Failing to weigh opportunity costs can destroy a small business.

When you don't, you're steering a ship through turbulent waters, and every decision you make charts a course toward possible disaster.

You have limited time, resources, and energy, so wasting any of it on poor choices or distractions is equivalent to tossing your hard-earned cash into a bonfire.

Perhaps even worse, all that time you invested can be, POOF, gone. Wasted! Mastering how to analyze opportunity costs is not a luxury — it's a necessity.

These are the three essential skills you need to make strategic decisions based on opportunity cost.

Skill 1: Decision-making

Let's not tiptoe around this: Your assumptions can be a corrosive acid, silently eroding the foundation of your strategic decisions.

The first step is awareness.

Know what assumptions you have, list them, and force the opposite to be true. This mental exercise can provide incredible insights, leaving you less vulnerable to poor judgments.

Then, there's feedback which can help you navigate your North Star.

It's crucial to embrace incremental and ongoing feedback. A discerning leader should cultivate what I like to call "death intelligence."

On the cusp of any major strategic decisions, ask yourself, "Which choice would I be at peace with on my deathbed?"

That question may sound heavy, but trust me, it will clear the noise and let you focus on what really matters.

Skill 2: Financial Literacy

You can't play the game if you don't understand the scoreboard.

Financial literacy is a must. I've sat in meetings with delusional business owners who think their ramshackle operations are gold mines. These folks eyeball some numbers and make irrational assumptions.

Get intimate with your financial statements; they are your navigational tools.

And let's not forget, cash is king. It's the lifeblood of your business, enabling you to weather storms, invest, and keep a healthy operation running smoothly.

Track your Free Cash Flow and Cash Conversion Cycle like a hawk.

Before making any strategic decisions, always, and I mean ALWAYS, assess financial risks.

Skill 3: Analytical Thinking

Analytical thinking is your lighthouse in a world teeming with information and possibilities.

Your ability to dissect a situation, to see the moving parts and how they interact, is invaluable. Assess potential outcomes, understand the risks, and evaluate the trade-offs.

Don't be the leader who makes strategic decisions based on gut feelings alone; be the leader who uses a calculated approach to navigate toward the best possible outcome.

So there you have it — Decision-Making, Financial Literacy, and Analytical Thinking.

Master them and watch as your ability to make strategic decisions based on opportunity costs transforms from a weakness into an asset.

Do more with less, but do it wisely. Because, let's face it, there's no room for mediocrity on the path to excellence.

Next Step: Want to dive deeper into making sound strategic decisions?

Don't just sit there contemplating. Act. Seek educational resources, attend workshops, or hire a business coach.

Because the most valuable investment you can make is in your ability to make better strategic decisions.