I have seen a growing trend lately in small business and entrepreneurships of the lack of understanding when it comes to opportunity costs. As defined:

The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.

When I decided to get out of the Navy in July of 2010, I made a decision that it would have been better for me to get out at that time, and finish my undergraduate degree, than to have stayed in at the time. The pay that was forgone during this time to date, is about $25,000. To me, that was a great deal of money and income to lose. I felt that by finishing my undergrad, the income that I would be able to earn within the next 5 years by having a degree, would GREATLY outweigh the money that I left.

Now today, I have an opportunity to fly, and make a considerable income increase, because of my Bachelors degree. Now I am faced with another decision. Whether or not to put my business pursuit on hold for a year or so so that I can pursue a personal ambition. While the personal ambition will greatly compensate me while I am away, the greatest cost that I will forgo is my brand image.

I was reminded that I have been in Jacksonville, Florida only a little over a year and a half. In that time, as a brand, I have accomplished recognition that some haven’t in 5 or 10 years. Not saying that to brag, but saying that is an enviable position to be in, and can be a costly lost. It allows the opportunity for others to move into my position in the market. So is the cost of one or the other worth it?

That is the choice that we are forced to make every day. Do we want this, or do we want that. The understanding that every decision we make takes the place of another is a powerful tool in decision-making. Often, many businesses jump over dollars to save quarters. They feel they cannot afford to hire, advertise, offer a better product, until they are at a certain level, but fail to realize the failure to do so, may be the most costly decision in the long run.

Even in our personal lives, we make this decision when it comes to friends, relationships, education. The more information that is available to make a decision the easier the process can be. So when making a decision, its more than just heads or tails, it may be all in the ability to see the values of the outcomes.