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Consider the cost of opportunity
As humans we make thousands of choices every day to weigh up good over bad decisions, and it’s no different when it comes to opportunities. Just because an opportunity presents itself in a bright and shiny package with a pretty bow on top, doesn’t necessarily mean it’s the right choice to make.
It’s essential to consider the opportunity cost of any situation if we hope to make intelligent choices. An opportunity cost represents the potential benefits an individual misses out on when choosing one alternative over another. Put differently, the cost of sacrificing alternatives by making a particular economic choice.
Opportunity cost = the difference between what you’re sacrificing and what you’re gaining.
It can be easy to overlook opportunity costs because they are intangible, however, having a clear idea of what you are giving up by choosing one thing over another is a critical factor in making good decisions.
How is opportunity cost defined in everyday life?
- You choose to spend your annual bonus on a family holiday instead of buying a new car. The opportunity cost here is that you are stuck with your old car.
Opportunity costs are often neglected when making higher priced purchases such as the decision to stretch the budget and invest in a full ECM solution versus a managed-print solution. If you walked a potential client through the opportunity costs, what are the odds that they might change their mind?
There are three key factors involved in opportunity cost: money, time, and effort.
These questions can help to make wise long-term decisions
- How much do I value this and what am I giving up now to have it?
- What is the cost of doing something (time, focus, energy, attention)?
- What is the cost of not doing something?
- What is the cost of not doing something right?
By being realistic and sensible when making decisions, you can confidently choose what is best for you in the long-run.