The Difference Between Sunk Costs and Opportunity Costs

You're listening to Podiatry Marketing, conversations on building a successful podiatry practice with Tyson Franklin and Jim McDannald.

Welcome back to Podiatry Marketing. I'm your host, Jim McDannald, joined as always by Tyson Franklin, my co host. Tyson, what's going on today?

I'm fantastic day, big Jim. Not a lot. There's not a lot happening at the moment. It's I've had a I've had a quite subdued week. And I've had a few internet problems up until this particular episode.

We are gonna fire on today.

That sounds good. I'm excited to see those those upload and download numbers just firing on cylinders. So it's gonna be a good good show today.

I know. Should be interesting even though I just saw a message pop up on my screen that says, your internet connection is slow. But we've tried we're trying testing out something new today. So let's let's see what happens. It should be fun.

So let's dive into today's topic, which is Yes. Difference between sunk costs and opportunity costs. And everyone's going, yeah, of course. That makes perfect sense.

Well, I'm I'm sure not everybody knows the differences, so I'm excited to hear a little bit about this topic.

Okay. Well, I've I've written some stuff down on this, so I wouldn't actually forget anything. Because it's just important to actually understand what sunk costs are and what opportunity costs are. So first, we're talk about sunk costs, and that's the time and effort you invest in a particular task, project, or person. And at some point, you've gotta look at the time and effort that you've invested and ask, is it still worthwhile pursuing it?

Or should you pivot? Or should you stop altogether? And sometimes people are unwilling to sort of give up on give up on certain things, especially when they've put a lot of time and effort into it. It's just it's hard to actually walk away. And and sometimes it can cloud their thinking, it can cloud their judgment, and if you challenge them on it, they'll go, oh, yeah, yeah, but and they will normally mention how much time and effort they've already put in.

And sometimes they need they need a third person. They need somebody else to talk to that can sort of help pull them away from it.

Is this the kind of like it's if it ain't broke if it ain't broke, don't fix it kind of thing? You just well, we've always done it this way, it works. So, know, why why think about doing anything else? Why why get that outside perspective when we know this thing works? So why would I wanna change?

Yeah. But sometimes it's more the opposite. It's not working.

Okay.

And they they either don't realize it's not working or they know it's not working, but they've already invested so much time and effort into making sure it worked. It's it's like when you've heard people where they'll let's say Thomas Edison, for example. The light bulb. He did so many I bet there are a lot of people that said to him, Thomas, come on. Should you move on to something else?

Now he didn't. He kept pursuing with it, and it worked out pretty well for him. But that's rare for someone to put that much time and effort into something and just keep going and keep going and keep going. And for some people, all of sudden, there is there is no inner side. And I got three examples I wanna go over.

First one is you've had a team member who is underperforming, and it doesn't matter how much time and effort that you give them, nothing changes. You get you're not getting the return on your investment. They'll be making certain mistakes, and it doesn't matter how many times you pull them aside and go, no, that's not how we're doing it. They they just don't listen. They it's just time to give up, pivot, or change.

And at some point, you've just gotta say enough is enough, and you gotta know when to actually walk away from certain team members. And that's why sometimes, you've just gotta let people go. It is the best thing for your business.

Yeah. I'm sure that's a difficult decision. Like you said, if you put time and effort into it and it's not working, then, you know, it's it's pretty clear that something has to be done. Just kinda doing the same old same old is not gonna be not necessarily not not only kind of like status quo, but maybe is damaging your practice or damaging your clinic in some way that you're just not totally aware of. So I think I think you're right there.

You have to once you know that something isn't working, need to kind of take some action.

Yeah. And and the second example sort of relates more to Thomas Edison, I suppose. You may have done specific training, and you thought that whatever you were doing in training was gonna be really, really valuable for your patients. But in the end, they don't want it. It doesn't matter how much you try and promote it to the patients.

