This is a tough and emotional issue… trying to protect or regain sunk costs. In words we are all familiar with, it is like “throwing good money after bad”. Don’t do it if you can help yourself, if you can even see the issue—most don’t until it is too late and that’s more money wasted.

This is a very natural reaction, but an emotional one and as we all know, there really is no place for emotional decision making in business. Facts, logic and analysis should control our decisions, but frequently as business owners, we do allow our emotions to take control.

Clearly, you have invested a significant amount into the development of a service or product before you roll it out and determine whether or not your idea will work, whether the market buy it and whether it will become a valuable item for your business. You may have built or imported inventory, created all the marketing support tools, maybe even hired additional people for various purposes to support the new program; you’ve made a large and important investment. Yet, for whatever reason, it fails to achieve a minimum level of success. It just doesn’t work for any number of reasons.

In this case, you have two choices: learn from your mistakes and move on, or, dig in deeper.

You can reinvest and force the plan to work no matter what the market is saying. You can adjust the colors, the price, the way the product works, the ad program, the sales program… all kinds of adjustments work through your mind as you fight to somehow save the huge investment you made in development, i.e. the sunk costs. Somehow, success with this new program becomes your mission, no matter what. Ego? Yes, but the motivation I am focusing on here, among many other emotional reasons, is the horror of losing all the sunk costs that can not be recaptured and the desire to invest further to protect the investment and make it pay off.

Simple rule: Ignore the issue of protecting sunk costs as if they do not exist. Gone is gone. There is no such thing as protecting the previous investment. If the information you are receiving is telling you empirically that the project is a loser, move on. Take the loss and learn from the experience. Spending more to make it work in hopes of gaining back some or all of the sunk costs is a losing battle and the wrong focus.

If the market is telling you “it does not fly”, investing more to make it fly, just to protect your investment, is a mistake. Take your loss and do not make it worse or larger. It is like throwing good money after bad. A mistake we all have experienced.

There are many other emotional reasons why one throws good money after bad, wasting resources, pursuing an unworkable idea, but this one—protecting your sunken investment—is one of the worst.