Amazon announced it is killing Diapers.com, Soap.com and its related brands. It acquired the parent company Quidsi seven years ago. For how much? A half billion dollars cash.

Unfortunately, Amazon never was able to make the unit profitable. So, it is done. It sounds like common sense: This method isn't working, so we are going to stop doing it. But how often do you keep going well past when you should stop?

Knowing when to quit is a skill mastered by some of the most successful entrepreneurs, including Amazon's Jeff Bezos, Apple's Steve Jobs and Dropbox's Drew Houston. Here is why it matters.

Going further into a failing venture usually doesn't help: At a certain point, adding more resources gives diminished returns. If you are going to succeed, then you absolutely need to know when your efforts are being wasted: As Seth Godin brilliantly put in The Dip, "Write down under what circumstances you're willing to quit." Lick your wounds and put your energy into something more productive.

Fighting another day increases your potential losses: Pushing forward for the sake of doing so creates mental inertia. And, like physics, investing more of your precious time, energy and resources becomes a habit rather than a conscious choice. The more time that passes, the more numb you are to how much you are losing by continuing.

Obsessing over moving forward blinds you to opportunity cost: What if you put all the energy and momentum into your lukewarm project into something else? The wisest entrepreneurs don't relive the past (you can't get those resources back), but focus on maximizing the next move. Your decision today is an independent action. For Jeff Bezos, the process is clear: The day before the Diapers.com announcement, Amazon bought the popular shopping site Souq to enter the growing Middle Eastern market. The shifting of resources is already happening.

Your ego shouldn't rule your planning: When we won't let go of a failing project, we often justify going forward because of the money or time we've already put into it. The real reason, however, is almost always ego. Imagine spending $500 million on a business you couldn't make work? Your decision has to be honest and ruthless. It's no coincidence that one of the most powerful companies today actually tries to get its ideas to fail. You should do the same.

Published on: Mar 30, 2017
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