Opportunity Costs

By: Santi Chacon
Denver, Colorado
Business Coach

Trade Offs:

Business executives should observe costs more in terms of trade offs. The opportunity costs is what the company can not benefit from because of the law of scarcity that govern economics. If an executive hires someone, that investment is now tied up to pay the salary of the new hire. The opportunity costs in this case could be performance bonuses or a raise for existing employees or investing in needed software packages to increase department productivity.

The most important question that business owners must answer is:

What are the implications of my business choices?

A characteristic of a seasoned business executive is the ability to understand the implications of his decisions. 'Implication' insinuates foresight and prudence in a business. Can you take the next year off from your business and still profit from it? If you are far from this ideal consider your time and financial investments and opportunity costs. You could be costing your company market share.

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