Opportunity Cost | 60 Second Business

Added: 2026-05-17

[00:00:00]Let's spend 60 seconds looking at opportunity cost.

[00:00:04]Opportunity cost is the value of the next best alternative that's given up when a decision is made. Every choice has an opportunity cost because resources, money, time, management attention, they can only be used once.

[00:00:17]So, for any business decision-maker, opportunity cost is like the hidden price tag on every choice they make.

[00:00:24]For example, if a business spends 100,000 pounds on new delivery vans instead of a marketing campaign, the opportunity cost is the benefit the marketing campaign would have delivered.

[00:00:36]If a student spends 3 hours revising business studies, the opportunity cost is whatever else they could have been doing with those 3 hours. Maybe revising economics, seeing friends, earning a wage.

[00:00:47]So, opportunity cost is at the heart of every business decision. For example, capital investment. Where do we best employ our money for the best return?

[00:00:56]Hiring people. Who should we appoint knowing we can't appoint them all?

[00:01:00]And maybe strategy. Which markets do we enter knowing we can't enter them all?

[00:01:05]So, thinking about opportunity cost forces managers to compare alternatives, not just to think about a single option in isolation.

[00:01:13]So, a project can look attractive on its own, but poor when compared with what else could have been done with the same resources.