Have you ever heard of the term “opportunity cost”? Have you ever heard the opportunity cost explained? It’s a term that gets thrown around a lot in economics but very few people understand it. In fact, I’ve been in the financial space to some degree for a decade and I can tell they are actually some of the worst offenders. I say “worst” because know better. At least the general public is oblivious to it so they know not what they do.
As a business owner (or human being really), it’s imperative that you learn about opportunity cost and how it can affect your business, your bank account and most importantly your time.
We’ve discussed several times that your time is your most valuable asset. And I’m going to keep repeating it until it sticks in your brain. Too many of you think money is the most important thing in the world and nothing could be further from the truth. Your time is. And that’s why it’s so important that you learn about opportunity cost.
Opportunity cost explained:
The loss of potential gain from other alternatives when one alternative is chosen.
Another definition is as follows:
The value a person could have received but passed up in pursuit of another option.
Here’s an example:
Let’s say you’re standing in line to get free coffee. Well, the coffee isn’t really free because you could have spent that hour doing something in exchange for money. You could have closed a new client, started a business, started a side hustle, etc. Your time is actually worth something and you wasted it. You could have made more money than the cost of the free ice cream.
Here’s another example:
You spent two hours clipping coupons to save 50 cents when you could have spent that time figuring out how to make an extra $50 bucks. In other words, you didn’t really save anything. In fact, you screwed yourself because you would have had a higher return on your time investment by making more money. This is why you’ll never hear about me being a coupon expert, because it’s a waste of time.
Now here is how business owners let opportunity cost screw them…
Oh my goodness let me count the ways. This is one of the areas where I see business owners and aspiring business owners really get themselves into a bind. And by the way, I used to be one of them. Fortunately, I would say I’m relatively reformed in this department (though by no means perfect).
Here are just some of the ways business owners are paying the high price of opportunity cost:
They insist on figuring everything out themselves instead of investing in mentorship.
This was actually one of my biggest mistakes when I said I wanted to start a business. I wasted years because I didn’t want to let go of money. I often say if I’d just invested sooner I’d already have a seven-figure business.
Fortunately, my clients know better and invested in Persuade to Profit. One of them quit her job eight weeks ago and has already booked three private clients, created her signature offering and already has half the spots sold. Another just recently posted she’s earned more money in one week than she used to make teaching at yoga studios in one month.
As you can see, investing in mentorship puts you on the fast track. They could have spent that time trying to figure it out on their own, but the truth is they either would have quit or it would have taken them much longer. It most likely would have been the former. You know how I know that? Because when I do follow up sales calls on people who did not invest in Persuade to Profit most of them do end up quitting.
They don’t hire help…
You can’t do a post on opportunity cost explained without talking about the importance of hiring help in your business. I won’t get too deep into it today only because Thursdays is when we cover scaling topics like systems and teams and we’ll go deeper into it then. For now, I want to plant the seed:
You cannot do everything yourself in your business.
In fact, it is egoic to even consider it a possibility. Many of you don’t just not want to release money, you also don’t want to release control. The crazy part is if you don’t release some control, you end up making less money. Like I said, we’ll get deeper into this on Thursday so make sure to sign up for our email list above, subscribe on YouTube or find me on my social media channels.