Few are aware of this cost in business

Anyone doing business needs to know their costs as well as possible.

I totally agree with that and I assume you do too.

And what costs does a business have?

– employee costs (if any)

– state taxes, bank commissions

– costs with certain service providers (eg: accounting)

– the costs of certain subscriptions

– production costs or those related to products (if applicable)

– costs with internal/external teams

– and so on

There are fixed costs and variable costs.

In the service area (especially), in each hill these costs are quite flexible and differ greatly with the workload, type of project, required resources, etc.

Well, here comes this cost that few are aware of.

Do you know which one it is?

Opportunity cost.

It took me a long time to realize this cost and really understand it.

What does he foresee?

Well, it states the following: you as an individual have limitations – you have 24 hours of time in a day, you have limited energy, you have limitations on the knowledge side (these can change), etc.

As a product/service provider, you can lose a lot of money because of this cost because:

– you allocate your (limited) resources to the wrong customers

– you lose good projects due to resource limits

That is: both for the client who offers you 5000 euros per month, and for the one who gives you 500 euros per month, you allocate roughly the same resources.

The experience you allocate is the same. The present knowledge is the same. The time may differ somewhat, but here it is debatable. The energy is the same.

Therefore, you can lose 4,500 euros if you choose to work with a 500-euro client (because you didn’t choose the 5,000-euro one).

Simple.

Also consider that every customer wants you to give them your attention and be there for them. Then think about having to split yourself equally into 10 different places at the same time instead of being all in one direction on one client.

Alex Hormozi said this in one of his podcast episodes: if you’re going to work for clients, at least choose to work for the rich.

Instead of taking 10 clients of 500 euros, you can take 1 client of 5000 euros.

Paradoxically, your level of involvement is almost the same if you have a 500 euro client and if you have a 5000 euro client. The stress is less when you work with more affluent clients. The impact you have through what you do to them is greater. Why limit yourself to a little?

So what would be the conclusion?

The next time a new client comes to you and wants you to help them for a little money, turn them down (if you can afford to turn them down).

Your time, knowledge, energy and experience are more important and have the value you give them.

In business everything is possible. I no longer rely on market prices. I don’t care about them. Clients who come to work with me choose me because they want to work with me, not someone else.

And don’t let it be understood that I’m making fun of their money or that I’m “begging” them for money (this expression sounds ugly). Not at all. I shouldn’t even write about it, but I write because I don’t want to leave room for interpretation.

When clients pay me, they do so because they already see value in what I offer and have agreed to it. And I give my maximum interest that the work turns out well and that they are satisfied. Those who complain that it’s expensive aren’t my customers anyway. Those who laugh that I have such prices wish they had the same.

It’s a simple equation.

The opportunity cost must always be taken into account. You also have to look at the potential of a project and several factors that are seen at the macro level.

In recent months I have had to turn down many requests precisely because of this opportunity cost. I also had to give up some clients. It’s not worth helping everyone, and you can’t.

The most recent example I have: a lady wrote to me on Facebook to help her promote her group. I gave her my YouTube tutorials and told her I couldn’t help her because I’m “full” until June (which I am). I only helped her with advice.

Maybe I could have taken 1 hour of my free time to help her and earn some extra money. But then I would have had to give up other important things, like health. At that time I went to the gym. If you make exceptions 1 time, let it go. But the problem is that there are always exceptions and at some point you end up giving up important things for you to do things for others. And I don’t think you want that :).

In my case I was no longer on the first exception and I chose not to help her.

So, in order to better understand this opportunity cost, you must know your priorities very well.

Have well-established principles. Know what you can and can’t give up. Because always to be able to have something, you have to give something else in exchange. There is always this “trade-off”. In the case of business, it would be time, energy, knowledge, experience, expertise vs money.

But often it’s not just about money and the 5 things mentioned. Sometimes you end up giving up: health (due to stress), time spent with loved ones, giving up unique moments and so on.

Bottom line: always factor in the opportunity cost. And you’ll see that the balance tilts differently when you have to make decisions 🙂

Stay strong!

– Andrei Isip