Are you trying to save money by doing everything yourself?  While it may feel like you are being cost effective, you may be surprised by the real cost of missed opportunities.  Trying to do everything may sidetrack you from doing the most important things your business needs. 

Opportunity cost is what you gain or lose by choosing one option or action over another.  It is the difference between the choice you made and what you would have gained if you had selected the next best alternative.  Every small business owner can improve profits and efficiency by making opportunity cost a part of the decision – making process.  Unless we do this, we underestimate the economic impact of the decisions we make every day. 

For example:

If your bill rate is $50 an hour and an assistant would charge you $30 an hour, you gain $20 an hour by using the assistant.  Of course, this assumes that you actually use that time as billable time.  If this is a recurring activity, there is an obvious on-going benefit to purchasing some assistance.  Sometimes it costs more to hire and train someone than it costs to do it yourself.  When the math is this clear, it is easy to make an efficient business decision.   

Opportunity cost calculations should also consider the long-term impact of our decisions.  How much revenue does a single client generate for your business?  You may have a one-time project worth thousands in a single year.  Or, you might have a client who generates thousands over the course of several years.  How many billable hours will you forfeit to obtain a new client?  We can be fairly certain that we need to spend time doing sales in order to have clients and billable revenue in the future.  Forfeiting guaranteed billable time to do sales is a time investment that requires a leap of faith.   If you are tracking your time and expenses, you and your accountant will be able to develop a reasonable estimate of the cost of gaining a new client or losing an existing one.                                                                                                                                                                                                                                                 

Small business owners wear many diverse hats that compete for our attention, time, and resources. We make educated guesses.  We take risks.  We try to make decisions that have a positive long-term impact without sacrificing short-term security.  Understanding the concept of opportunity cost and using it as a decision-making tool can have a profound impact on the future of your business.