If I were to show you a way to build a successful business without using your own money and resources; how many businesses would you go on to build? In the text below, i will be teaching you how to start a business from scratch using the power of leverage. Leverage as a word might sound absurd to you but underneath, you can find tremendous power.
“Leverage is the reason some people become rich and others do not become rich.” – Rich Dad
“The most important word in the world of money is cash flow. The second most important word is leverage.” – Rich Dad
By doing more with less, you are simply harnessing the power of leverage. Now what is leverage? Please forget about the dictionary meaning of the word, let me bring it to you in a layman’s language. To me, leverage is simply the ability to do much with less. For better understanding, imagine buying a car worth $100,000 with just $20,000 or less. That is leverage in its simplest term; buying more with less.
“People without leverage work for those with leverage.” – Rich Dad
“Give me a lever and a place to stand, I will move the earth.” – Archimedes
My main purpose of writing this article is to show you in detail how to use the power of leverage to build your business. Since leverage is doing more with less, this article is all about building your business and achieving great results with less. So if you are ready to learn, then let’s ride
“He who stands on the giants shoulders; sees farther than the giant.” – Poissant
Starting a Business With No Money Using the Power of Leverage
A. Intellectual Leverage
This is the first kind of leverage you can apply to build a successful business. To me, it is the most important and most powerful form of leverage. I have seen entrepreneurs amass massive wealth with nothing more than an idea.
“Thinking is hard work. When you are forced to think, you expand your mental capacity. When you expand your mental capacity, your wealth increases.” – Rich Dad
Armed with an excellent idea, strong legal protection and an iron clad will to succeed; you can build a big business with less. Let me give you an illustration. Suppose you run a small company and you have just invented a widget with great market potential but you lack the financial muscle to mass produce it. What do you do? You can take your invention to a bigger company to mass produce it on your behalf.
Since you have nothing but an idea in the form of an invention, you can strike a deal with a manufacturing company to mass produce and market on your behalf and split profit with you while you still retain the right to your invention. If the deal is to last for 3 years, I am sure you can make enough money to take over the production and marketing of your invention.
An important point I want to stress here is this; your idea is not a leverage, a strong legal protection is. Your idea will not make you money except it’s backed by legal protection. Without protecting your intellectual property, forget about making something worthwhile out of it. Intellectual protection can come in the form of trademarks, copyrights and patents.
The second approach is to leverage the intellectual strength of other people. As an entrepreneur, you should keep a keen eye for talented and skillful people to attract to your company. Bringing a team of intellectuals into your company will go a long way in boosting investor’s confidence. Intellectuals can also help you build your business by acting as advisors.
Intellectuals can be professionals such as accountants, legal advisers, tax strategists and so on. Take a look at Microsoft Corporation; it grew rapidly because it was able to harness the intellectual strength of young computer whiz kids. If Microsoft can leverage the intellectual capabilities of these youngsters to strengthen their business, why can’t you?
B. Financial Leverage
This is another kind of leverage you can use to build your business. Let me share with you real life illustrations of how financial leverage works. Few years ago, the richest black man in the world; Aliko Dangote, was on a project to build the largest cement factory in Africa.
The total cost of the project was one billion dollars. His company; Dangote Group brought $320,000,000 and a consortium of banks brought the remaining $680,000,000. Today, this company by name Obajana Cement PLC is already in business. Thanks to the power of financial leverage.
Financial leverage can also be achieved in business by buying more with less from your suppliers. You can call it obtaining credit facility but I prefer to call it leverage. Just like in Aliko Dangote’s case, you can pay $1,000 cash and get goods worth $3,000 on credit from your suppliers if you are credit worthy.
“Financial leverage is the advantage the rich have over the poor and middle class.” – Rich Dad
C. Brand Leverage
“If you are not a brand, you are a commodity.” – Robert Kiyosaki
This is a very powerful form of leverage that can be applied in two ways. Before brand leverage can be used to build your business, you must fulfill any one of these conditions. It’s either you have an already existing business and you want to expand or you want to start a business and you intend using brand leverage to go about it. If any of these applies to you, then read on.
If you are a business owner and your aim is to expand using brand leverage, the prerequisite is that your business must be a brand identity or have a unique product. If you intend starting a new business and you don’t want to go through the stress of building a business from scratch, then brand leverage in any of the following ways:
- The first way to apply brand leverage as an expansion strategy is through Franchising. You can franchise your business to other interested entrepreneurs for a fee and royalty. I hope you know the Mc Donald’s story? It is a story of how Ray Kroc built Mc Donald’s, a multi billion dollar business simply by applying the franchise tactic to his business.
That is the power of brand leverage. On the other hand, you can be a franchisee if you are starting out in business. Instead of going through the stress of building a business from scratch, you can buy into someone else’s brand.
- Licensing is another way you can apply brand leverage to your business. Licensing is simply giving another company the right to use your trademarks in return for royalties. The richest man in the world and founder of Microsoft Corporation; Bill W. Gates, became a multi billionaire by licensing his software “MS DOS” to hardware giant; IBM.
A point to note is this; he didn’t invent MS DOS. He simply bought it from some programmers, licensed it to IBM and became the richest man in the world. Once again, that’s the power of brand leverage.
D. Personality Leverage
“It takes 20 years to build a reputation and only five Minutes to ruin it. If you think about that, you will do things differently.” – Warren Buffett
This is an under utilized kind of leverage because most people have sold their integrity for peanuts. You can’t apply this type of leverage except you are a person of integrity. You must also have a proven track record of success and credibility.
Aliko Dangote; the richest black man in the world and founder of Obajana Cement PLC, the largest cement factory in Africa was able to get the banks to finance his expansion because he had financial integrity. He has a proven track record of success in his business of buying and reviving moribund (dead) companies.
“The most important thing in your business relationships is your reputation for honesty. If you can genuinely and sincerely fake honesty, you will be a success. Never doubt it.” – The Mafia Manager
You can start from scratch and build your business to any level if you are prepared to develop your personality. Venture Capitalists and investors want to deal with an entrepreneur that has financial integrity. Customers and suppliers want to do business with someone of integrity and credit worthiness. So take your time to build your personal brand and I will see you at the top.