Have you ever made a choice you regret?
Has someone promised something they didn’t deliver?
Do you worry about getting back something lost?
Are you holding out hope that you can recover from something that didn’t go as planned?
I’ve made investments that didn’t work out.
I’ve had people give their word, then give it away by not doing what they said.
I’ve invested in coaching that didn’t deliver.
It’s disappointing and disheartening, and when someone doesn’t deliver, it can create scarcity, stress, and strife.
One of the most expensive examples is when I invested in technology to improve the experience for those working with my Freedom FastTrack financial program in 2007.
We wanted to build a membership where people could upload documents, see their strategy, keep improvement records, and share information easily with attorneys, accountants, investment advisors, and insurance professionals. The intention was to create a more efficient experience for everyone involved.
After investing $200,000+ in technology to support my coaches, clients, and financial team, it didn’t work.
Technology was rapidly changing and I didn’t speak the tech jargon of the developers. Plus, the system got more confusing and complex each time I met with the tech team. Each call drained both my energy and my bank account.
I went tens of thousands of dollars past what made sense, hoping I could salvage my initial investment. But hope is not an effective strategy. In fact, it isn’t a strategy at all.
It can be hard to know when to let go. The longer you wait, the more expensive the tuition. Waiting is simply a detour to the lesson. It creates even more loss.
Sunk costs are expenses that have already been incurred and cannot be recovered. They are independent of any future events and should not influence ongoing decision-making or project viability assessments. Essentially, sunk costs are past expenditures that are irrelevant to future financial considerations but can still impact strategic decisions due to their psychological burden.
There is also the opportunity cost.
How much does it occupy your mind, drain your energy, and create frustration?
Sunk costs create emotional baggage; they hijack abundance.
For some, it is wishful thinking; for others, it is people-pleasing and avoiding hard conversations. Costly.
One of my greatest lessons is that integrity is a two-way street. If you uphold your word and do the work, but the other party doesn’t, integrity is lost. It is time for a new agreement or to move on.
I was once working with a coach who put me on hold while he ordered fast food. Wait. He wasn’t present, and he was driving. And this was a $10,000/month contract. When I confronted him and wanted to end the coaching, he said it was a one-year contract. But I paid for focus, attention, and results—not half-assed effort.
If you aren’t getting what you have paid for, ask for what you want. Create a new agreement. Or move on.
We are responsible for our lives and for our results. But when we engage independent contractors, coaches, one-on-one programs, it requires cooperation and collaboration.
I’ve been in relationships where I kept my word, and others didn’t do what they committed to. I wanted them to change. I wanted the result I paid for. But overpromising and underdelivering happens when people are more committed to sales than service.
So, what do you do? Move forward. Move on. Cultivate the lesson so it doesn’t repeat in the future.
The unfortunate part of sunk costs is it can create bitterness and create a skeptic. This doesn’t serve you. This can slow down progress. It destroys trust.
I remember meeting Stephen M.R. Covey and reading The Speed of Trust. When you work with the right team, hire the best people, and people do what they say when they say they will do it, exponential results can be created.
When you wish the past were different or that you had made different choices but keep doing the same things, insanity ensues.
Every entrepreneur faces this dilemma. A bad hire, a mistake—SUNK COSTS.
The worst thing to do is keep quiet, keep going, and continue the loss.
When we run a book marketing campaign, we are constantly monitoring the effectiveness of the ad. We are constantly making changes. We stop contributing to the messages and initiatives that are no longer effective.
But you have to know your value, stand for your value, and know when to move on. Too often, people worry about employees and if they will change or do the work. That has a massive cost. It robs peace of mind.
I’ve fired employees who took more time telling me how busy they were than actually doing the work. And once they were gone, we didn’t even have to hire because the team could move forward without the worry, without the wasted time. The way to lose A-teamers is to keep B-teamers.
In sports, people who don’t perform get traded or cut. They can even lose big contracts. Removing someone who is destroying the culture or hurting the team—even at a cost—improves the culture and performance.
Where would your life improve by moving on and moving forward?
Yes, it stings to make a mistake and lose money. But it is worse to keep hemorrhaging, worrying, and staying frustrated.
Right now, your instincts may be to move on, but it would be inconvenient. It will be more costly to wait.
In summary: When we ignore the concept of sunk costs, we risk falling into what’s known as the “sunk cost fallacy.” This is when individuals or businesses keep pouring money, time, and effort into a failing project just because they’ve already invested a lot into it. They think they need to salvage their investment rather than cut their losses, which can be a dangerous mindset.
Here’s the real cost of falling into this trap:
- Missed Opportunities: By continuing to throw resources into a failing project, we’re not just wasting those resources—we’re also missing out on using them in areas that could actually generate a return. Every dollar, every moment, every bit of energy spent on a lost cause is a missed opportunity to invest in success.
- Increased Financial Losses: It seems counterintuitive, but investing more into a project that’s already proven to be a money pit will only deepen the financial hole. It’s like digging deeper when you’re already stuck in a ditch.
- Reduced Efficiency: Clinging to outdated or ineffective assets because we’ve spent money on them in the past doesn’t just cost us financially—it also drags down our operational efficiency. Using old tech or methods because they were expensive is a quick way to fall behind competitors who choose efficiency over sentiment.
- Emotional and Psychological Costs: The stress, regret, and blow to our confidence that come from sticking with these sunk costs can be just as damaging as the financial repercussions. When we’re emotionally invested in our sunk costs, it clouds our judgment.
To effectively address sunk costs, we must recognize them for what they are: gone, irrecoverable. They should not factor into our future decisions.
Instead, we need to focus on incremental costs and benefits. This mindset supports clearer, more effective decision-making and resource allocation, setting the stage for better outcomes.
Remember, it’s not just about what’s been spent—it’s about what’s best moving forward.
