July 28, 2017

227: The Art of Cutting Your Losses

In this episode, Steli and Hiten talk about cultivating the art of cutting your losses. Investing your time, energy and money into something that is NOT working is painful to admit, but necessary to confront when it comes to the success of your business. Listen as Steli and Hiten give examples of how people choose to not cut their losses when they really should. They discuss the dangers of holding on to that bad employee, poor marketing strategy, or ad agency that isn’t producing results. They also express the need for self-awareness when making that tough choice to STOP what you’re doing and cut your losses.

Time Stamped Show Notes:

00:05 – Today’s episode is about how to cultivate the art of cutting your losses

00:47 – Steli says founders have a problem with knowing when and how to cut their losses

01:46 – The problem is that founders don’t STOP, even if they know they’ve already made some wrong decisions

02:09 – Hiten says to explore the sunk cost fallacy

02:28 – Hiten says it is the root cause of 99% of our business problems; and it won’t stop until we get over it

02:51 – In a previous episode, Hiten and Steli talked about organizational and personal self-awareness which relates to today’s topic

03:07 – Hiten says the problem lies in one’s decision to keep doing something (that’s proven to not be beneficial) because you’re already so very invested in it

03:50 – The hardest part is to evaluating and realizing that what you are doing is NOT working

05:05 – Hiten’s tactic is to think of the exact opposite of what you are doing

05:48 – Steli says thinking of the opposite in and of itself is not enough, especially if you are just doing something to prove yourself right

06:54 – Steli says this is like going to different places, but still applying the same angle

07:45 – An example of this is hiring an agency to do an ad for you and they are not delivering any good work

08:01 – Since you already spent money on them, instead of stopping the project and looking for another agency, you stay with them because the thought of stopping is painful – this is NOT cutting your losses

08:36 – When it comes to investments, people do not stop even if they have started losing

09:15 – Steli says there is a cost of doing business and a cost of living—you are going to make mistakes along the way, but there is a way to mitigate the risk and that is by cutting your losses

10:02 – Steli says to lose quickly and move onto the next thing where you have a chance to win versus waiting for the time when you think you will win

10:21 – Steli’s base principle is if things start out very difficult, they typically never end well

10:47 – Steli wants to cut his losses as early as possible; so, when things start out too complicated, that is his signal to stop

11:28 – Projects that start with problems don’t end well

12:33 – Hiten says the more you persevere at something, the more likely it is for you to stop doing it the way you have been doing

13:05 – Hiten says to ask if what you are doing is making an impact

13:13 – People have the idea that they just have to persevere at something, but if they are moving in the wrong direction, it’s not going to do anything for you

13:49 – To change what you are doing, you have to realize that it is not working anymore

14:02 – For example: hiring someone that is not working out and you deciding not to cut them out fast enough

14:54 – Another example is selling one way that is not working for your business, but you keep doing it because it’s the easy thing to do

15:13 – This is the sunk mental cost – it will be harder to find another way to do things but what you are doing right now is not working

16:12 – In marketing, this is doing a certain type of marketing that is not converting for you bu...

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By Steli Efti & Hiten Shah: Serial Entrepreneurs, Sales & Marketing Experts, Startup Investors & Advisors, CEOs running multi million dollar SaaS Startups

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