Opportunity Cost in Business

There is no limit to the opportunities which will come your way as you achieve higher and higher levels of success.

But there is a limit to the time you will have.

In fact, throughout our life plenty of opportunities are going to come our way. But we will never have more than 24 hours in a day.

So how do we decide which opportunities to take and which ones to overlook.

Well, one guy who could probably give us a hint or two about this is one of the world's most successful investors, Warren Buffet.

When an investment comes his way, he looks at four basic filters in his checklist:

Is it a good business?
Is it available at a good price?
Does it have honest and capable management?
Does it have a durable competitive advantage?

But do you know what factor they look at more than anything else:

Opportunity Cost

That's right: given that we all have limited resources, what other opportunities will I miss out on if I take advantage of this opportunity.

For instance, next month I have been asked to do a presentation for a number of successful real estate agents.

Given this will take me away from my day-to-day work, should I do it and miss out on the opportunities to create wealth in other ways? Or should I pass?

I decided to do it because...

a) I think I will generate far more work out of it than by what I would do at the office.

b) I can catch up with a friend and business associate on the way back who has referred me a substantial amount of business.

However, had it been less attractive (i.e. a meeting with a client) I would have declined.

The key to identifying opportunity cost is working out what your time is worth.

And then knocking back anything which doesn't value your time.

And one of the most valuable "opportunities" I would never, ever surpass is the opportunity to learn.

In fact, every spare moment my wife tells me my head is always stuck in a book... or a CD or something.

And that is because - without question - the greatest breakthroughs I have ever had have all come through something I have learnt.

How about you? How much are you taking advantage of the opportunity to learn?

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