Sunk cost fallacy is the tendency to prolong an action you’ve invested time, money, or effort into, even though its cost outweighs its benefits. This is why casinos thrive, sportsbooks profit, and lotteries succeed. Our emotions or needs get in the way of clear, logical thinking.
You can see the sunk cost fallacy play out in auto repair shop owners, too, when a shop owner continues to give opportunities to a team member who is a poor fit for the business. The shop owner only sees the invested time and training and the need for that position to be filled, but his emotions tell him to hold on and maybe it will click for the employee if he provides more training or another one-on-one. Perhaps your shop has grown and your team is unhappy with the limitations of a once-working product, but you’ve spent thousands of dollars on it over time and encourage your team to find workarounds, which leads to decreased efficiency—a different loss.
In this month’s feature, “What You Don’t Know You Don’t Know” shop owners Juke Ball of Juke Auto in Austin, Texas, and Erich Schmidt of Schmidt Auto Care in Springboro, Ohio, talk about some of their sunk cost learning experiences, among others. For new shop owners, it’s an opportunity to observe and learn from the mistakes of successful operators. As Groucho Marx once said, “Learn from the mistakes of others. You can never live long enough to make them all yourself.” For the seasoned shop owner, it’s a chance to reflect on some of the challenges you faced and have overcome.
And with Valentine’s Day in our midst, Kathleen Callahan's latest column, “How to Fall (Back) In Love with Shop Ownership” talks to shop owners about how to overcome disenchantment with their businesses to get back that loving feeling.
Finally, as we enter tax season, financial experts Eric Joern, a partner with Kaizen CPAs & Advisors, and Hunt Demarest, a senior accountant with Paar, Melis & Associates, provide seven tax prep tips to help keep your shop in the good graces of the IRS.
