Cost of an Opportunity

Cost of an Opportunity is something that you must understand. Calculate your opportunity cost

Written by Ian Richardson

February 19, 2024

Cost of an Opportunity

By Ian Richardson, Principal Consultant, Fox & Crow Group

Opportunities are exciting – everyone enjoys a good opportunity. Building something new. Momentum and the associated excitement as a project takes off.

Reality can sing a different tune. What about the cost of an opportunity? What impact can it have on the organization’s finances, human capital, and other efforts?

Sometimes the right thing to do with an opportunity is to say “No.”

Opportunity is Vision

My business partner is a visionary. Carrie’s mind runs a million miles per second, and she’s able to see 50 moves ahead on the chess board. Her instinct on revenue generation is correct more often than not.

She does not see the operational impacts of her opportunities. Capacity has no meaning in her world – people can simply work harder.

Financial and operational impact don’t play into her consideration process.

Our conversations generally circle around her excitement bumping against my operational dread.

Vision is important. Motivation, revenue generation, impact expansion, growth. All stem from vision. Vision can create a heap of problems as well.

Making sure your organization’s “eyes” aren’t bigger than it’s stomach is important.

Opportunities need anchors as well as wind in their sails

Scoping the cost of an opportunity is a vital part of business health and success. Too many opportunities leads to chaos. The impacts can be massive and widespread:

  • Teams confusion around priority can occur.
  • Your sales team will be ineffective at closing deals because of too much noise in their world view.
  • Marketing will never keep up with demand for collateral creation.
  • Delivery will suffer because standards and process are absent.
  • Financial risks can bubble up.

Visionaries need “anchors” to ground themselves and avoid overwhelming an organization.

What is the cost of an opportunity?

Areas to consider around an opportunity include:

  • What teams will be involved in pursuing this opportunity?
    • What is the human capital required from each team?
    • Who will be accountable for the opportunity?
  • What is the target market for this opportunity?
    • What pain point does the opportunity address?
    • What resources will your team need to spend to recognize or assess the above list?
  • What financial requirements exist to pursue this opportunity?
    • One time costs?
    • Recurring costs?
  • Are there licensing, regulatory, or legal costs involved in the opportunity?
  • What items need to be forgone to allow for this opportunity?
  • Are there current offerings that are in direct conflict with this opportunity?
  • What does the competitive landscape look like this with opportunity?
  • What is the managerial overhead needed for this opportunity?
    • KPIs? Metrics? Process, Procedure, Policy requirements?
    • How will we document the opportunity? In what systems?

Final Thoughts around opportunity cost

As you can see – there are a lot of questions that come up with opportunities. These questions need not lead you and your team to saying “No” to opportunities.

The answer becomes “soon” or “let’s get more data” instead of “let’s go.” Assessing the costs of an opportunity leads to better outcomes for your organization.

It pays to look before you leap.

If you’re struggling to assess opportunity cost, we can help. Grab time here to get started:

Contact | Fox & Crow Group (foxcrowgroup.com)

 

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