When you’re running a business, it can be difficult to look at your sunk costs and walk away from things that aren’t working. Sometimes, we put a lot of money into a product, service, or investment that just doesn’t end up working out. And the better option would be to leave it behind you and focus on the future.
But when we put money into these investments, it’s easy to stick it out due to the idea of sunk costs. If you’re finding it impossible to walk away from your sunk costs here are three tips you can follow to help yourself let them go.
1. Look Towards the Future
One of the most difficult parts about letting go of sunk costs is thinking about the money that you spent in the past. No one wants to feel like they've wasted money. But any expense that you have in your business got it to where it is now. So instead of thinking about how much money you’ve spent, think about how that expense was a step in the right direction.
A good example of looking towards the future is that you just bought a new project management software for $5,000 to help your employees. However, this software has actually been making workflow more difficult for your employees.
A newer software just launched that can help improve the workflow and fit into your employees day to day better. But instead of investing in new software, you hold on to the old one because you already spent the $5,000
It’s better to make a new investment for the betterment of your employees and the potential to speed up their workflow. This way you can get more done and make more money. The $5,000 is already gone. So look towards the future rather than being stuck on the sunk cost in the past.
You can also try to think about the overarching goals of your business. Where do you want to be long-term? And will this sunk cost really affect that in the long run? Understanding that there is more at stake than one sunk cost can make moving on from them a little easier to stomach.
2. Try Using Technology in Your Decision Making
One of the reasons it’s so hard to let go of sunk costs is because of the psychology behind it. We feel that things we have paid money for are worth keeping around. Or that it’s a waste to move on from a particular investment because we put money into it, even if it isn’t adding any value to our business.
When it comes to making financial decisions for your business, try using cost calculators. Technology won’t be susceptible to the same psychological decision-making. Seeing the raw data can help you make a better decision when it comes to moving on from sunk costs.
3. Reframe Your Mindset
One of the hardest things for humans to do is accept a “loss”. But when you run a business or are managing investments, sometimes you have to reframe your mindset.
Accepting a loss doesn’t necessarily mean you’ve lost too much. In investing, a loss can even be a good thing and help you out in the long run. A loss is only going to be negative when we accept it as such.
Trying to reframe your mindset about sunk costs can help you let go of them and continue looking towards the future of your business. When it comes to the future of your business, you should always be looking for more opportunities to push you ahead.
There are tons of grants for small businesses that can help you get your business ahead. Maybe your sunk cost will be not getting a grant, but instead of taking that as a loss, consider how you can apply for other opportunities that may work better for your business.
Conclusion
It can be incredibly difficult to let go of sunk costs. When it comes to psychology, we don’t want to accept losses. But as a business person, there is always going to be room for loss. You will have to accept these losses to allow your business to grow. So be sure to look towards the future and understand how your sunk costs can be a benefit to your business.
