Image from Flickr courtesy of cupcake queen
As I talk to small business owners regardless of the industry they are in, one thing most seem to struggle with is understanding opportunity cost and how it controls your business’ growth. No, this isn’t a lesson on a confusing financial term. Stick with me.
Here’s how opportunity cost works:
- You only have so many hours in the day.
- In those hours, you have a finite amount of self-control.
- When you say yes to things that you really don’t have time for or that don’t map to your goals, you exhaust valuable mental energy that you could be using to move your business forward.
- Saying yes to something you shouldn’t actually costs you opportunities down the road and slows your growth in your business.
Dan and Chip Heath talk about our finite self-control in their book, Switch: How to Change Things When Change Is Hard, one of my favorites about change. We zap that finite amount of self-control in a lot of situations including coping with our fears, not spending too much money or avoiding that chocolate cupcake that looks so good, trying to focus on tasks that we don’t want to do and many others. Every day we have a certain amount of self-control we’re dealing with.
When you exhaust your self-control, you exhaust the same mental capability you need to think creatively, focus on what you need to and persist when frustrated or have failed. Not only are you unable to make smart decisions in your business when your self-control is exhausted, you also lose valuable time when you should be working toward your goals.
The important question for you to ask yourself before you say yes to anything and before you put anything on your to do list is what is the opportunity cost of this task?
1) If I say yes, will it speed up my business’ growth?
2) Does it help me achieve my goals (short-term and long-term)?
3) What has to take a back seat if I say yes to this? Am I ok with that?
Decisions aren’t made in a vacuum. Before you say yes to anything or add a new idea to your to do list, stop and ask yourself these three questions. You’ll find that by understanding opportunity cost, your business will grow more quickly and you’ll have more self-control in your tank to complete the important goals you’ve set for your business.