The Hidden Cost Of Chasing The Wrong Deals

Forbes

03-07-2025

Nikolaus Kimla is CEO of Pipeliner CRM, an innovative sales CRM solution designed by sales professionals for sales professionals.
Sales is all about the art of closing the deal. Behind the curtain, that means a lot of patience, persuasion and persistence. But what if that determination hurts more than it helps?
Today's economic climate means sales teams must be lean and efficient, bringing in more sales revenue and fewer expenditures. What many aren't considering, because it's not ingrained behavior, is the risk of the sunk cost.
Identifying Sunk Cost
What is sunk cost? It's going past the point of no return; pursuing a new customer or an upsell to the point that, even if the sale is won, the revenue is lost to the time invested in the pursuit.
But again, what is sales without a little bit of persistence? All good businesses know that pursuing sales is an investment. Where sunk cost comes into consideration is in defining that line between investment and loss. At what point do you stop following up on an unqualified lead? When do you need to revisit your sales strategy, because it's just not cutting it?
Some common signs that indicate you might be close to passing the boundary between revenue-generating and sunk costs are:
• Persistent follow-up without any indications of purchasing intent
• Defending a deal because 'we've already spent so much time on it'
• Over-reliance on legacy clients with diminishing returns or a lack of interest in new products and features
How Sunk Costs Stall Sales Growth
Sunk costs are, for the most part, avoidable when you know how to watch for them. As a result, it's possible to largely mitigate their impact on KPIs and your bottom line. However, when you're not monitoring their risk, the real consequences come into play. If left unconsidered, sunk costs can lower your win rates, decrease team morale, lead to inefficient pipelines, inaccurate sales forecasting and reduce agility.
Knowing When To Bail Out
One of the challenges of avoiding sunk costs is that there's no one set definition of that invisible boundary—it looks different from business to business and even sale to sale at times.
That said, there are a few common indicators that mean a potential sale may be nearing the point of sunk cost, such as repeated delays in the decision-making process, multiple demos and proposals with no real movement or a lack of urgency in communication. Some questions to ask to help identify the risk of sunk costs include:
• Does this customer align with our ideal buyer profile?
• Are you ignoring red flags because you've 'already come this far?'
• Are you investing more senior leadership, travel or support with no payoff?
• Is the buyer matching your energy when it comes to moving the conversation forward, or are you doing all the pushing?
Leveraging a sales CRM designed with sunk costs in mind can simplify the establishment of comprehensive strategies for monitoring what that boundary looks like. Each company can set its own rules for monitoring. For example, for one company, it may be a set percentage of the overall sale, while for another, it may be a specific number of hours dedicated to nurturing each lead. Consequently, sales professionals can more easily assess the health of each lead to determine when they may be nearing that boundary.
Even with the right sales tools, it can be easy to overlook the warning signs if you're not watching out for them. Other best practices to help prevent sunk cost risk can include regularly qualifying and re-qualifying your leads, setting a firm internal deadline for when you will stop pursuing a lead or pivoting to a new stakeholder.
Why Sunk Costs Are Especially Dangerous Right Now
Sales teams are under increased pressure as many B2B and B2C shoppers tighten budgets and slash discretionary spending. This means heightened scrutiny on KPIs, which sunk costs can quickly destroy.
Sales teams that set markers for when a lead becomes a sunk cost will see the most success moving ahead. Those who monitor their sunk cost parameters will have an easier time managing their sunk cost risk and avoiding lost revenue before it happens.
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