Hi Jesse!

Jesse, your posts about leverage below (such as this one and also this one) have really made me think....

Jesse, is this how you understand using the concept of leverage? Let me first give an example....

First, what is a lever? A lever is a tool you can use to allow yourself to (for example) lift much bigger weights than you normally could....

So, for example, by yourself, using only your arms, you may not be able to lift a big boulder. You might be able to lift a small rock -- but not a big boulder, because it's too heavy.

HOWEVER, if you use a lever, you can use that leverage to lift a much heavier object than you could normally....

The way I see it, the way almost EVERYONE works is like trying to lift the boulder directly. They want to lift the big boulder -- that is, make a lot of wealth -- but they try to do it directly with NO leverage! No wonder they can't do it!

Those, however, who know about the concept of leverage use it.... They use leverage, of one kind or another, to easily lift that big boulder (or make those big profits)....

To better explain this, what I mean is that the average person, including the average small businessperson, is selling their time, and how much money they make is directly related to how much time they spend working. This is the connection you have to break!

It's NOT generally possible to break this as an employee. Practically the only way to break this connection between money and time is as a business person....

Now, on to forms of leverage. For example, Jesse, you mentioned your employees.... Employees are a form of leverage, by using employees you can accomplish more.

For example, let's take someone who starts a lawn-mowing business.... How much money they can make is limited by how much time they can spend mowing lawns. If (say) they charge $20 per hour to mow a lawn, they can make a maximum of about $800 per week (for a 40-hour work week)....

However, what if they are able to get more jobs than they can physically handle? One thing they could do is then employ someone -- say at $15 per hour -- to mow lawns for them.... This gives them leverage. Suddenly, they're no longer limited to just how many hours they can work. In fact, the only limit is how many jobs they can get mowing lawns, and how many good people they can hire! They've started to break the link between their income and their time....

Jesse, now, your post really made me think of the following.... If you do something, and it's profitable (whether small or large), then you can often use leverage (of one kind or another) to increase that profit, so that it becomes a large profit. For example, in our lawn mowing business above, one person working by himself or herself can only make about $800 per week, which is about $40,000 per year.

Most people, if they started this business, would be stuck there. They would just earn that $40,000, year in, year out.

However, someone who knows about leverage knows then that, since they *are* making a profit, that they can use leverage to increase that profit.... Such as by taking on employees.

(Another way is to start a franchise, where you run the franchise which gets the jobs, which you then give to the franchisees, and you can guarantee to them a minimum income per week.... This is how one large lawn mowing franchise business I know of in Australia -- called Jim's Mowing -- operates.... People pay to own a franchise, and for that they get a guaranteed weekly income, and they don't have to look for lawn mowing jobs, because the jobs are given to them.... Jim Penman, who started Jim's mowing, started his own lawn mowing business in the way I described above. However, when he got more jobs than he could handle, he would sell them to others with their own small lawn mowing businesses.... Eventually, this grew into a large franchise business.)

What I'm trying to get at is that if you are making a profit without using any leverage at all, you can probably almost always increase it through leverage, of one kind or another....

There are many types of leverage. Taking on employees is only one kind.... Using commissioned salespeople is another kind. There's also capital leverage, by borrowing money or using the money of investors. And other types of leverage too....

The thing about leverage, however, is that with some forms of leverage you could also be increasing your risk, so you'd have to take that into account. Other types of leverage, though, it seems to me, can decrease your risk....

However, if you are a small, profitable business, then the way to grow is to think about what kinds of leverage can I use, to help break the link between money earned and time spent?....

I'd love to hear your thoughts on this!

- Dien