05 Aug 2010

Lack of Leverage … A Flaw in Many Business Models

Because I am both a business owner and business coach (I know, a strange combination), I was asked to submit a sample overview of a “Key Lesson Learned as a Business Owner” to a national business magazine.  I’m pretty sure I got it there on time … reporter’s can be quite demanding.  That was over a month ago and I never heard anything back.  Such rejection brings back all kinds of feelings for me from more than one high school dance … ouch.   Anyhow, I figured why not share one of my biggest business mistakes with my understanding and supportive Growth Coach Blog readers.  Who really needs Entrepreneur Magazine anyhow? OK, enough sour grapes.

So what was a key lesson I learned early on as a business owner that could help my blog readers?  That’s easy … get leverage in your business! Stop trying to do all things on a one-to-one basis or on your own.   Stop being a Chief Everything Officer.  Stop being the information and decision-making bottleneck in your business.  Instead, learn to get the most you can out of everything you do and have… maximize your return but minimize your investment.  To me, leverage is creatively finding ways to maximize your earnings while minimizing your time, effort and risk. Got leverage?

There are multiple ways to get leverage (financial firepower) into your business. You can do it with people, technology, systems, methodologies, marketing, new service approaches, other people’s ideas and money, and/or adjusting your business model. To cover some of the more common ones with greater specificity, you can derive income off of other people’s efforts (hire your first or hire additional employees or independent contractors), utilize new technologies or methodologies, put business systems in place to replace your doing everything, or simply adjust your approaches and business model.  Few small businesses truly have leverage.  Early on during my entrepreneurial journey, I was no different.

When I first got into business coaching in 1992, I helped small business owners achieve greater success and balance but did so strictly on a one-to-one basis.  For 18 months, I was flying high and loving life until it dawned on me.  I was simply swapping my time for money … it was more like a job than a business.  Most consultants, coaches, advisers, repair people, doctors, home service people, etc. have the same business model and with a similar flaw … no or minimal leverage. How about you?

While I loved business coaching, and still do today, back then I could only serve so many clients in a day, had an income ceiling, was perpetually exhausted, and had NO LEVERAGE.  Things had to change … and for things to change, I needed to change my thinking and mindset. I had to expand my possibilities.

I wanted a better way to manage my business and life.  Don’t we all?  The critical question I finally asked myself was, “How could I serve more clients, provide more value, earn more money, and work less hours?” I know … that was a complicated question and I was demanding a lot.  But empowering questions help you uncover empowering solutions.  Thank God I wanted MORE Success and MORE Life … because that’s exactly what I asked for and what I got.   Don’t you deserve the same?

It hit me…I could either add employees (for family/lifestyle reasons back then I declined) OR instead of doing just one-to-one coaching, I could change my business model/methodologies and develop a GROUP coaching process. Why not develop a coaching process that enabled me to serve multiple clients at the same time in a group workshop format … and for multiple years?  Why not coach a roomful of clients instead of just one at a time? These empowering questions opened up a much more profitable path for me as a business owner and a more balanced life.

Ask yourself the same type of question, “How can I serve more customers, provide more value, earn more money, and work less hours?”  Keep wrestling with that question until you get some profitable answers, even if it takes days.   Odds are your answers will touch on leveraging people, technology, systems, methodologies, marketing, new service approaches, other people’s money and ideas, and/or adjusting your business model.

For me, that question changed the course of my business and life.  I designed a modified coaching process, followed the group-coaching workshop path, and business took off.  Instead of driving around everywhere and only coaching 3-4 clients per day, I could coach a dozen or more clients at the same time and at the same location.  Revenues and profits more than tripled.  Because of leverage, I could now serve hundreds of clients each year instead of dozens. Since it was in a group format, I could charge clients less and that helped me attract even more clients.  While it was more affordable for them, it was also more profitable for me … LEVERAGE … serving multiple clients at the same time. Everyone was happier.  Even the clients loved bonding and collaborating with other business owners, sharing best practices, and serving as accountability partners for each other.

In fact, others took notice and wanted to replicate my coaching process.  Gary Green, a veteran franchisor, convinced me to develop The Growth Coach into a franchise model.  While I was fearful of this strange business model (franchising), I quickly recognized once again the power of leverage.  I could help others achieve their entrepreneurial dreams by helping them to become business coaches so they could in turn help countless small business owners in their own communities throughout North America.

These franchise owners/business coaches would leverage our group coaching process, operational systems, marketing systems, and trademarks.  For that, we would get a very small percentage of their income as royalties … good leverage … deriving a small income off the efforts of others leveraging all of our proprietary processes, tools, and trademarks.  Our franchise owners were happy with the financial leverage that came from the group coaching workshops and their clients were happy to participate in an affordable and supportive group format.  Everyone is better off.

We now have over 135 franchise owners (business coaches) in over 150 markets throughout North America and they too are helping several thousand small business owners every year develop more leverage in their businesses … teaching them to change their mindsets,  behaviors, habits, and strategies in order to earn more, work less, and enjoy richer lives.  Leverage has come full circle.

Lack of leverage was one of my biggest initial mistakes and hard lessons.  Not any more.  Let me ask you a simple question, “Got Leverage?”

2 thoughts on “Lack of Leverage … A Flaw in Many Business Models”

  1. Thank you for sharing this information with me Daniel. I am in the process of launching my business and I am grateful for your insight on what makes a successful business. You suggestion: “There are multiple ways to get leverage (financial firepower) into your business. You can do it with people, technology, systems, methodologies, marketing, new service approaches, other people’s ideas and money, and/or adjusting your business model, “sound very sound and I will be making notes of them, so that I can use them when I get started.

    Today I am asking myself this very same question- “How could I serve more clients, provide more value, earn more money, and work less hours?” As you suggested, I will keep asking myself this question until I find the answer. I know I have a lot to share and have been sharing, but how do I share with a group and monetize?
    I look forward to reading more of your Blogs as I transform my business model as well as all areas of my life.
    Again- thank you.

    Pauline Lewinson

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