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Software Advice from Wall Street

Billy Marshall
June 24, 2015

There is a saying on Wall Street regarding investment decisions – cut your losses, dump your losers, double down on a winner. The basic philosophy comes from the concept of discounted cash flow analysis. It does not matter how much money you invested (spent) historically, all that matters is what you will invest (spend) in the future and how much cash will flow to you from that investing (spending). If a stock has declined since you bought it, and you are pretty certain nothing fundamental has changed to improve its future outlook, you would be crazy to buy more.

Bull Statue on Wall Street

Yet this is exactly what many folks dealing with failed software implementations continue to do. If every experience has been negative, what has changed to make you believe future return on investment will be positive? Is the company behind the application a leader that simply has not yet broken out? Why is another dollar flushed down the drain going to improve the outcome? Think about how much money you would lose in the stock market with the following investment approach:

“I don’t care how much the stock price has declined. I am going to buy more because I have already bought so much.”

Buying more does not change the outlook – it simply accelerates losses. If you are convinced that your experience is an aberration, that the market is wrong, that the company behind the stock is really a high quality opportunity, that a rebound is inevitable, then there is nothing wrong with doubling down on a heretofore loser – you’re getting a bargain at the lower price. If you are not convinced of the foregoing, cut your losses and dump your losers. You are simply paying more money for more pain without the joy of future income associated with the investment.

Download a copy of the “The Practical Guide to Buying Software for Service Contractors” for further reading on making the right software purchase for your company.

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