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Opportunity Cost for SMEs Jul 7, 2022

Opportunity Cost for SMEs

When you are a business owner, there are multiple factors that you must consider for your business. In a perfect world, you’d have unlimited resources and time and you’d be able to afford everything that’s good for your business. But since it’s far from a perfect world, entrepreneurs often need to make choices, this is especially true for SMEs. Here is when opportunity costs arise.

The major standard in financial matters of the company is opportunity cost. The opportunity cost of something foregone. Opportunity costs address the potential advantages that an individual, financial investor, or business misses out on while picking one option over another. Since opportunity costs are often unseen or implicit,  they can be often ignored.

We can’t have everything in life or for our business. This is where resource constraints arise. Our unlimited desires are confronted by a limited supply of resources, services, time, cash, and opportunities. This idea is what drives choices—and additionally, costs, and trade-offs.

What does opportunity cost mean for SMEs?

Business owners, specifically small business owners should always consider opportunity costs for their short-term as well as long-term goals.

Most entrepreneurs do consider opportunity costs whenever they come to choose which of two potential options to initiate. Small companies figure opportunity costs while processing their operating costs to give a bid or estimate the cost of a task.

Imagine you are a small business, you are probably the jack of all or many ‘trades’ within the business.

You are of course the business development officer and face of the business, but also do the accounts for the business, pay the team, lodge the BAS maybe, do administrative tasks and work 16-to-18-hour days – sounds familiar?

You are a perfectionist and yes no one can do these tasks better than you!

But what is the opportunity cost of you doing all these tasks in the business?

How many clients are you not being able to service because of having to do all the accounts and admin work?

How many hours are not spent on client service because you have to look after IT or manage staff payroll?

How many things do you do in the business that only you can do and no one else can undertake? And what happens when you get sick who does these tasks?

When was the last time you were able to finish work at a decent hour or go on a holiday?

These are all the opportunity costs of doing business.

As a business owner, opportunity costs can hinder business growth.

Outsourcing non-core accounts, administration, IT, and marketing support work enables you to grow your business.

Outsourcing allows you to reduce the opportunity costs of key person dependency within the business.

Outsourcing allows you to put a measure on your opportunity cost – is your time worth only $17/hr plus GST for example – if an outsourced partner can do the same task at that hourly rate?

Measure what growth you are foregoing by not delegating and outsourcing tasks.

Measure what is the cost on health because you are working 24×7 in the business instead of on the business?

SBA’s away team provides a range of support services to SMEs that reduces opportunity costs and accelerates growth for SMEs and reduces key person dependencies.

Discover a critical competitive advantage for your SME by engaging team SBA and reducing key person opportunity costs.

Increase and enhance the value of your business by identifying opportunity costs and reducing opportunity costs via a bespoke outsourcing solution from team SBA.


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