Entrepreneurial Articles
The Opportunity Cost Of Doing Business
Opportunity may be seen as the existence of a situation whereby it presents itself to an individual or group of individuals to profit in someway by pursuing it in a certain manner? The results may yield a favourable outcome for the pursuer(s) but the reason only a small amount of opportunity is exploited to present its rewards is that along with most opportunity comes an element of risk.
It is almost possible to show this graphically illustrating the greater the potential, the greater the risk, e.g. A small business owner contemplates opening a bistro bar in a shopping centre with a potential yield of $100 000 per annum, risking $250 000 whereas Donald Trump may risk $100m on a new golf course development, with a potential yield of $10m per annum
Hence, in the world of business, the universal search is for opportunity! There is plenty out there so what stops us from taking it? As has been well documented throughout the years, people have vastly different attitudes to risk, thus by definition, vastly different attitudes towards opportunity. As a result many of these great opportunities are passed by in favour of security whereby the individual(s) dismiss the opportunity and move on? What governs this thought process?
We constantly are told through various mediums not to miss out on this opportunity - by simple reasoning and the law of numbers - a great ally if one wishes to use it correctly - EVERY OPPORTUNITY CANNOT BE FLAWED! Therefore by failing to at least examine each opportunity is a gross mis-service to our experience in this life.
What many of us fail to realise is that we are economists constantly involved in decisions and choice under the constraint of limited resources - great to have the opportunity to examine an opportunity but held back by a famous, or infamous, economic concept- opportunity choice.
Opportunity Cost may be defined as the cost of choice, when output, time and money are limited. On a practical everyday level one may fail to even examine an opportunity, or examine an opportunity, but look at what this will cost to undertake.
This is where our thought processes enter the debate. Aside from the natural character of the individual(s) involved; this may involve how we are taught to think from a young age. Are we bombarded by positive or negative thoughts and statements from a young age?
Do we really believe that we will live forever and can take the assets that may be involved in an opportunity or have been accumulated over time with us? If we are lucky enough to have an opportunity it probably means we have been given an opportunity already. Circumstances, freedom from war, starvation or the basic need to devote every hour to survival- is it then correct, for us, even morally, to fail to examine an opportunity?
Luckily, we have tools with which to examine opportunity. The ability to do our homework, freedom to access any amount of information to aid us in our evaluation, the law of numbers and the aforementioned favourable circumstances.
In America we produce great opportunity takers. Is this conditioning? They are certainly no cleverer than any other country's populace! They merely do their homework and apply the basics to each opportunity presented more than any other people.
The underlying message must be to at least examine every opportunity using the basics, irrespective of the final decision, producing a circular process:
Circumstances enable Opportunity. This gives us a chance to do our Homework. The Law of Numbers dictates that at least one Opportunity will work. The Opportunity Cost will help us make a Decision.
This method of Opportunity Seeking cannot fail to produce results; whether or not they produce the desired results, one at least owes it to themselves and those not fortunate enough to have opportunity, to examine it properly.
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