Sometimes you just have to cut your losses to get ahead in life

March 15, 2018

One of the DMs yesterday was from one of you about paying someone in India to do some work and their work was not good and they wanted more to remedy their own failure! There is a very good sales trick that people use to commit you to something small and then you end up getting trapped. Not wanting to lose your initial money, you end up spending even more. This is a classic example of when “emotion” rules your decisions and you make bad ones. Taking a “deposit” from people is a similar thing. You commit with a small deposit and then you feel obliged to go through with the rest.

 

Personally, as I got more experienced in business, I didn’t fall for this that easily and whilst some people find it hard to understand, I have at times written money off instead of spending more. Here is an example: Years ago I put a deposit down on 10 flats. It was a huge speculative deposit and after many months, I realised that the constructor is having troubles and I would in effect have to take a mortgage (i.e. commit to even more money) to buy properties that were not going to complete and were not rentable or sellable.

 

 

People told me I was crazy but I wrote the deposits off. Others who felt they had to carry on with their commitment and went ahead lost so much more because they ended up having to take mortgages on a development which became a ghost town. Sometimes you have to detach your emotions from decisions and not throw good money after bad. Logic must dictate your business decisions if you want to progress in business - even if it means losing money on bad decisions. At least you cut your losses.

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