Opportunity Cost

What is opportunity cost?:

• The cost of missing out on the next best alternative

• The benefits that could have been gained by taking a different decision

Why opportunity cost is important:

• For most businesses resources are limited (particularly new businesses)

• When resources are limited, decisions have to be made about what to spend/invest and where to focus

• Entrepreneurs and business management take calculated risks and weigh up the potential implications of decisions (opportunity costs) before choosing the options they believe are best for their business