Recently I was taking with someone about this subject who suggested that it would make a great podcast episode - and I totally agreed, so here we are!
Knowing and understanding the concept of opportunity cost in both life and business is super important, and in this episode I'm breaking down what exactly it is, how to assess it and how to use it as a tool to make better decisions.
Listen + subscribe on iTunes // Stitcher
If you have ever been in business, sales, gambled or just know someone who likes this phrase, then you’ve heard the term opportunity cost before.
Here's how I like to think about: opportunity cost is the cost of continuing on one path at the expense of a pursuing a potentially better path.
You know I love a good analogy, so here are a few real life, practical examples of opportunity cost that might help you grasp the concept a little better.
Example 1:
If you are gambling, there is an opportunity cost to continuing to put money into the pot even when you think your hand won’t win, simply because you’re already invested.
At some point you have to recognize and evaluate the opportunity cost, cut your losses and run otherwise you'll continue to bleed money and lose the game entirely.
Here's another example for you....
Example 2:
Let's say you're dating someone that you know isn’t right for you long-term, but you're staying because you've invested time, energy and emotions into the relationship.
The longer you stay, the greater the opportunity cost because you're potentially missing out on the opportunity for something that would be much better for you in the long run.
Example 3:
If more time freedom is important to you in your business, but all you're spending all your time trading hours for dollars as opposed to creating passive income streams, your opportunity cost will grow higher every day that you continue that pattern.
The Reality
We have to learn how to consistently measure the opportunity cost of what we’re trading now at the expense of something better.
If you never stop and make that assessment you’re always going to be stuck in the same rate race.
In any area of life or business that isn't working the way you want it, there is an opportunity cost involved with not addressing it, and we need to know what that is in order to make better decisions and appropriate pivots.
Start by asking yourself what situations you may be dealing with right now that are costing you better potential opportunity? What are you holding onto that would be better moved on from or switched up?
One thing I want to mention: there should hopefully be some things in your life and business that you don't need to count the opportunity cost for, because it's working and you're happy. Don't look for problems where there aren't any. Just be happy!
However, for the other things that you aren’t 100% positive about, you need to develop a process for deciding when it's best to cut your losses and change course OR what deciding factors are going to help you continue moving forward.
And hey....if you've just been skimming through this article without actually listening to the podcast, now's the part where you need to click play because I'm sharing a SUPER personal story about why I really wanted to name this episode "Don't Wait Until Your Business Throws a Spoon at You." Trust me.....you want to listen ;)
We invest a lot into our businesses, just as we invest a lot into our families. We love what we create and usually feel a massive connection to the investments we've made. This is all normal and fine.
Just don’t feel let those feelings keep you stuck in patterns that aren't working out in your favor. Learn how to recognize the opportunity cost of what you're doing and how to cut your losses and move on to bigger, better things when it's time.
Raising Your Business is an 8-week self-guided course that walks you step-by-step through the 10-point path you need to follow in order to raise and nurture a truly successful business.
This program is perfect for you if you’ve started your business, but don’t feel like you are super clear on how you will structure your brand, programs, pricing, and content. If you know what you want, but don’t know how to get there, then this is a great fit!
If you want to know more about Raising Your Business, be sure to check out my newest live workshop, Your 10 Point Path to Raise a Successful Business, where I will walk you through the process to ensure you’re raising your business the right way. Save your spot today!
Connect with Dana
We love hearing from you!
If you’ve got a question about today’s episode or want to leave us some inbox love, you can email us at hello@boss-mom.com. Or, you can always find Dana hanging out in her happy place, the Boss Mom Facebook Community.
We would also LOVE it if you’d leave a podcast rating or review for us on iTunes! We know it can be kind of tricky to figure out, so here are a few step-by-step instructions on how to leave an iTunes rating or review for a podcast from your iPhone or iPad.
- Launch Apple’s Podcast app.
- Tap the Search tab.
- Enter the name of the podcast you want to rate or review.
- Tap the blue Search key at the bottom right.
- Tap the album art for the podcast.
- Tap the Reviews tab.
- Tap Write a Review at the bottom.
- Enter your iTunes password to login.
- Tap the Stars to leave a rating.
- Enter title text and content to leave a review.
- Tap Send.