Leverage refers to a business taking on debt to finance activities with the expectation of a positive return on investment. Being “over-leveraged” means you have more debt than equity, and unless the debt begins to fuel profits, you risk sinking further into debt.
(Keep in mind I was a B student in finance, so this may not be EXACTLY right, but it’s close)
Leverage, or the law of the lever, is what allows for the amplification of force through the use of tools, device, machinery, or positioning. By using leverage properly, very heavy objects can be moved much more easily.
(I was a B student in physics too)
Today I recognized how important both concepts of leverage are.
I am learning to leverage myself and my team to accomplish more. This is more similar to the physics example. I utilize people and put them into positions where more can get done in my business. I have less things to worry about. I pay for this leverage.
Business has an ebb and flow, if you’re lucky. Sometimes cash will be tight, other times you feel like the money will never stop flowing. When cash is tight, you may need to borrow, either with credit cards, loans, or other lines of credit. While this seems scary, sometimes it is exactly what’s necessary, so you can leverage yourself elsewhere.
Learning how to leverage in life and in business is something I’ve come to truly appreciate.