Today I want us to focus on Opportunity Costs. The best way to frame the concept of opportunity costs is with the simple question,
“If I say yes to this, what do I have to say no to?”
So, if I approve an expense that I am not sure is necessary, I might eventually have to say no to something that I think we really do need.
And, when you are a small business owner, you might be saying yes to putting your logo on a bag at a festival that is really too far away from your location to be likely to bring in new clients, and later you might be saying no to your daughter’s tennis lessons.
I’m not saying that you shouldn’t spend money. I am simply saying that you need to know that you have the money, that this is a worthwhile (read: profit creating) expense, and that it won’t require you to say no later to something you see as a non-negotiable right now.
And during the coronavirus, the business owners who said no to things they didn’t need earlier so that they could say yes to saving for a rainy day are the ones who didn’t have to close their businesses. That is an opportunity cost they never could have imagined.