Sometimes Quitting is the Answer

"Quit." The q-word is often seen as one of the worst four-letter words in business. However, there are times when quitting can actually benefit your operations.

Imagine you have a project consuming all your resources with no real returns. What should you do?

The answer is simple: quit. Abandon that specific effort to use your resources more effectively.

Let's explore what basic economics can teach us about quitting and how to determine if changing course is the best option for your business.

Different Business Initiatives Each Have Their Own Costs

By using simple arithmetic, you can calculate and compare the costs of your options to determine the best course of action.

Suppose your business has two potential routes with $1,950 available. You could invest in more efficient technologies (Option A) or focus on marketing efforts (Option B). Both have distinct advantages, but which is wiser?

Start by comparing the opportunity cost of each action. Opportunity cost is the estimated benefits sacrificed by choosing one option over another, giving you extra data to consider.

For example, Option A, an IT upgrade, will increase productivity by 5%, translating to approximately $1,000 more revenue each month. However, it will take a month for your team to adjust to the new technology, and it will initially cost $1,500.

Option B, aggressive marketing, promises $7 for every dollar invested, with the flexibility to invest $325 each month for six months.

Crunching the numbers, Option A will deliver $500 extra in month two before the full benefit of $1,000 by month three. By the six-month mark, you’ll have $4,500 more in revenue plus the $450 left from the upgrade, totaling $4,950.

Comparatively, Option B will generate $13,650 in the same timeframe. The difference is $8,700, meaning Option A has an opportunity cost of $8,700.

However, Option A’s benefits will continue, while Option B is time-constrained. After a year, Option A would generate $10,500, plus the saved $450, totaling $10,950. Option B would stop at $13,650 after six months. Thus, Option A still has an opportunity cost of $2,700, suggesting Option B is better within this timeframe.

This simplified example doesn’t account for potential compromises. Perhaps you choose the $1,500 upgrade and use the remaining $450 for marketing. This gives you an added value of $7,650 after six months and $14,100 after a year.

Why It Could Be Best to Quit These Efforts

Projections and actual outcomes often differ because the real world is unpredictable. If your upgrade doesn’t deliver added value or your marketing efforts fall short, the project could become a financial drain. Abandoning the project once it’s clearly unsuccessful can minimize damage.

The Dangers of the Sunk Cost Fallacy

The sunk cost fallacy is the belief that continuing a project is better to avoid wasting invested resources, even if it’s unsuccessful. This thinking leads to more wasted money, time, and effort. The smarter strategy is to monitor efforts and pull the plug if benchmarks aren’t met. This encourages bigger risks and potentially greater success.

In other words, sometimes quitting is the smart move.

We Can Help You Balance Your IT Initiatives So You Don’t Have to Give Up on Them

Information technology can be one of the most expensive elements for a business to manage. Many businesses lack the resources to do so properly, but quitting isn’t the solution.

Instead, reach out to Kornerstone Technology Inc. and our managed services. Give up the struggle of managing IT, not the IT itself. Call us at 818-206-6383 to get started.