Opportunity Cost, Part 3

Hello! Happy Wednesday!

While we could go on about opportunity cost for weeks or years, and while it’s sure to come up again (literally in the next post, as it turns out), I thought we’d wrap up this topic and jump to another, since we’re just getting this here blog started

So, today we’re wrapping up opportunity cost with a way less number-y, much simpler concept: the value of your time!

And when I say your time, I assume you have subordinates - if not, ouch! You’re stuck doing the stuff. But in the case that some delegation is possible, let me ease your conscience a bit

Let’s say you’re the head of anything from a department of a few people up to an entire business - say, a brewery! - well then, you’re certain to have some medium- to large-sized projects, interesting ideas or maybe simple licensing applications that stand to improve efficiency or just sell more pints. Some (purely hypothetical, I swear) examples might be:

  • Applying for a modification to your ABC license that allows you to sell wine and cider

    • Let's say this upgrade allows you to bring in an extra $40k per year - remember my “all lines are independent, there’s no fixed max on pints” hypothesis? (and granted, my old wine profit calculator says $60k+, but let's say it's not even that)

    • Thus, you stand to make ~$3k per month, so doing the paperwork a month sooner means $3k of otherwise untapped money in your pocket

  • Working on driving down labor

    • If you’re roughly our size, then even a 3% drop could be perhaps $250-$750 per month

  • Driving new style creation

    • Increasing revenue in your taproom by even 1% might be well over $1,000

  • Dialing in cash flow

    • Having time to attend to the small things could mean catching a double-payment, pushing brew dates slightly into the future, avoiding late fees by paying crucial bills on time; any number of small things, which improve cash flow, mitigating the risk of taking out a big loan

    • Viscerally: if delegating small work during a busy month decreases your chance of having to take out a $100k loan by 10%, and the interest payments on that loan are $10k, then using classic Pascal logic, the value of delegation is 10%*$10,000 = $1,000 (granted this is a one-time value, not monthly, but still)

Sure, money, we get it, but what is that delegation going to cost me?

Well, in California, 10 hours per week at minimum wage ($13.25) times a 1.1 multiplier to be safe is $632/month. So yeah, if you think you can find $633 every month with an extra 10 hours per week, then delegate! While you may not be doing 10 whole hours of needless stuff, and while it'd be tough to find someone willing to do just 10 hours of stuff per week at minimum wage, clearly this story isn't one about exact dollars-and-cents but about the gist - your time is valuable, a big business has plenty of 4-figure tokens just lying around on the floor, and your job isn't really to sweep or stamp things unless you want to (it's a good political move to appear alongside the "working stiffs" with some frequency) - rather, for the most part it's to push the company forward. Heck, increasing taproom revenue almost certainly means more tips, which is a free morale boost for the bartenders - so think of delegation as selfless if you wish!

Not so bad, right? Well I’d like to thank y’all for trudging through my series on Opportunity Cost, and I’ll see ya next week for something hopefully just as interesting and practical - maybe beer pricing!

Cheers,

Adrian “Dustin Hoffman as Raymond Babbitt in Rain Man” Febre