How to Identify the Cost of Growth Versus the Cost of Opportunity
We all know that there are going to be costs involved in taking your business to the next level. How you approach those costs and how you make decisions about your opportunity will be pivotal to whether your business goes to the next phase or languishes where it is now.
There are two different mindsets you can have when you look at costs: you can see them as the cost of growth or the cost of opportunity. Let me explain.
Being in cost of growth mode means having a short-term outlook and seeing everything purely in terms of dollars spent. You have an expense mindset. You look at each decision and say, ‘Geez, I really need to do that however I’m not sure I can afford that right now,’ without looking further into the future and recognising the long-term benefits of spending versus investing that money. When you are in cost of growth mode you are holding yourself back and limiting your horizons as all you really focus on is the declining bank account.
When you look at decisions as strategic steps in the process to realise the opportunities and not simply costs, your whole horizon will expand. You are clear about where you are going and you are moving forward within the market that you are targeting. You are reaching out and grabbing the opportunity, rather than letting your fears hold you back. You are strategically planning, gaining clarity and confidence. You have an investment mindset.
Let’s have a look at an example. Let’s say you run a retail outlet and you are considering expanding to a second location as business has been good and you think you are on the right track. If you are in cost of growth mode, you’ll do all your sums and decide that maybe it doesn’t quite add up. Maybe you’re not ready after all. Maybe you don’t have the financial resources to pull it off right now. You might next year, but not now. Or maybe you think your current little store is where you belong. Maybe you’re not willing to go to the edge of the cliff.
But if you are moving forward with clarity and confidence, you will not see expansion to a second store or location as a cost but as an opportunity. You’ll understand what the new location will bring – it will make everything bigger and better and launch the next phase of your business. Your buying or marketing decisions will not change but the leverage of the outcome will be growth and the realising of the opportunity.
Perhaps the decision will hurt you in the short term, whether it’s your finances, your operations – whatever. But sometimes you must go two steps backwards to go four steps forward. If you’re in cost of growth mode you’ll just see the two steps back, but if you’re in cost of opportunity mode you’ll also see the four steps forward. This is how you grow a business. It’s not a licence to throw money at something every chance you get, but it is about being bold and backing yourself if you’ve put in the hard yards.
Strategic thinking or critical thinking surrounding opportunity is generally accompanied by decision making models; they are a guide to help us think in a prescribed way. Models do not define what or how we should think; they are the result of an active thought process. Please note there is no such thing as a bad business, rather bad business owners making bad business decisions.
The better you get at this in terms of business decisions the better and clearer the outcomes and ultimately your chance at great success as your business grows and prospers.
Focus on the cost of opportunity, not the cost of growth and be prepared to take a short term hit for a long term gain.
Stefan Kazakis is a business strategist, sought-after presenter and speaker and author of the new book, From Deadwood to Diamonds (Major Street Publishing, $29.95). Stefan has had over 20 years’ experience running successful small to medium sized businesses – including a family business which he took from near bankruptcy to be a multimillion dollar business. Stefan has helped clients from a variety of crossroads and industries seize their opportunities to achieve ongoing business success and substantial profit growth. For more information please visit www.stefankazakis.com or email [email protected].
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