How Confirmation Bias Skews Your Business Spending

Jun 20

2 min read

You’re not overspending because you're reckless—you're just proving yourself right.

A founder once said:

“We tried influencer marketing, and it didn’t work. But I kept pouring money into it for 6 more months—because I wanted it to work.”

Another purchased an expensive CRM software after one positive review, then ignored team complaints for over a year.

This is confirmation bias in action—the tendency to seek out, favor, and act on information that validates your existing beliefs.

And for SMBs, it can quietly distort how you spend, scale, and sustain.

Let’s explore how confirmation bias shows up in business spending—and how to outsmart it before it eats your margins.

Step 1: What Is Confirmation Bias, Really?

Confirmation bias is the mental shortcut where you:

Pay more attention to what supports your view
Dismiss evidence that contradicts it
Justify decisions to avoid feeling wrong

In business, this bias often leads to:

Unjustified loyalty to poor tools or vendors
Overspending on ideas that "should" work
Ignoring feedback or data that challenges assumptions

It’s not stubbornness. It’s psychology.

And it’s costly.

Step 2: Where Confirmation Bias Shows Up in SMB Spending

Marketing

You believe offline ads work best → keep spending on hoardings, ignoring better ROI from digital.

Hiring

You prefer referrals → downplay poor performance, overvalue “culture fit.”

Tech tools

You liked the founder pitch → justify ₹1 lakh/year CRM even if only 2 users log in.

Vendors

You once got a good deal → ignore new data that they're now overcharging.

In every case, you're not responding to results.

You're defending a belief.

Step 3: Ask the “If I Were Starting Today” Question

To break the bias, use this mental reframe:

“If I were making this decision fresh today—without sunk cost—would I still spend this money?”

If the answer is no:

Pause spending
Re-evaluate alternatives
Ask for team feedback
Look at usage or ROI metrics honestly

Confirmation bias fades when you shift from proving yourself right to doing what’s right now.

Step 4: Use Structured Reviews—Not Gut Feel

Create a spend evaluation checklist:

Has this spend delivered measurable results in the last 90 days?
Would I choose this vendor/tool again in a blind comparison?
Are users/customers/team still benefiting from it?
Is there evidence I’ve ignored because I “liked” the idea?

This converts vague instinct into clear decision triggers.

Bias thrives in gut feel. Systems beat it.

Step 5: Bring in an Outsider’s Lens Quarterly

Every quarter, ask:

A trusted advisor
Your accountant
Or even a non-financial co-founder:

“What are we still spending on that you wouldn’t approve?”

Fresh eyes = bias breaker.

Especially when your ego is too close to the expense.

TL;DR – Too Long; Didn’t Read

Confirmation bias makes you justify poor financial decisions by seeking evidence that supports your belief.
It shows up in marketing, hiring, vendor loyalty, and tool subscriptions.
Ask yourself: “Would I still spend this if I started from scratch today?”
Use structured reviews and outside input to challenge your own logic.
Don’t protect your past decisions—protect your present margins.

Business is hard enough.

Don’t let psychology quietly cost you money.

Because smart spending isn’t about defending your decisions.

It’s about updating them when reality changes.