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October 1, 2001                                                  



Read about the upcoming Biz Concepts for Coaches ecourse.

Dear Readers:

Here's an excerpt from the upcoming Biz Concepts for Coaches ecourse that starts in November, available free to all CoachVille members.  To access this course and scores of other programs, tools and resources, including the new, free CoachVille Referral Service, visit CoachVille at http://www.coachville.com.  Lifetime membership is only $79.

Happy Reading,

Steve Davis
chiefeditor@coachville.com

>>> business concepts for coaches
the online course from coachville.com
free for members

   

Business Concept #14
Opportunity Cost

Basic Idea
Basically, opportunity cost means that if you're doing one thing, you're losing out on whatever opportunities might come from doing another thing.  Even if you're doing quite well with that first thing!

Why the concept of opportunity cost matters...
Opportunity cost, originally an accounting term that was used to measure how much opportunity was being lost because capital was invested in the current X instead of a potentially more lucrative Y, is now a popular term in universal use.

Opportunity cost is a powerful way to ensure your clients are focusing on the highest and best use of their time.  Instead of measuring against standard benchmarks of revenue, profitability, growth or even happiness, you challenge the client to look beyond their current job/business/goal and to identify even better ones.  And, there is always a better goal out there, just waiting to be discovered.

Here's how to use this concept with a client...
It's easy. Just ask your client this question:
"Hey Bob!  We both know you're very successful in your current business but let me ask you a theoretical question, okay?
'How much more profit are you missing because you're so fully engaged in earning a profit from your current product line?'

Most clients will respond with something like "Huh, are you nuts?" so be prepared for this.  One of the ways to add value to our clients is to expand their thinking in ways that they cannot themselves, even if they are already successful in what they are focused on.  Asking this question is a way to stretch their thinking beyond their current levels of success and if nothing else, it helps the client to validate that what they ARE focused on is truly the best thing to focus on.

This matters, because the pace and variety of opportunities is constantly changing.  And, a General Electric Corporation has proven with its creative destructionism campaign, just because something is working well doesn't mean you shouldn't break it.  Opportunity cost is a tool of creative destructionism and a tool that should be in every coach's toolbox, no matter what market you are serving.

More on the concept...
There are MANY more opportunities available to people today -- both in business and in their personal life.  In the old days, there weren't as many opportunities so folks were loath to give up X to take a chance on Y. But today, with so many more opportunities and demands on our time, it's very important to always be aware of how much we're losing out on (our opportunity cost) even if we're incredibly successful/happy/profitable in what we're current engaged in.  The fast cycling of new/better opportunities continues to increase.


Example #1
Let's say you've got a client who is a trainer and who earns a healthy $100,000 a year in speaking fees. But let's also say that this client is also a gifted writer with several undone books, and the reason the books aren't done is because the client can't get into the 'mood' to finish them.  And let's guess that over the next 3 years, these books would likely bring in $1,000,000 in royalties to the client.  Given that, one could say that this client's opportunity cost is at LEAST $700,000.  ($1mm less three years of speaking fees of $300,000.).  So, even though the client is very successful as a speaker, he's actually losing $700,000 worth of opportunity because he's too busy stuck in his current opportunity.  You would say that his opportunity cost is $700,000.   Meaning, lost opportunity.

Example #2
Let's say you've got a client who is a coach and who turns down clients who can't or won't pay the coach's full fee.  And the coach isn't flexible, and the coach has some empty slots.  Now, there are many reasons to not take on clients who can't/won't pay the full fee, but let's just say the coach turned down someone who was very well connected, could send a lot of high-end referrals, but who just couldn't handle the fee due to a difficult financial time.

And let's say that this lost client could have sent 10 clients over the next several years, valued at $5000 per year per client, so $50,000.  So those empty coaching slots are costing the coach, in effect, $50,000 a year because she won't take on a discounted client.  The opportunity lost is $50,000 a year.  That's expensive.


More ways to use with a client...
1. When you see a client who is resisting making a change that seems pretty beneficial to you, ask them something like:
"Let's look 5 years out.  Can you guess how much revenue you'll be losing over the next 5 years because you are refusing to make this one simple change now?"

2. When you find a client who is too busy to take advantage of new business opportunities, help the client to measure/quantify how much they are losing -- financially and otherwise -- because they refuse to change.  This process usually gets their attention and if the opportunity cost is quite high, they often are motivated to change.


Final comment
Remember, the basic idea here is to start talking about lost, missing or delayed opportunities as COSTS.  Now, in the accounting sense, you're not going to see a line item under expenses called Opportunity Cost.  Because if you did, every company in the world would be running at a loss -- that's how many opportunities are passing people by.  But by calling these lost opportunities a cost, it can help get your client's attention.




The Biz Concepts for Coaches ecourse begins in November 2001 and is available exclusively, and is free, for CoachVille members.  To access this course and scores of other programs, tools and resources, including the new, free CoachVille Referral Service, visit CoachVille at http://www.coachville.com.  Lifetime membership is only $79.



copyright 2001 by coachville.com.  all rights reserved.  limited distribution with license.


Issue Sponsor: Coaching Critiques.



Coaching Critiques
One of the products we're working on this Fall for all members of CoachVille is called Coaching Critiques.

We'll be recording 100 sessions between coaches and their clients (will full permission on both sides) and then Thomas and other senior coaches will comment on what they feel went well during the coaching session -- and things the coach could have done differently.  Their recorded comments will be inserted every 2-5 minutes into the tape of the recording session, so the listener (you), can learn contextually, using an actual (albeit previously recorded) coaching session as the classroom.   

This is HIGHLY efficient learning, because it's real-life, just-in-time and contextual.  Think "play-by-play commentary."  The commentary will include a brief discussion of the coaching skills used, the coaching mistakes made, the coach's discernment skills and the quality of the the coach's listening skills.  The senior coaches will weave in suggestions and alternatives throughout the "voice over" critiquing session.

These 100 sessions will be available on RealAudio and they will be reading in transcript form as well.  All free for members of CoachVille.  A CD (playable in your car or home stereo and also playable on your computer) will be available to members for a special, discounted price.  The recording sessions begin in September and conclude in December 2001. 

Coaching Critiques is just one of dozens of coach training and client marketing course, tools and resources available to members of CoachVille.com, now with over 2,000 members from 27 countries.



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