Ep 431 – Avoiding the Sunk Cost Trap: “Business or Pressure” with Allissa Haines

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0:01:04.5 AH: Welcome to Business or Pressure, taking the pain out of massage business with me, Alissa Haynes. This is your no-nonsense guide to building a happy, sustainable, massage therapy business. It's our mission to make sure that every massage therapist and bodyworker has the tools to make a living wage and a thriving business. Let's jump in. We are almost done with our first quarter of the money series, where every episode has been talking about the money and the money management within your massage business. Today, we get a little philosophical, we get a little less tangible, and we're gonna talk about the sunk-cost fallacy, also called the sunk-cost trap. It is the tendency of people to irrationally continue an activity, even though it's not meeting their expectations, and even though it's costing them more and more money, or time, or energy. You have probably heard the concept of throwing good money after bad. And a really great example of this is cars. You buy a car and you have to put a certain amount of maintenance into cars as they age. So if you drive it long enough, bigger and bigger things need to be fixed.

0:02:13.6 AH: So you get new tires, which is a normal maintenance thing, and then something busts in the transmission. And you think, "Oh gosh, I just put $500 into these tires, even though this is a huge issue with the transmission and my car is seven years old, I better just fix it 'cause I just put all this money into the tires. I can't give up this car." And then a few months later, something else breaks, and you're like, "Well, I just put all this money into new tires and fixing the transmission, I'm not gonna make my money back if I sell it now." It's when we start pouring more and more money into a thing that we should probably just let go of, or tangibly in the case of a car, we put more money into it than the vehicle is really worth, and we keep doing that instead of making a plan for replacement. We overvalue the car in our brains because of the money we've pretty recently put into it. And not just money, but this shows up in relationships, which is totally my favorite example 'cause everybody can like kind of roll their eyes and think about a time that they did this.

0:03:12.7 AH: Let's say you're in a romantic relationship and you've been in that relationship for a few years or a few decades, but we realize that there are situations or habits or personality traits or growth that no longer make them the right partner for us. In our heads we think, "But I've got so many years in this relationship, we just booked a vacation together, we just moved in together, we just got a cat together. I've spent all of this time and energy," and maybe even money, "Within this relationship, I really should stick with it to see how it turns out. I should stick with it and make it work because I have sunk so much time, energy, love, money into this." We overvalue that time and energy you've put into a relationship that is no longer good for you with regards to planning for our future with or without that person. It is the overvaluing that gets us. And we do this in business too.

0:04:05.6 AH: I've got some real tangible examples of this. Several years ago when I had a large office space, I expanded when the space next door became available and I made it into a yoga space. And I tried for three years to make it work. It did not work. It was clearly not working a year or two in. But in my head, I overvalued the money and the energy I had put into the build and to finding teachers and to getting equipment. And when you spend multiple weekends painting and decorating a space and then lots of weekends maintaining it and cleaning it and researching the perfect light bulbs with a warm glow that will dim well, you put a lot of value into the object of all that energy. And it makes you really resistant to letting go and quitting and walking away. At the two-year point, I knew. I started having conversations with colleagues and peer mentors about what to do. I knew it wasn't working, but it still took me another year to shut it down. So on top of the $20,000-plus I had sunk into it, I lost like an extra, I don't know, 8-10K in that last year, which is ridiculous. But I had that sunk-cost fallacy issue.

0:05:17.7 AH: And this can happen with people too in our business. So when I changed spaces and I scaled back and I just had my massage office with my one room, when I first moved in, I shared my space with someone. I sublet to her and we kind of split the schedule halfsies. And about nine months in, I realized that I really needed the room more. And she had three weeknights a week and I had two and I really needed three. And I worked through a lot of scenarios in my head, but essentially by not having that third weeknight available to me, I was losing money. But I hemmed and hawed because I put so much time into mentoring this therapist. I didn't necessarily wanted to end her lease, but the scheduling wasn't working for me anymore. And there were some personality issues that wasn't making it a great situation in my office. And I was able to kind of ignore the personality issues for months and months, but then the financial ones finally hit me, but it still took me another four months to figure it all out and sit down with her and make the change.

0:06:17.3 AH: So there was like an extra two or three months where I wasn't seeing patients on a third weeknight a week. That probably cost me, I don't know, $1,000 in lost income because I hemmed and hawed about that for quite a while. More than $1,000 now that I think of it. So the moral of this story here is when you are making business decisions, when something is not working for you, either financially or mentally, why are you continuing to do it? There might be really valid reasons, and there also could just be that you're overvaluing the time or the money or the energy that you put into the thing, and that's preventing you from making a clean break and moving on and making space for bigger and better things. And that is the sunk-cost fallacy, a little financial lesson and a little bit more than that.

0:07:05.5 AH: Moving on, it's time for our high five. Today's high five is to my friend Meg who recommended the book: The Good Enough Job: Reclaiming Life from Work, by, I don't know if it's Simon or Simone Stolzoff.

0:07:20.7 AH: I have only just started the book, but I'm finding it really helpful and interesting, and especially because I got a kid in my house who's kind of a perfectionist, and I am really enjoying this book. So thanks Meg, I appreciate the recommendation. Meg's also really good at recommending podcasts, so thanks for that too.

0:07:36.7 AH: All right, that's it for today. I wanted this to be a quick one. If you have a question about running your massage business or an idea for an episode, please, please, please, email me. I love it when you email me, businessorpressureatabmp.com. And FYI, if you ever emailed me and I didn't get back to you, it's 'cause I didn't get the email. I always get back to people, so try me again. You can also find me at deepbreathdigital.com. I have a new sliding scale fee structure for my one-to-one consulting, so if you need help but can't handle a huge consulting bill, check it out, deepbreathdigital.com. And I also hang out over there with my community of massage therapists who peer-mentor each other. It's really lovely. Make sure you are subscribed to ABMP's podcast so you don't miss a beat. There is so much to learn about building and maintaining a massage business. We're gonna help you cover all of it so you can be successful. I will meet you right back here for the next episode. I can't wait.