Opportunity Cost

The value of the best alternative forgone when making a decision. Every choice to pursue one path eliminates the value that would have come from the next best option.

Opportunity cost is the hidden cost of every business decision. A founder who spends three months building a feature her team wanted might have generated far more revenue spending that time on a product customers were asking for.

A founder is offered two partnerships. She can only accept one. She chooses the one with lower guaranteed revenue but access to a strategic network. The opportunity cost is the guaranteed revenue from the other offer, and she is betting the network will deliver more long-term value.