses always involve more cash outflows than inflows until a break-even point is reached so it makes sense that Entrepreneurs have accepted this idea.

If you agree that “You have to spend money to make money”, what about “You have to spend time to make time”?

Using Gerber’s E-Myth terms, as a Technician, you need to take the time to identify specific tasks to delegate to your employees and you have to take the time to train the employees.  As a Manager, you need to create the systems to monitor the employees and hold employees accountable to the company standards.  As an Entrepreneur, you must realize the value of working on the business and not just in the business.  An Entrepreneur must allocate time to step back out of the day-to-day activities in order to create strategies, systems and plans that are crucial to sustained success and continued growth.  In each case, it takes an initial investment in time to save time in the long run.

Peer Groups

One way for small business owners to enhance their Entrepreneurial leverage is to join a small business owner peer group.  Please see my prior article, “Are you a Lone Wolf” https://jayvarcoe.com/are-you-a-lone-wolf/ for more information about Peer Groups. 

I facilitate peer boards for small business owners in the Phoenix Metro area.  I call my peer groups, Transcendent Peer Boards.  I chose the term, transcendent, because the benefit of the group is greater than the sum of the parts and the members transcend themselves in order to benefit of the group.  There are many different formats, member profiles, and purposes for similar organized groups. Similar groups may be called Peer Groups or Mastermind Groups.  Vistage is one of the more widely recognized and advertised peer groups.

My company’s mission is to promote Flow in the lives of small business owners.  Utilizing Leverage to overcome bottlenecks in your small business will go a long way toward the pursuit of flow.  If a small business owner does not master the concept of Leverage, the full potential of the business will probably not be realized. 

If you would like to learn more about the use of Leverage for your small business or if you would like to explore the benefits to joining a Transcendent Peer Board, let’s talk.  Please reach out to me in LinkedIn or contact me at jay@jayvarcoe.com .