Why Throwing Good Money After Bad Hurts Your Business

The more you’ve invested in anything, the more critical it feels for you to get a return on that investment. So, what happens if you keep pouring money into these efforts in the hope that it will eventually work out in your favor?

These kinds of skewed choices come about thanks to the sunk cost fallacy—the tendency human beings have to be swayed toward illogical decisions based on what we’ve already spent. 

Let’s discuss how to avoid this in your business by working through the logic, free of the emotional context that the sunk cost fallacy introduces.

The First Step is Accepting Your Prior Investments are Gone

Before anything else, you need to let it sink in that the money you’ve put into your software thus far is irretrievable. It has been spent. Your best option is to recontextualize this investment as an experiment that ultimately didn’t work. As such, it is in the past, and you need to focus on the future.

So, instead of asking how you can adjust your spending to justify what has already been spent, ask whether or not you would make the same investment you’re considering if you had put in zero money so far. This simple shift helps you evaluate your plans more realistically and from a clearer perspective. 

The Second Step is Financially Evaluating Your Options

Next, you need to examine each of your potential actions to see which will be most beneficial to you over time, especially as the real costs come rolling in.

For instance, let’s compare the costs of trying to fix an issue with one of your tools and those of shifting to a proactive, managed option.

Fixing an Issue Often Exacerbates Your Financial Responsibilities

There are numerous costs associated with fixing things as they arise. Naturally, there’s the quoted price that comes with acquiring support, as well as the time needed to apply patches.

However, there are also sneaky hidden costs that need to be accounted for, and this is where the real financial impacts happen:

• Lost Productivity - Software that doesn’t work properly takes up time. If a staff of 23, each making $28.16 per hour, loses an hour per employee each week to slow software, that’s $33,679.36 down the drain from that lost hour alone… certainly not nothing, but possibly not on your radar.
• Security - Properly protecting your business and its assets is expensive, but it absolutely pales in comparison to the cost of suffering a data breach. The latter often causes small businesses to close permanently, as they often have to pay for various remediation measures and tend to lose customers after the event.
• Opportunity costs - Let’s say you currently use System Z in your business, and System Z has some serious issues that occur regularly. The more time your team spends fixing System Z, the less time they have to research an alternative or other useful pieces of technology for your business. 

Managed IT Focuses on Inclusive Value

Comparatively, the costs of managed services are (save for rare, very situational circumstances) far more predictable. Effectively everything is covered for a monthly fee, easily adjusted to precisely meet your business’ needs.

This “everything” leads to significant business benefits, including boosted productivity, heightened data accuracy, improved security, an enhanced customer experience, and greater growth potential.

Considering these two scenarios—using break-fix IT and using managed services—the better option seems obvious.

We’ll Help You Audit Your Technology for Dollars to Save

Of course, all this doesn’t happen in a bubble. You and your team are intrinsically involved with your technology and the choices you’ve made concerning it, so there are plenty of obstacles to your remaining objective. You may feel some kind of way about the software you initially built your business on. Things might get awkward if a hardware vendor you stop working with also happens to be part of your foursome on the golf course each week.

The point is, it can be hard to make certain calls when all the extraneous variables are considered, so why not have a neutral third party do it for you?

By entrusting your IT management to us, your software will be thoroughly examined in its current state, allowing any hidden costs to be uncovered and identified. We’ll then develop a strategy to optimize your business’ return on investment, leaning on cold, hard data to come to any conclusions… helping you move forward, rather than standing in place.

Reexamining your technology decisions may feel like you’re unearthing a mistake, but the opposite is true: you’re actually investing in the successful future of your business.

Again, it won’t be easy, but we can be there to help you along. Reach out to Preferred at 708-781-7110 to learn more about what we can do for you and to set up a consultation.