Opportunity cost is the value of the best thing not chosen.
It never appears on any statement, which is why it is routinely left out of decisions it should govern.
Why a profitable choice can be the wrong one
A job returning fifteen per cent margin is profitable. Taken with capacity that would otherwise have run a thirty per cent job, it cost the business fifteen points.
Nothing in the accounts shows that. The job made money, and the better job simply never happened.
This is the argument for knowing job margin by type before the schedule fills.
Where it bites hardest
Capacity. Every hour committed is an hour unavailable — see growth capacity.
Owner attention, which is the scarcest resource in most owner-operated businesses and is never priced.
Cash. Money spent on equipment is money not available for wages, marketing or a reserve.
The comparison is against the next best, not against nothing
The question is never "will this make money". Almost anything makes some money. The question is whether it makes more than the alternative.
That is also the honest hurdle in a return on investment calculation.
Keeping a bad customer
A demanding, low-margin customer is frequently kept because the revenue is real. Its opportunity cost is the capacity and patience not spent on better work, and it is usually larger than the revenue.
Not the same as a sunk cost
Opportunity cost looks forward at what is being given up. A sunk cost looks backward at what is already gone, and should be ignored entirely.