“If you do what you’ve always done, you’ll get what you’ve always gotten.” – Tony Robbins.
To put microeconomic theory in simple terms, when one unique alternative is preferred over others, the lack of future benefit from the other alternatives becomes your opportunity cost. Opportunity cost is the absence of any gain that could have been enjoyed when you choose to take an alternative course of action.
Consider an example: someone gives up watching a film to prepare for a test, to get a high grade. The cost of the opportunity here is the cost of the pleasure of watching the film. Similarly, not buying a new car is the opportunity cost of taking a holiday.
Everybody, including yourself probably, questions if their company can be strengthened, if they can do more jobs to increase their income, or pursue their passions. Most of these questions have no easy answers — everyone is different, and so is their route to success. We have, however, found a pattern in the practices that allow people to accomplish all these three aims, or at least to take action towards them: Side Hustles.
You’ve probably heard of a Side Hustle before. It doesn’t have to be a full side-business or even makes you a lot of money.
The extra time you take out from your day to do something which you love and has the potential to turn into revenue is called Side Hustle 🙂
Given a choice, what would you compliment your current job with? You might want to launch a company-related podcast, write a personal blog, or sell craft online. It’s all about discovering what inspires you and then carrying it through, without making that big sacrifice of quitting your present job. While a Side Hustle may not require you to quit your job, it comes with its own opportunity costs.
The most common and WRONG way to calculate opportunity cost is by using this formula —
Opportunity Cost = several hours spent doing something X $ earnings per hour.
This formula, however, can be deceptive and comes with its flaws. If you’re thinking about starting a Side Hustle, let’s look at some opportunity costs you’ll be paying. We’ll also elaborate on a more reliable formula to quantify this cost̉.
Bye-Bye Leisure Time
To successfully launch a Side Hustle, you will sacrifice a lot of leisure time. In the long term, if you intend to turn your Side Hustle into a real company, be prepared to give up most of your spare time to pursue your business. Therefore, think it through and ensure that you are absolutely committed to the goal before you launch that side gig.
Being a solo entrepreneur, or bootstrapping a new company, requires a high level of time commitment, as you put company processes in place. Be it ideation or execution, every problem will have to be personally handled by you. This might result in you missing your me-time.
There are some Side Hustles, however, that is easy to set up. For example, if you venture into teaching gardening, using a Learning Management System, you avoid the hassle of writing code for your course. All you need to do is create engaging course content – and leave the rest to a platform, like FreshLMS, which takes care of all the technical aspects.
Neglect Your Regular Job
If you are in a high-paying job, you may find it unreasonable to pursue Side Hustles that are less profitable or not as satisfying as your primary profession.
Running any business – be it a Side Hustle or full-fledged entrepreneurship – can be stressful. And it will most likely eat into the peaceful times you may have enjoyed earlier.
Getting Out Of Your Comfort Zone
A Side Hustle will make you get out of your comfort zone. Whether it is doing things you have never done before or interacting with new people, be prepared to get out of your safe space.
You’re going to have to give up on some other plans you’ve made for your life when you start a Side Hustle. After all, it takes time and commitment to grow a Side Hustle from a hobby into a full, monetized enterprise. So put all other plans aside.
Now, let’s look at some of the opportunity costs that we may encounter as we go full-throttle with our Side Hustle.
For starters, the formula discussed above may not be the most optimal way to quantify opportunity cost, as it fails to mention one key element that keeps you going to achieve what you want— LOVE. Loving what you do pushes you to do well at your work, and encourages you to excel, making you more likely to put in your best effort into what you’re doing.
This doesn’t mean you’ll have to work round the clock. It means you’re committed to achieving success.
That said, here is the formula that we think should be used to calculate opportunity cost for your Side Hustle –
Opportunity cost = several hours spent doing something you LOVE X $ earnings per hour.
When you implement this formula, the opportunity cost becomes much lower, almost 0. You’ll want to start your Side Hustle as soon as possible! Add discipline to what you enjoy doing, and create a digital offering of your own. Surely you can do amazing things and reach your aim of financial independence!