It's just they just don't want it. Thanks for doing that training, but it's not something they were after. And that'll that'll vary depending on the type of clinic that you have as well. But yeah, going back to the Thomas Edison thing, even though he never quit, he just kept pursuing because he probably knew in his head, he knew he was on the right track, he just had to find what was going to work. So it's sort of a little bit different to even though he sunk a lot of time and effort into what he was doing, I think when it comes to team members or it comes to specific training that you've gone and done, you're not gonna put that you're not gonna keep putting that amount of time into it.

At some point, you gotta know when to walk away. And the the third example I wanna use is is relating to to marketing. And sometimes, might come up with a great idea. Oh, I've got this fantastic marketing plan, and we've all done this. And you'll sit down, you produce all the assets, everything is fantastic.

You push it time and time again, you really work it, and it just either underperforms or it just flops. And it's at that point when people gotta realize, okay, let's move on to something else. It's time to stop, pivot, or just just change what we're doing. And but some people don't do that. They just keep pursuing it.

Oh, yeah. But I I think this marketing campaign will work, and it it just doesn't work. You gotta know when to pull up stumps, which I don't know. Do you know what that saying what that saying means? Jim?

Sometimes you gotta give up or just, I guess, move on to the next thing.

You do. Do you know what pulling up stumps means, though?

I think of a tree and, like, taking a stump out of out of the ground. That's all I can think about.

Oh, I love throwing sayings at you. Okay. So pulling up stumps in Australia and The UK and other parts of the world, not America. I had this game called cricket. Okay.

So in cricket, they have three stumps in the ground that you hammer in, and you put these two bales on top. So when the bowler comes down, throws the ball, the batsman is trying to hit the ball, and you're trying to hit the stumps. If you hit the stumps and the bales fall off, just need one of them to fall off, then he's out. He walks away. At the end of the day, you pull the stumps out and you go home.

So you gotta pull up stumps at the end of the day. Yeah. So pull up stumps.

Okay.

There we go. This is educational educational podcast if nothing else.

For sure.

So where was I?

I do have a I do I do have a question though. Yeah. Like, you talked about you know, earlier you mentioned, you know, getting a different perspective. You know, what are some ways that people listening to the show today like, how do you get that outside perspective? You know, if you've kind of been doing what you always been doing, you know, not making these changes, like what are some ways that people can, you know, what are some ways they can get that perspective to hopefully implement some some action and and and basically implement some change in the practices?

Well, I I think the first thing is anybody who's in business for themselves should have friends, colleagues that are also in business. And they need to just ask them. Just contact your friends and say, hey, I've been doing this. These are the results I've been getting. What do you think?

And get their opinion on it. Now, they might be a terrible business owner, and they might go, yeah, I've done the same thing. It doesn't work for me either, but we're still doing it. If they're giving you that advice, it's not the best. Or they actually they have a business coach.

They reach out to someone who's a business coach and they go, hey, can we do a couple of sessions together? I wanna talk about my marketing plan. This is what I've been doing. This is the results I'm getting. How can I tweak it and change it?

But sometimes you might just be oh, I'll give you an example. This is a perfect example. A real life example happened in my business. Now, a lot of podiatrists have shockwave machines. And I used to do marketing, and one of our big marketing campaigns was attention.

People with heel and arch pain. That was the marketing campaign. Then we had all this other stuff went with it. Best best marketing campaign ever came up with. It just made us so much money, that headline, plus the the rest we had in the article.

Then we thought, okay. Let's let's change it. So we did this other ad about Shockwave and what what that was all about. Every time we ran the heel pain ad, attention, people with heel and arch pain, we got about 10 times more inquiries, patients, and we made money from it than doing the Shockwave ad. Now it's not saying that the Shockwave ad didn't work, but it didn't work as well as the heel pain ad.

I could've said to him, oh, no. I'm gonna keep pushing the Shockwave thing because I know more people are using it. It's getting more more people are understanding how it works. I'm gonna just keep pushing that. But you gotta sit back and go, well, if I spend x here, I get 10 times more than if I spend x on Shockwave.

And so you look at the figures and you go, okay. Everything is telling me it's not that you can't do any advertising in Shockwave, but if you're gonna spend money, spend it in the areas where you know you're gonna get that return. That that's a real life example. That actually did happen in my clinic.

