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Eleven Ways to Generate Leverage from Your Business

Written by: Andrew Neitlich

Article Overview: Too many businesses – even fairly large ones -- are more like mom and pop entities that take too much time to run, barely make a profit after factoring in the owners’ time, and aren’t worth much on sale. Business owners need to develop sources of leverage so that their business runs without them. That way, work becomes more enjoyable and the business becomes more valuable. This article describes eleven ways that business owners can generate leverage in their business.

Eleven Ways to Generate Leverage from Your Business

Eleven Ways to Generate Leverage from Your Business

By Andrew Neitlich

Too many businesses – even fairly large ones -- are more like mom and pop entities that take too much time to run, barely make a profit after factoring in the owners’ time, and aren’t worth much on sale. Business owners need to develop sources of leverage so that their business runs without them. That way, work becomes more enjoyable and the business becomes more valuable.

Following are eleven ways that business owners can generate leverage in their business:

One: Mindset. First and foremost, the business owner needs the right mindset. He or she must put ego aside and be willing to give control to people and processes to take over the business. Many business owners fear that no one can serve customers like they can. This may be true, but to have a truly successful business, the CEO needs to be willing to cede control. With the right mindset in place and the additional ways to generate leverage (to be discussed below), he or she has a blueprint to succeed.

Two: Time Management. The business owner needs to spend most of his or her time setting direction for the company, improving performance, and developing processes and systems. Time spent “in” the business instead of “on” it, as Michael Gerber makes clear in E-myth, is time poorly spent. Business owners need a sense of where they spend their time, and how they can focus more on building their business to run without them.

Three: Metrics. Business leaders should be setting high standards for each and every core process, and then measuring results. That way, they can hold people accountable for doing what matters in the business. Metrics are an essential tool for generating leverage. The business owner can watch the metrics and provide tools for others to generate results. Meanwhile, employees do the work of meeting standards and continuing to improve.

Four: Talent. In the restaurant business, there is an adage that every restaurant chain is guaranteed to fail once it opens one restaurant more than its management team can handle. One of the most important limiting factors in any business is talent. Business owners need a stable pool of full-time talent to grow the business, and in many cases, a pool of part-time talent to flex up capacity when needed. Therefore, one of the most important jobs of every business owner is to find, develop, engage, and retain top talent.

Five: Alliances. The more alliances and strong relationships that the business owner can create, the more powerful their network (or power base), and the more the business owner can get done. Alliances with employees, suppliers, distributors, marketing channels, government, and local leaders assure that in both good and challenging times the business owner has a network of relationships to make things happen. Ideally, these alliances are loyal to the business first, and the business owner second.

Six: Operational Systems. Every business should have operational systems so that the business thrives even when the owner or manager is not present. These systems include detailed product manuals, consistent processes, clear performance standards, and a set of processes to train and motivate people to provide consistent, excellent service to customers. That way, customers associate the business brand with a positive experience every time.

Seven: Marketing Systems. We are blessed to live in a time where much of our marketing can happen while we are doing other things. Thanks to virtual teams, outsourced firms, and the Internet, we can get visible in effective ways 24 hours a day, 7 days a week. Also, business owners should constantly test and refine their marketing tactics in order to have a honed lead generation and conversion machine.

Eight: Technology. While the promise of technological solutions sometimes falls short of expectations, technology can still bring enormous leverage to every business. Software, mobile communications tools, and web-based technology can all contribute to a more efficient and profitable business.

Nine: A Unique Edge. The me-too business that is almost identical to its competitors will not generate as much value as a business that has a measurable, significant, meaningful (to its customers) advantage over the competition. Types of “edge” include: proprietary technology or intellectual capital, scale, operational excellence, customer intimacy, unique marketing strategies, proprietary alliances, relationships with suppliers/sources of product, and product leadership. Every business should strive to have a three to one advantage over its competitors in some meaningful area, or at least to be the dominant leader in a niche market.

Ten: Financing. Develop business credit and sources of financing in order to have a ready source of cash to expand when needed. Sometimes the only thing that separates one business from another is the cash to withstand down business cycles – or expand when others can’t.

Eleven: Exit Strategy. By having a clear vision of how to exit the business, the business owner can focus on developing a business that will be attractive to a buyer. Buyers want a business that they can take over and run – without depending on the owner for a long transition period. An exit strategy requires a commitment to a set of processes, a respected brand, and a business that runs without heavy involvement by the owner.

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Article Tags: adage, blueprint, business leaders, business metrics, business owner, business owners, ceo, core process, e myth, ego, entities, improving performance, leverage, michael gerber, mindset, mom, restaurant business, successful business, time management



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