Opportunity is an idea or event that could result in a positive outcome, such as a lucrative business deal. A good business leader can recognize an opportunity and take advantage of it before someone else does. Spotting an opportunity takes an impeccable eye and a keen understanding of what it means to your business.
Opportunity involves finding unmet needs or desires that you can satisfy with your product or service. It also requires a willingness to think outside the box. This is often where the best business opportunities lie, such as developing a new technology that addresses a specific need, or adjusting your existing products for different markets or customer segments.
Another important factor in identifying an opportunity is understanding the difference between an actual cost and an opportunity cost. Essentially, an actual cost is a dollar amount or percentage that is incurred directly in making a decision. An opportunity cost, on the other hand, is the potential value that is lost by not selecting an alternative option. It’s not something that can be calculated with exact measurements and therefore is usually gauged through estimation. Business owners, investors, and individuals all face these kinds of high stakes trade-off decisions every day.
In business, calculating opportunity costs can help you make more informed and profitable decisions. For example, if your company is considering whether to spend $11,000 in retained earnings on a marketing campaign or stow it away in a savings account, the opportunity cost would be the return you’d receive if you invested that money in a stock that delivered a higher rate of return.