Leverage is a concept with which I am absolutely fascinated. Whether you’re talking about business negotiations, engineering, or even something like a football play, leverage is something that comes into play in so many facets of life.

As it relates to anything competitive, if you don’t have any leverage, you need to find some. If what you think is leverage isn’t working, you need to find something else. And if you just don’t think you need any leverage…. how does that saying go… YOU’RE DOING IT WRONG.

Leverage in Business is Critical

Let’s back up. What the heck is leverage as it relates to your small business, and why do you need it?

Leverage can be defined as “the power to influence a person or situation to achieve an outcome.” There are certainly some other definitions of leverage as the word applies to other situations (such as the kind of leverage used in a pulley), but this is the definition we’ll stick with for now.

“The power to influence.” Doesn’t that just sound like something that could help your business in so many ways? Your business should have objectives, whether they are financial, social or something else. But whatever your goals are, someone or something can help you get there.

And somehow, someway you need to influence that someone or something to achieve your goal. That’s leverage.

How about an example: Let’s say there is an up-and-coming Italian restaurant out on the East side of Tucson. We’ll call them ABCheese Pizza.

The owners of ABCheese, like so many of us, just want to keep their dream of business ownership alive. The rest of us hope that their delicious Chicago-style pizza sticks around. But ABCheese’s meat and veggie supplier just announced that their rates will be going up. Unfortunately, this increase in prices in addition to a recently increased rent could very well put ABCheese out of business. What in the world can they do?

If you’d ask me, I’d say they should look for leverage in dealing with (many would say against instead of with, but creating an adversarial situation is rarely a good thing in business) both the food supplier and their landlord. What might that leverage be?

The leverage in dealing with the landlord is something available to many business owners: look at other, more affordable retail options. It’s a buyer’s (and renter’s) market in the world of real estate right now, so go shopping for another location. If ABCheese’s current landlord isn’t willing to keep their rent the same, I’d advise them to seriously consider moving. If they’ve established a great reputation, location will not matter as much as it would to an upstart business.

And how about that supplier? Perhaps ABCheese has established relationships over the years with other restaurants (even many from outside of Tucson) that purchase from that supplier. Odds are, those customers are facing price increases as well. But if someone among those customers could band all of them together, they’d have much a much better chance of negotiating more reasonable rates from the supplier, and even shop around with other suppliers together. This kind of leverage is called “Cooperative Purchasing” in the world of government contracting, and believe me, it’s quite effective.

You might ask what you should do if your business’ situation isn’t as clear-cut as ABCheese’s. What leverage do you have? You must think creatively to answer that question. What do you have that someone else needs? What can you do to modify your standing in a business relationship to make your business mean more? Find the answers to these questions, and you’re on the right path to influencing a person or situation to achieve your desired outcome.

One thing GWebware’s clients have in common is that they are very strategic about how they use leverage. Interested in going next level with your business strategy? Use the form below to contact us!

 

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