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Opportunity Cost

Opportunity cost is the return you give up by investing capital in one SKU instead of an alternative that could have delivered a higher return.

Why It Matters

•Makes trade-offs between SKUs explicit when capital is limited.
•Explains why "acceptable" products can still be harmful if they block investment into better ones.
•Shifts thinking from "does this SKU make money?" to "is this the best place to put my money?".
•Central to any capital allocation framework.

Connection to Capital

Every purchase order has an opportunity cost: choosing one SKU means not deploying the same capital into another, potentially more attractive option.

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