When it comes to business, there’s one concept that can help companies achieve success and stay ahead of the competition: leverage. But what exactly is leverage, and how can small and medium-sized businesses (SMEs) implement it to their advantage?

Read on to explore the definition of leverage, its benefits, and three ways SMEs can implement leverage to grow their business.

What is leverage in business?

In its simplest definition, leverage is the strategic use of resources to maximise returns and achieve a competitive advantage. These resources can include financial capital, human capital, and technological resources, among others. Leveraging these resources can help businesses achieve more with less, and improve their efficiency and effectiveness.

Benefits of leverage in business

Leverage is not just a fancy business term; it has tangible benefits for SMEs. Here are a few benefits of leveraging resources in business:
1. Increased efficiency and effectiveness: By leveraging resources, businesses can achieve more with less. They can streamline their processes, reduce waste, and optimise their operations to improve efficiency and effectiveness.
2. Better returns on investment: By investing in the right resources and leveraging them strategically, businesses can maximise their returns on investment. For example, investing in technology can help businesses automate their processes and increase productivity, leading to higher profits.
3. Competitive advantage: By leveraging their resources effectively, businesses can gain a competitive advantage over their rivals. This can be through offering better products or services, being more efficient, or simply having more resources at their disposal.

Three ways SMEs can implement leverage in their business

Now that we know what leverage is and its benefits, let’s explore three ways SMEs can implement leverage in their business:
1. Leverage financial capital
One of the most common ways to leverage resources is by using financial capital. SMEs can use loans, lines of credit, or equity financing to invest in their business and grow their operations. However, it’s important to use financial leverage wisely and not overextend your business. Here are a few tips for leveraging financial capital:
– Have a clear plan: Before seeking financing, have a clear plan for how you will use the funds to grow your business. This will help you maximise the returns on your investment and avoid wasting resources.
– Shop around for financing: There are many options for financing, from traditional bank loans to alternative lenders. Shop around for the best rates and terms, and don’t be afraid to negotiate.
– Use financing to invest in your business: Whether it’s investing in new equipment or hiring more staff, use financing to invest in your business and increase your revenue.
2. Leverage human capital
Human capital refers to the skills, knowledge, and experience of your employees. Leveraging human capital can help SMEs improve their productivity and efficiency. Here are a few ways to leverage human capital:
– Invest in training and development: By investing in the training and development of your employees, you can improve their skills and knowledge, which can lead to higher productivity and better results.
– Delegate tasks effectively: Delegating tasks effectively can help you leverage your employees’ skills and expertise. Assign tasks that align with their strengths and provide them with the resources they need to succeed.
– Encourage collaboration: Encouraging collaboration and teamwork can help you leverage the collective skills and knowledge of your employees. Foster a culture of collaboration and provide opportunities for your employees to work together.
3. Leverage technology
Leveraging technology is one of the most effective ways for SMEs to improve their efficiency and productivity. Here are some ways SMEs can leverage technology:
  • Cloud Computing: Cloud computing is a powerful tool for businesses of all sizes. It allows you to store and access your data and applications remotely, from anywhere with an internet connection. This can help SMEs to reduce IT costs, improve collaboration, and increase productivity.
  • Automation: Automation can help businesses streamline their processes, reduce errors, and save time. SMEs can leverage automation tools such as robotic process automation (RPA), chatbots, and workflow management software to automate repetitive tasks and focus on more important work.
  • Digital Marketing: Digital marketing is an essential tool for SMEs to reach new customers and grow their business. By leveraging digital marketing channels such as social media, email, and search engines, SMEs can target their ideal customers with personalised messages and measure the effectiveness of their campaigns.
  • Data Analytics: You can’t improve what you can’t measure! Data analytics can help SMEs to make more informed business decisions by analysing data and identifying trends. SMEs can leverage data analytics tools such as Google Analytics, Tableau, and Power BI to gather insights about their customers, operations, and performance, and use this information to optimise their business strategy.
So, at this stage we hope you’ve realised that leverage is an immensely powerful concept that can help SMEs achieve success and stay ahead of their competition. By strategically using resources such as financial capital, human capital, and technology, SMEs can increase their efficiency, improve their returns on investment, and gain a competitive advantage.
And of course, we totally understand that Implementing leverage in your business can seem daunting at first, but it’s important to start small and focus on the areas that will have the most impact.
Why not try a brainstorming task with your team or business partner about what you can leverage and what needs leveraged!  By doing so, you can set your business on a path towards long-term success and growth.

If you want guidance, ways to approach leverage and achieve true business growth, contact ActionCOACH Harrogate today!