I want to talk today about something with which we are all familiar. I believe that we need to keep this in the forefront of our minds as business owners. This term is “opportunity cost.” The idea of opportunity cost is, “what are you missing out on when you do x,” the idea here being that when you do activity x, you cannot also do activity y, m, z, q, etc.
During winter here in Idaho, it can be easy to get cabin fever. I can only stay nice and cozy inside for so long before I have to get out. When I get out during the winter, I like to go skiing or snowmobiling. Unfortunately, I can’t to both at the same exact time. I recently upgraded both my skis and my snowmachine. I ended up going out with my snowmachine more often than I went skiing during the first bit of winter – in fact, during the first part of winter, I had only used my brand-new pair of skis once. I chose to go out on my sled at the cost of going skiing.
“Time is money,” the old saying goes. If that’s true, then as business owners we should spend our time on those activities that will help us make more of it. Let me put this scenario before you. You have a $1,000 dollar project sitting on your desk, and it’s due in a week. You also need to get some time in working on your business, and not just in it. You have a little bit of extra time. What do you spend your time doing?
Your hourly rate for the project is obviously fairly high. However, your hourly rate for on-it-not-in-it (OINII) time will always be higher. Getting a project like that done is good, and getting things done on time needs to be a priority. But you need to consider what doing that project now will cost you. You get $1,000 dollars out of it, but how much more money are you missing out on by not finding ways to do better in your business?
Consider the opportunity cost is vital if we want to be successful. Doing so helps keep us focused on the bigger picture, not just on the here and now.
Check out The Appraiser Coach Podcast for more info on this topic:
746 Opportunity Cost VIDEO AUDIO
