Sure if you pay your employees $10 and they make $15, that’s leverage. Similarly, if you buy a house using 100% of the banks money, that is also leverage. The problem is that risk frequently increases proportionately with leverage.

For example, if you suddenly lose your job or fall ill and are unable to work for 6 months, your “leveraged” house would suddenly turn into a huge liability. It’s a boat anchor dragging down your financial life. The same is true of employees. If you have a slow month or slow season, you still have to pay all your staff regardless of whether or not you made enough money. If you lay off your employees, people won’t want to come back to work for you and you won’t be able to retain a quality work force. Thus further hurting your profitability.

My point is, leverage is a two-edged sword. It will cut you just as quickly as it advances you. I would use it cautiously.