Opportunity Cost, Part Three of Three – Why This Matters In Business

This is the third in a series of articles on Opportunity Cost and why it matters in business.

Part One

Part Two


Opportunity cost is one of the most important concepts in all of economics. If you understand it, you can start to see the world in a slightly different way. It’s also one of the most relevant economic concepts to simple business decisions.

For the most part, business people know this sort of thing instinctively. OK, you might have got the Clapton question wrong, but I bet you’d pay a cleaner £20 rather than spend two hours of your own time with one of those Henry vacuum cleaners. However, just occasionally you’ll see businesses doing something stupid that could be avoided with a better application of the opportunity cost principle.

One of these areas that we often see is management and registration of internet domains – “mycompany.com” and “mycompany.co.uk” and so forth. There are lots of companies who will register domains for you very cheaply.

Except that two years later when the domain is due for renewal, you somehow miss the automated email reminder and the domain lapses. Before you notice, someone else pounces on “mycompany.com” and “mycompany.co.uk” and points those domains to their website or asks you for lots of money to buy the domains back. (There is a legal issue here, but you certainly don’t want the hassle of going to court to get your domain name back.) What is the opportunity cost of your cheap domain registration then?

Rather than using one of the cheap domain name companies, you should spend a little bit more (at a much lower opportunity cost) and opt for a company providing domain name management – one you can rely upon to ensure you keep your domains.

This is just one example of many. There are perils to outsourcing that often scare companies into doing little things in house. But there are potentially bigger risks in trying to do things in-house that are outside your core expertise. Many of the services we offer at Clare Associates may well be services that fall outside of your core expertise – website management, copy writing and content creationGoogle AdWords management, financial operation and control, business simulations, training coursesrecruitment and more.

The opportunity cost of asking us to help with these important business activities may well be less than trying to do it yourselves. Call us to discuss how we could help your business.

By Mark Poles

Chartered Accountant, Google Qualified Advertising Professional, Google Analytics Qualified Individual, creator of "You're Hired!".