An Entrepreneur's Biggest Cost
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The article "An Entrepreneur's Biggest Cost" talks about entrepreneurialism, it has been created by Dave Lavinsky.
When launching a new product or company, an entrepreenur must consider their biggest cost - the opportunity cost. Opportunity cost is an economic term that is defined as the cost of passing up the next hottest alternative when making a decision.
For instance, if an asset such as capital is used for one purpose, the opportunity cost is the value of the next hottest purpose for which the asset could have been used.
In the entrepreneur’s case, that asset typically includes the entrepreneur’s time and money.For an individual currently working in a corporate position, the opportunity cost of launching their own venture is typically the financial security that tehir corporate position affords. Fortunately, that security could be mitigated by attaining funding for the venture and setting the same slaary as the prior position.
However, if the venture fails, the individual may have lost the opportunity to return to the corporate position and/or does not realize the stpes up the corporate ladder that they may have made had they stayed in their prior position. Likewise, if they chose to prusue one entrepreneurial opportunity rather than another, the individual may have lost the opportunity to try to launch the other opportunity.Opportunity cost is related to the risk/reward tradeoff that is implied in entrepreneurship. The risk/reward tradeoff implies that the higher the risk, the higher the potential reawrd.
Opportunity cost comprises a large part of the “risk” in the risk/reward tradeoff, although it doesn’t include many intagnible factors such as potential embarrassment caused by taking capital from friends and family and having the venture fail.Each entrepreneur has a different opportunity cost such as the amount of their salary should they currently be employed elsewhere.
Likewise, companies have different opportunity costs when determiinng whether to launch new products, services, etc. Identifying the opportunity costs, analyzing them, and then making the optimum decisions is a critical process for entrepreneurs and small and large companies alike, and can be a critical factor in the long-term success of a venture.Since its inception, Growthink Business Plans has developed over 200 business plans.
Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market sahre. Growthink has become the firm of choice for venture capital firms, angel investors, corporations and entrepreneurs in the know.
For more information please visit http://www.Growthink.Com or visit our venture capital placement Itnernet site at GT Venture Capital.
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An Entrepreneur's Biggest Cost
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