How falling prey to the Sunk Cost Fallacy could be keeping you from growing.
Let’s say you’re a tech-savvy Home-Pro that has invested money and time into software for your company. You realize the importance and benefit of automating your processes. Keeping CRM and project management digital has made you five times more efficient than the old days of paper invoices, whiteboards, and spreadsheets. So you’re done, right? No need to keep shopping around for new platforms. You’ve improved your Contractor business, and everything is running smoothly. I mean, you invested all that time and money at the outset, why waste it all by switching to another system?
Careful now, you’re dangerously close to falling into the Sunk Cost Fallacy.
“Preposterous!” you exclaim. “I am not being fallacious.” Well…you might be, but that’s ok. Studies have shown that falling into the sunk cost fallacy is completely common. So common, in fact, that some animals have been observed to commit it as well.
Here’s a quick example: You spend $100 on a concert ticket. The day of the show you come down with a nasty head-cold. You don’t really feel like going to the concert now, but not going would be a total waste of that $100. So, you force yourself to go and spend the next few hours in complete misery.
You see, the fallacy is in even considering the $100. That ship has sailed. The money is gone, and everyone from your banker to Ticketmaster have already moved on. The only person thinking about it is you. The rational evaluation is this: “Will I be completely miserable if I go to this concert?” The answer is obviously “yes.” You’d be much better off wrapped in a Snuggie, eating a bowl of soup on the couch. The $100 is gone either way.
This brings us back to your business. Let’s say that, to make sure your company is running at peak performance, you research a new platform for your CRM and Project Management.
When you compare this new system with your current one, you see there are a few advantages. Maybe it integrates better with your other software. It could have a robust reporting feature that your current system falls short on. Maybe it has a mobile app that lets your people in the field do more in less time. Whatever it is, this new system is an improvement.
You shouldn’t be considering the effort and cash you’ve dropped on your current system. The money has been paid and the time already spent. You can’t go back in time and you can’t get a refund for services you’ve already used.
The best solution is the best solution…everything else is extraneous noise.
Trust me, I know how hard it is to try to ignore the Sunk Cost Fallacy. I’m the guy who tries to get his money’s worth at a buffet and spends the next four hours writhing in pain from over-eating. I could have eaten a sensible amount and be out enjoying myself for the same amount of money. But no, I too am fallacious.
Don’t be afraid to change. Open yourself up to the possibility that there is a solution out there that can improve your situation. Even if your situation is currently pretty good. No matter how much you’ve spent to get here, every day you start at 0.