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When deciding between one thing and another, there’s always pros to be considered and drawbacks to keep in mind. But as part of that decision-making, have you factored in the opportunity cost?
In other words, what opportunity do you lose when you opt for one course of action over another? In real estate, this opportunity cost is a factor worth keeping in mind, ensuring you stay focused on high-value activities.
So how does it play out and why does understanding the opportunity cost help?
What is the opportunity cost?
By definition, the opportunity cost is the loss of other alternatives when one alternative is chosen.
It’s the price you pay for taking one course of action over another.
Often when making that decision, you feel the choice you’ve made will have better results for you regardless of what you lose by making it.
Is there a better return on investment?
In our line of work, we weigh this opportunity cost each day.
For example, what is the opportunity cost in choosing to do a direct mail-out as opposed to channeling your resources of time and money into telemarketing?
As a guesstimate, if you have a clean database, the phone calls will provide a better return on investment.
However, if you have a cold database, those calls would likely produce lower returns than a direct mail-out or buyer letter highlighting a successful sale.
Another example of opportunity cost is something as simple as choosing between going to work and skipping a day. What are you losing out on if you choose one over the other?
In its simplest form, skipping work has an opportunity cost in terms of lost income, but there’s a potential opportunity cost in rarely taking a day off as well.
If we choose work over personal, that opportunity cost might involve missing out on something and never having the chance to do it again. For example, it could be a family holiday or a significant family event. Is that opportunity worth missing?
Meanwhile, consider your average day and week and ask yourself, is there an opportunity cost due to lack of productivity?
In other words, how much of our time isn’t spent working on dollar-productive activities?
It’s pretty instinctive
The reality is, we all have a sense of the opportunity cost. We instinctively know what we should do and what we shouldn’t, and where we’d be best placed directing our energy and time for maximum impact.
But it’s worth keeping that opportunity cost front of mind. When making choices, taking the opportunity cost into consideration makes for better decisions.
It focuses our attention towards high-value activities and places relevance on how we spend our time.
It amplifies the value we place on our personal goals and desires. It ultimately affects our outcomes.
Now is the time to direct our focus on what’s important. Now is the time to get crystal clear on the high-value activities that provide maximum effect and to understand how these impact our ability to achieve both our personal and professional goals.
So, ask yourself, what opportunity cost is there in the decisions I’m making right now, for today, for tomorrow and for the period ahead?
And whatever you do, ensure that cost is something you can afford.
Manos Findikakis is the CEO of Agents’Agency.
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