Are you Overlooking this Critical Cost?
When you are costing out your projects, how often do you remember to factor in Opportunity Costs? Do you know what Packaging Opportunity Costs are? We've referred to them a few times in our weekly releases. Here are some thoughts on opportunity costs.
- Why are Opportunity Costs overlooked?
- There is no Profit and Loss statement line item that says opportunity Cost
- Only traditional expenses (Salaries/ Healthcare/ Electricity...) show on the P+L
- We can't quantify them
- They are speculative projections
- It's not how we think
Opportunity Costs aren't tangible and we can't track them like usual expenses in business. That doesn't make them any less important.
- Why are they critical?
- We could be missing real growth
- We could be missing enhanced profits
- We could be missing greater flexibility
When you are costing a project, remember to recognize the Opportunity Costs and whether you would be better off by outsourcing the project.
