The sunk cost fallacy is when you dump a lot of money into a failing program in hopes that it’ll get better. The fallacy is thinking that just because your investing in it, it’ll pay off eventually. If this sounds familiar, you might be in financial hot water.
When it comes to dentists, these sunk costs could be a new piece of equipment, an employee, your marketing budget, etc. If you notice a “sunk cost” in your practice, get rid of it immediately.
Say there’s a new piece of equipment you really like. It does a lot of cool things and allows you to do procedures that you couldn’t before. Problem is, no one in your area needs those procedures, so that equipment is just sitting in a room somewhere being useless. That’s a sunk cost.
If there’s a high paid employee that you notice hasn’t been working as much, or isn’t generally a nice person. Maybe a front desk person who consistently drives people away. This is also a sunk cost.
If your pumping tens of thousands into marketing and your return on investment sucks, this is also a sunk cost.
You could be emotionally attached to a lot of these things, and that’s understandable. That is the basis of the fallacy after all: emotional attachment. But you have to be able to stand back and evaluate the real value of some of these things. That’s most of the reason why we’re here; to help you review and get some perspective to avoid the sink holes that are eating your cash and giving nothing in return.