Remember back when you were a kid and your mother said, “You can’t give up on those trumpet lessons. I paid a lot for that trumpet!”
Or when you decided that someone lied to you about there being lots of cute-but-shy guys in the chess club, but the advisor told you quitting was for sissies?
In the quilting world, we call them UFO’s (Unfinished Objects). Some of them are spectacular failures that even Goodwill shoppers wouldn’t want.
Well, it just doesn’t work like that in real life. People quit all the time. Sometimes things just aren’t working out. Like that bridge to nowhere someone just abandoned.
In your business, it’s even more true that you should be a little quicker to discard those bad business ideas.
Bad Business Projects Should be Discarded
The reasoning behind staying with a bad project goes something like this: “If I give it up now, I’ve lost all the money I spent. So I’d better finish it.” That’s what’s called the sunk cost fallacy. I’ll give you a little of the psychology behind this fallacy, but you can read more at youarenotsmart.com.
Basically, we humans are hard-wired to look more carefully at losses than gains. It’s an evolution thing that “the prospect of losses has become a more powerful motivator on your behavior than the promise of gains.” Behavioral psychologist Dan Ariely calls this the “pain of paying.”
But Instead of Giving Up, We Do the Opposite
In many cases, business owners escalate the cash spent on the project. “If we put more money into it, maybe that will help.” Hence, some lovely over-budget and over-time projects that ultimately end up on the scrap heap.
How to Avoid The Sunk Cost Fallacy
- Recognize that it’s going on.
- Get a dose of reality from advisors. Getting the opinions of others helps temper your tendency to stick with a project beyond the point of no return.
- Consider the best use of your time. What makes the most sense in terms of the value of your time? Think about this using your best decision-making skills.
Looking at these decisions in terms of your time turns your mind into a time-valuation machine.
Chris Guillebeau says, in “Winners give up all the time,”
“Never give up” is bad advice. Real winners don’t hesitate to walk away from an unsuccessful venture.”
On the Other Hand, Maybe It’s Just “The Dip”
In his typical contrarian fashion, Seth Godin says, don’t give up. He says there comes a point with any venture or project when you encounter The Dip – the tough part. To make it through The Dip, you have to focus.
Don’t give up on your Big Idea just because you’re going through tough times with it. If you truly believe in what you’re doing, renew your focus.
Godin uses this analogy:
“…the real success goes to those who obsess….A woodpecker can tap twenty times on a thousand trees and get nowhere, but stay busy. Or he can tap twenty-thousand times on one tree and get dinner.”
If you know it’s worth the effort, go for it. Work your way through The Dip and out to the other side.
If you decide it’s not worth the effort, give up. Don’t wait. Do it now. Then move on.
Go out in your back yard, look up at the stars, holler “NEXT!” and get back to work on your next Big Idea.
Your takeaway thought:
- What project are you dealing with now? Are you looking at the issue and wondering if you should give up or keep going? Ask yourself:
- Am I in the Dip? Is this just temporary, or is it a wall?
Do I have enough resources to keep going?
- How does this project align with my Big Idea? (Or does it?)
- Do I have consensus from business advisors and team members?
- Is this project the best use of my time and resources?
Your answers to this question might help you decide whether to keep going or give up.
Here’s to the success of your Frugal Business!