The Power of Leverage in Business

The Power of Leverage in Business

You might be wondering why some entrepreneurs go bankrupt after one business venture. This is because they do not have a good contingency plan. One of the backup plan that we are looking for is having another source of income regardless if it is through employment or another business.

power of leverage

There is a saying that you must not put all the eggs in one basket. Once the basket drops, all the eggs will be shattered into pieces thus losing all their value.

Just like in business, when your primary source of income crashes then expect a downturn in your financial stability. This is when the power of leverage comes in handy.

What is leverage?

When we are talking about business leverage it does not only concern having many employees. It is also about having more sources of income.

Once you’ve mastered the art of leveraging, you’ll minimize the chances of going completely broke. You’ll have a fallback in case something is not going well with your main business.

However, you need to have a sustainable income from your main business to have some capital for your other businesses. Before anything else, you must plan everything from the top. It is not advisable to just shell out money on ventures that have minimal chances of succeeding.

How to start leveraging?

Once you already have a sustainable income from your main business, it is now time to save them up. If you do not have all the money in the world, the 70-30 rule will always work.

It means that you only have to spend 30 percent out of your monthly income. The remaining 70 percent must be on your savings. However, there are times wherein you need more budget for emergency expenses. In this manner, you can increase the spending percentage from 30 to 40 or 50 in some cases.

Add more businesses gradually. Do not do it all at once as you do not want to risk all your savings. It only entails that you should start adding businesses once the previous business that you put up is somehow winning.

Conclusion

We have proven that leverage is the best way to have more security in a business. With this, you shall be able to have a more rewarding experience in doing business in the long run. Furthermore, it also entails that you must be more responsible as your business empire is growing.

 

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