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Opportunity Cost
- coryl 17y agoI didn't think the post was particularly useful for startups, so here's my take. Opportunity cost is basically what you give up when you decide to take one option over another. Costs aren't limited to literal cash outlays, but usually more importantly include costs regarding time, focus, and lots of other intangibles. For example, lets say you decide to go to grad school instead of taking a job. An opportunity cost analysis shows you'd might be giving up a $60k/year job, an experience working with a top firm, networking opportunities with colleagues, ability to own a car, affording rent to live on your own, etc. For early startups, you can use opportunity cost to help weigh which direction to take your company. Using opportunity cost can help you look at what your giving up when you forgo one option for another. Its really the strategic non-tangibles that matter most, so don't forget to consider things like happiness, employee morale, product focus, etc.