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Business owners are constantly bombarded with information about fiscal responsibility and how to avoid incurring more expenses than necessary. But sometimes the fear over “losing or spending money” leads many to stick with a decision because they already purchased a product or service, not because it’s the right choice. This is otherwise known as the “sunk cost fallacy.”
It’s important to understand that sunk costs are bound to happen in any type of business and can affect several people and processes. But, since they cannot be retrieved, they should not factor into future financial decisions.
Three ways to prevent the sunk cost fallacy when making technology decisions:
- Learn from previous sunk costs and make decisions based on what is best for your business
- Realize you may need to update your technology stack and purchase new equipment
- Don’t let the past determine how you make future technical decisions