There’s No Leverage In That! Maximum Results through Minimal Effort

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As a lifelong sailor (at one point I even lived on a sailboat for the better part of a year) I’ve long marveled at the power of leverage in sailing. The way the tiller (the long stick used in steering) provides enough power to steer the boat and keep it on course, wrapping a headsail sheet (or rope, for landlubbers) around a winch and trimming it in with a winch handle, or the series of lines, shackles, blocks and pulleys that enable one to trim a mainsail under thousands of pounds of pressure with a single hand/arm motion are all examples.

So too is the system I just bought that allows me to lift the heavy hardtop off of a Jeep Wrangler and hoist it to the ceiling of the garage with minimal effort.

If these examples aren’t enough, I’ll draw one more from my years as a cyclist. A fit runner might be able to keep a pace in the range of eight miles an hour. The leverage created by the large chain ring on the front of my bike and smaller cog on the rear make it possible for me to ride at a pace of 20+ miles an hour for hours on end.

All three of these are examples of how we can use leverage such that minimal effort or energy can produce maximum results. Could the same be true in operating a finishing business?

Several years ago, following the sale of the company I was leading, I reached a career juncture that had me considering what came next. Having long consulted with several companies inside and outside manufacturing and liking the satisfaction that came with helping other business owners achieve their goals I was strongly considering making my consulting practice my full-time job. I bounced the idea off of a close friend — himself a recently retired Fortune 500 CEO — and awaited his feedback. He responded with five words that have stuck with me ever since. Five words that affected the way I look at business. Five words that changed the trajectory of my life and that of many around me.

What were these five words of wisdom? When I suggested to my friend I might turn to consulting on a full-time basis his simple response was, “There’s no leverage in that!”

Leverage, like a winch trimming a jib sheet. Leverage, like a pulley lifting a Jeep top. Leverage, like a set of gears turning a bike wheel. Leverage.

A quick disclaimer. I mean no offense to those in the practice of consulting who provide valuable services to their clients. I have been both a provider and recipient of valuable consulting counsel. However, as a consultant, unless I was willing to expand my practice by hiring additional team members and billing out their time as well as mine, as a sole practitioner the only way for me to generate income was to put in the time and bill out my hours. As my friend put it, “there’s no leverage in that.”

Just like in sailing, hoisting or cycling, one strategy to becoming an extremely successful finishing operation leader is to create as much business leverage as possible. Business leverage comes in many forms. Consider these:

People Leverage. By employing great people and delegating work to them, we take that work off our plates and simultaneously generate margin on the difference between what they are paid and the economic value they add to the business and its customers.

Debt Leverage. Assume a $300,000 investment in new equipment increases annual cash flow by $100,000 and is financed by a 5-year note at an annual interest rate of 7%. So long as the cash flow expectations are met, this investment, financed with cash from a financial institution, will generate significant additional annual cash flow over time with minimal, if any, up-front cash investment on the part of the company.

Pricing Leverage. Most manufacturers don’t appreciate the latitude the market will afford them to increase price. An increase in price generates additional gross profit instantaneously.

Efficiency Leverage. Opportunities for improving yield, reducing cycle time and accelerating throughput hide all over many finishing operations. Improvement in part density, line speed, transfer efficiency and material cost reductions create instantaneous and often substantial improvements in gross profit, net income and cash flow.

Automation Leverage. Throughput and capacity improvements resulting from investments in well-planned and effectively deployed robotics and automation technology create instantaneous cost reduction and revenue growth potential.

Leverage always carries with it a degree of risk. Sometimes the people we hire don’t generate the work product we expect, payback periods on equipment investments can run longer than planned, increasing price carries the risk that a customer will move to another supplier, efficiency improvement projects can miss their goals and automating an operation doesn’t always go exactly as planned. However, used properly, carefully and effectively, leverage can pay huge dividends.

And not trying to scale and improve your finishing operations through leverage, well….

There’s no leverage in that!