When it Comes to Sunk Costs, Don’t Look Back
Money, time and other resources that have been committed to a project are known as sunk costs.
There is no getting them back, for the most part. Picture your money and resources growing wings, if you need to. But the funny thing about sunk costs is that when you’re making executive decisions on a project, you should do your best to ignore them. Instead, concentrate on the future and the costs and opportunities therein.
If you have spent $100,000 on a six-month project, you have a few options. None of these options involve recouping the initial $100,000 sunk cost associated with the project. So going forward, if another $100,000 is needed, and say, another three-month commitment, only think about the variables and profits associated with going forward.
Ignoring your losses is a difficult thing to do. It may be against our nature, even. But doing so will give you an accurate perspective on a project; one that isn’t clouded by sunk costs that have long ago floated away on their wings.
Hint: You have to look beyond the website or pricing page.
Gross margin documents the business your product is building, yet it’s often tucked away in a financial update while a medley of product metrics enjoy the spotlight.