That's that's exactly what I'm talking about. I think that's a great example. Getting the outside protector or kind of just analyzing what you're doing, just being a little more analytical about it can be a helpful way to to make some better decisions in your practice.

Yeah. And this leads on to the second part of it. Know, you got sunk costs, and then you have opportunity costs. So you can't change the past. Anything you've done in the past, the past is the past.

But you can change the future. So you think about what are you giving up by not putting your efforts elsewhere? Perfect example was every time I did a shockwave campaign or ad, I was actually not putting time and effort into a different opportunity, which was the heel pain ad. So every time I put time and effort in one area, I was losing an opportunity in the other area. Fortunately, I was smart enough to take this, it only took about six weeks for me to realize, let's pivot back to what was actually working, what was what was giving us the return on our investment.

And so, therefore, you gotta look at where could your time and money be better spent? That's a question you should always be always be asking yourself.

Yeah. You only have so much time and money. Right? These are not these are limited resources that we have. And like, you know, like you said, if you're spending three or four hours doing something, that's also three or four hours you're not doing something else.

So really finding those high value opportunities. And sometimes it takes a little bit of experimentation. It's not like you find you don't hit a home run the first time at bat. You need to keep figuring these things out so you can really focus on those areas that are providing that ROI.

Yeah. And sometimes you might hit a home run first time. Yep. And and that and sometimes that can be having massive success really early for little effort can sometimes this will sound weird. It'd be one of the worst things that can happen for you because you think, oh my god.

I'm a legend. Yeah. I'm a legend in my own lunchbox here. It doesn't matter. Yeah.

Everything I touch turns to gold. Sometimes it's just timing. Right place, right time. It's just what the market wanted. But other times, it's not always the case.

And that's why because I'd set up so many clinics over so many years, there were some clinics I set up in areas, and I tell you right now, it was just it was like a license to print money. It just absolutely boomed. So you think, oh, the next one now knowing that, the next one's gonna go even better. No. Not necessarily.

The other one next one took a little bit it it it wasn't the same timing, location. Things were a little bit different. Yeah. Sometimes it's not always you're not gonna hear at home run the first time, and if you do, that is fantastic. But I've already mentioned that with your marketing, with specific training or team members, that's one thing where you might be putting too much time and effort in there, you're missing out on other opportunities.

But what about some of the services you offer? So if you're spending a lot of time doing routine foot care, yeah, you've marketed it, you've built your business up and that. And I've said to some people, why don't you pivot and do block out more time in your day to do these other higher paying services? Oh, and they're scared to let something go because they go, oh, but what if I lose it? But they don't realize the opportunities in these other areas of podiatry that they could be missing out on.

And I think that is that is probably a bigger thing than anything else.

Yeah. It can be difficult. Right? People kinda get into routine. They know what they they've done in their practice and to kinda open up a slot or two and maybe have it be empty for a week or two if they can't fill that slot.

It feels like failure and sometimes they can want to kind of go back to the safe thing or the thing that always seemed like it worked. But until you're willing to kind of risk things or experiment a little bit in your practice, you never really know what you want. Right? Maybe would do the routine folk care just to kind of get started in practice and get to a profitable state for your clinic. But you've always wanted to do sports medicine or you've always wanted to do pediatrics.

And if you want to move in that direction, have to kind of open yourself up to the potential that you know, it's okay if you're gonna move in this direction to take those little risks and to open things up and change things a bit.

Yeah. Well, a podcast I did recently on podiatry legends with Rob Cononello, and he was just saying that younger podiatrists coming through, pick a couple of things that you really wanna pursue and and focus in on those areas a little bit more. You don't have to be doing all aspects of podiatry. And sometimes, because people are doing all aspects, they're missing opportunities. They're they're putting time and effort into some aspects of podiatry, and then they're too scared to let that go, but they don't realize the opportunities they could be missing.

So if you're still doing home visits and you're still doing nursing homes because that's what you did when you first opened your clinic five, ten, fifteen years ago, you could be missing out on big opportunities because you're sitting in a nursing home. This is part of the podiatry evolution. As your business grows, you gotta let stuff go. Just because you've sunk a lot of time and effort into it doesn't mean you have to keep doing it. Let let it go.

