Power of Leverage – Secret Wealth Formula of the Rich

Leverage is defined as the Ability to influence a system, or an environment, in a way that multiplies the outcome of one’s efforts without a corresponding increase in the consumption of resources.  ~ Business Dictionary

Thus leverage means doing a lot with a little. You must have heard of the saying ‘many hands make work light‘. That’s the power of leverage. Most people fail to achieve the desired success in their business because they don’t take advantage of the power of leverage.

Leveraged Income

Leveraged Income can be defined as the income derived from efforts of others. Unfortunately, majority of people in the world today earn a linear income, i.e. they trade their time for money. As a result, no matter how smart they are or how high their hourly rate is, they are still restricted to only 24 hours in a day and hence a limited earning potential.

Leverage on the other hand, allows you to use the time and efforts of others to create an income. By learning to leverage your time, you can financially benefit not only from your own efforts, but from other people’s efforts as well. In the words of Robert Kiyosaki, “Leverage is one of those words that can mean many different things. What I mean is you have the power to earn more and more by working less and less.“

How It Works

Assume you are in the business of providing legal consultancy and you charge Rs. 1000 per hour as consultation fee. Taking daily working hours to be eight, you would earn Rs. 8,000 per day (before expenses). This is an example of Linear Income where you use your own 100% efforts to generate income. This is what majority of people do their entire lives.

Now suppose you shifted to legal consultancy referral business and instead of providing consultancy yourself, you work on finding clients looking for legal advice and employ lawyers at your firm. Let us assume that you reach a point where you employ 20 lawyers each providing hourly consultancy and you pay them Rs. 800 per hour (keeping Rs. 200  per hour as referral income). Using the power of leverage, you will now earn  Rs. 32,000 per day (20 lawyers giving you Rs. 200 per hour with 8 hours per day), which is 4 times of what you were earning by doing the work yourself.

So you can work hard yourself and earn Rs. 8,000 per day and then deduct expenses from this income. OR, you could earn clean Rs. 32,000 per day by finding clients who need legal advice. As an Entrepreneur, which is the smarter option?

Word of Caution: To reach the level where you can leverage others you have to work really hard initially. It’s not as simple as it looks. You have to do lot of consultancy yourself, create a pool of clients and earn a goodwill in the market before you can start employing other lawyers. But a smart Entrepreneur is willing to take short-term pains for long-term gains.

Unfortunately in most traditional businesses, it’s the business owners who benefit the most, despite the employees being working the most. Does that mean you should quit your current job right  and start your own business? If you have a good referral base along with capital and management skills, you might afford to jump into the Entrepreneur’s role.

Now, there is a good news and a bad news. Bad news is that most of you wouldn’t have all three – capital, expertise and referral base. Good news is that today there exists a business opportunity that allows you to use the power of leverage without quitting you current job or requiring huge capital investment.

We are talking about Network Marketing which allows you to benefit from work of others besides the benefit of residual income. Network Marketing Industry is not a joke but a mature and professional industry today. This is the reason why respected entrepreneurs like Warren Buffett, Bill Gates, Donald Trump, Robert Kiyosaki, Paul Zane Pilzer and other Experts recommend Network Marketing. Infact, this industry is creating more millionaires today than the dot com boom industry did.