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In light of the feedback from the last issue,
let's discuss a couple of more specific examples of leverage.
One of the principal foundations of effective
entrepreneurship is the judicious use of OPM -- other people's
money.
In business, a company utilizing only its own
money severely limits its ability to grow and operate.
In fact few can. Virtually every business
utilizes an operating line to enable it to fund its ongoing cash
flow and capital requirements.
The use of other people's money is another example of financial leverage.
This application of financial leverage can be a very powerful way to
accelerate your wealth building plan as well.
However, use caution.
I like the way Robert Kiyosaki explains the use
of leverage in his Rich Dad book series.
As Kiyosaki explains, you want to employ
leverage in a way that is cash flow positive.
The specific examples he uses are related to
real estate investing, but the principle applies to any type of
leveraged investing.
I've used it personally as a way to accumulate
a significant, income producing equity position -- where the
dividend income pays for the loan payment on the funds borrowed.
The use of other
people's money is also a key strategy for entrepreneurs.
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But wherever
possible, do it in a way that
is cash flow positive.
Think of it as
renting the use of the money.
Your return or
potential return should be significantly greater
than the cost of using the money.
This is financial
leverage used to your advantage.
A second type of leverage is "technical"
leverage.
Have you heard that term before?
Technical leverage
is the use of hardware and software that enables your business to streamline
functions.
Marketing,
administration and training systems are great examples of technical
leverage.
Anything that can
automate or streamline key activities or functions and which allow
you to work smarter rather than harder.
Technical leverage
is ultimately going to translate into time leverage, but it tends to
be technology driven.
So there's the
distinction most often used when referring to the term.
So remember, you
don't need large stockpiles of cash to get your wealth building
plans going, you can use other people's money instead.
Employ the use of
financial and technical leverage to accelerate your wealth building
plans, whether it be your investments or your business or both
growing that much faster for you.
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