Let it leave that for the new podiatrist coming through so you can then focus your your attention on new opportunities. And it's even satellite locations, and this this is a huge one. Some will have their main clinic, and also, they're gonna set up one, two, three satellite locations away from their main clinic, and they'll put so much time and effort into trying trying to build those up. And sometimes they work and sometimes they don't. But occasionally, they'll they'll put that much time and effort into some of them.

They're too scared to go, you know what? Maybe that's not working. We should just put our time and effort back into our main clinic. That is the cash cow. It's the thing that is actually, you know, paying all the bills.

And and don't worry about it. You may have set something up. You may have put a time a lot of time and effort into it. It's just not working. Walk away from it.

Close the doors. Come back to your main clinic again.

Yeah. Definitely, you'll have so many so many hours in the day, and it can be difficult to to spread yourself too thin. You know, there there can be sometimes opportunities in these satellite locations. I know sometimes

Oh, definitely.

And you're in a suburban area and you're like, well, that new that new suburb on the edge is really starting to grow. There can be opportunities there, but you have to be, you know, analyzing your financials. You know, what are you doing in your practice? And you know, if you're spreading yourself too thin, you definitely don't want to hurt that main office. So you know, it definitely is something that takes time and you have to utilize reflection and some analysis of the situation as you're going about it.

Doing it in a real kind of specific way can be really helpful. But yeah, it's it's it's, you know, trying to figure out, you know, what's best and and how to juggle these satellite clinics can definitely be difficult, I'm sure.

Yeah. Well, I had a coaching client who in a matter of four months, we were able to triple their turnover because they were visiting, like, eight or nine different places. They had their own clinic that they they had the lease for the whole week on this particular building, but they're only there two days a week. The rest of the time, they were out visiting these other medical centers and nursing homes. And I said to them, write down a list of all the places you go to and how much money you make there per session.

And we're saying each session was a four hour block. I said, rank them from one to 10. So they ranked them from one to 10 compared to their own business. When they're in their own business, they were turning over at least double what they're making anywhere else. I said, okay.

See this lowest one down here, the one that's ranked number ten, nine and ten, yeah, get rid of them. And I went, oh, what do mean? Said, get rid of them. Just contact me and say you're not visiting anymore. Next week's your last week.

Put that that time there into your own business. They went, oh, they'll they'll worry about it, but I put so much time in building up. Said, don't do it. Don't worry about it. I said and what they were thinking was sunk costs, and I'm thinking opportunity costs.

So they got rid of them. The the extra day that they put into their business over here, all of sudden, they're making three times what they were at that particular place. I said, okay. Let's do the next one. So we did the next one, and then we did the next one.

And we did it over a four month period till eventually, they were one day a week out at some other places that were still really profitable, and the other four out of five days, they were in their own business. But by being in their own business as well, the doors were open more often. They were able to get a receptionist in to work there. They were then seeing more patients because they weren't doing everything themselves, and they they turned over tripled just following that simple principle. So what they did is they gave up on the sunk cost and put their time and effort into the opportunity costs, and everything boomed.

That's awesome to hear. It's it's yeah. It's kind of investing in themselves and their practice. It seems like it really paid off.

So to they could make a movie about that. It'd be a fantastic story. Rags to riches. But the last thing I want people to think about then is, are your sunk costs getting in the way of your opportunity costs? So just look at where you're putting your time and effort in, what returns are you getting, and are you spending too much time in certain areas, whether it's marketing, people, training, ideas, the type of work that you're doing, and think about can you make some changes because you might be missing out on certain opportunities.

Yeah. I couldn't agree more. That that's a great way to end it there.

Okay, Jim. I look forward to talking to you next week.

Alright. Sounds great, Tyson.

Okay. Bye.

Bye now.

Thanks for listening to Podiatry Marketing with Tyson Franklin and Jim McDonnell. Subscribe and learn more at Podiatry Marketing. That's the website address, podiatry.marketing.