I recently heard an economist identify “opportunity costs” as “the most useful idea in economics”. That comment sparked this Business Lesson Found.
According to Investopedia “opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another.” Take, for example, the choice between spending $330 on clothes or investing in one share of Tesla stock. If, on November 30th, you opted to buy the clothes, your opportunity costs would have been equal to $470 since Telsa stock has appreciated to $800 (as of last Friday). The classic example of opportunity costs is the choice between attending college or starting a full-time job instead. The opportunity costs of attending college are lost wages.
For business owners, the trade-off between “working in your business” versus “working on your business” has substantial opportunity costs. If, as owner, all or most of your time is in production, on service calls or putting out fires, the opportunity costs derive from what you are not doing: Increasing the value of your company. Spending the time to plan how best to grow your business, increase efficiency, and coalesce staff into a productive team maximizes your business’ value. But this can only be achieved if you take time to work on your business instead of only working in it. Every owner needs to ask themselves:
Is this trade-off intentional or are you just letting it happen?
This series of Lessons Found blogs is another example of opportunity costs. My New Year’s article on KPI’s was the last time you received a Lessons Found blog. The opportunity costs from this decision are more than compensated by my passion for guiding clients in making better decisions and delivering better results.
If you want to discuss any of these topics or learn more about how a peer advisory group can help increase the value of your company, let me know when is a good time to chat. You can connect with me by calling 717-439-6254 or emailing me: mark@strategicbizgroup.com.
Life brings us lessons every day. Sometimes from expected sources. And sometimes from sources and situations we never would have thought possible. Either way, they are a gift found. I am fortunate to find these types of lessons regularly and wanted to share them with you with this weekly series of “Business Lessons Found”.
Did you recently receive the gift of a Business Lesson Found that has helped you with management, marketing or another aspect in business? I would love to hear about it. Comment below or send me an email to let me know.
ACKNOWLEDGEMENT: Image by Pete Linforth from Pixabay
