How much does a wrong decision really cost?

Every day, those who lead a company face decisions that can change the course of things: What price to set? Where to invest? When to expand?
Whether you are a manager, entrepreneur, or simply someone dealing with important decisions, the fear of making mistakes is constant. But have you ever asked yourself how much a wrong choice can cost?

With this article, we will provide you with an authoritative guide to understanding the impact of wrong decisions.

All business decisions, from the smallest to the most strategic, are based on a fundamental assumption: the available data is correct, up to date and relevant. But what happens when this assumption fails?

When starting data is incomplete, inconsistent, or outdated, even the most sophisticated analyses lose effectiveness. Simulations become less reliable, forecasts weaker, choices riskier. It’s like navigating with a demagnetized compass: even with the best intention and the best map, you end up off course. And often, the error is not immediately visible. It slowly creeps into processes, numbers, results that don’t add up.

Direct economic loss: According to a Gartner survey, companies attribute on average 15 million dollars per year to losses caused by decisions made on poor quality data.
Profits at risk: Decision errors can cost up to 3% of annual company profits, again according to Gartner.

And this is not just about large enterprises or high tech sectors. Even an SME may find itself investing poorly, losing customers, or wasting precious time because of unverified data or poorly integrated information systems.

Data quality, therefore, is not a technical aspect to be delegated. It is a strategic lever to oversee. Because without solid data, even the most rational decision can turn into an expensive mistake.

When we think about mistakes, our mind immediately jumps to direct costs: money lost, time wasted, missed opportunities.
However, a wrong business decision does not stop at the numbers on the balance sheet. Its price is often subtler and deeper than we imagine. For example, a failed investment does not only mean “negative balance,” but often also months, sometimes years, of wasted work, resources diverted from other projects, and a direct impact on team motivation. In some cases, even the company’s reputation can be damaged, with consequences that reflect on employees, partners, and customers.
These “invisible” costs, intangible and difficult to sum up in a single figure, are often the hardest to digest. According to one of the most up to date estimates for the Italian market:

• Strategic areas: a failed marketing campaign, a poor partner choice, or wrong export plans can lead to revenue and market share loss. Think of a wrong pricing strategy: a price too low risks squeezing margins to the point of making new customer acquisition unsustainable, while a price too high can drastically reduce sales volume. In both cases, revenues shrink, and fixed costs which remain unchanged weigh even more on the operating result.
• In production activities: evaluation errors on supplies, technologies, or management can generate delays, waste, and increased fixed costs, impacting competitiveness. Even adopting unsuitable software or an immature sales channel: all decisions that absorb resources without returning value and directly affect margins.
• In human resources: a wrong hire can cost a company up to 300% of the annual salary of the position involved, considering compensation, recruitment process, training, time lost, and productivity drop. (Source: SHRM).
• Replacing an employee who resigns or is not aligned costs on average at least 20% of the annual salary to fill the vacant position, even in direct costs alone. (Source: SHRM)

1. Hidden costs and missed revenues: the domino effect
There are visible costs that are easily detectable: think of a wrong supplier, a lost client, a wasted budget. But the overall effect on a company’s economic dynamics is often deeper. A wrong choice can gradually, silently but steadily increase expenses. At the same time, it can block or reduce revenue flows, slowing growth and reducing market competitiveness.
According to various studies and sources, SMEs often suffer losses and inefficiencies linked to recurring management problems, including frequent decision errors and the lack of structured systems of control and decision support. This means that the real risk is not so much a single wrong choice, but the lack of a structured method to assess its impact before it turns into economic damage.

2. Reputational damage and a compromised corporate image
A single mistake can damage a brand’s credibility. Defective products, poor services, or poorly managed communication campaigns cause negative reviews, loss of customer trust, possible boycotts.
Even more serious are cases of incorrect or illegal behavior, as unfair or illegal practices can undermine the company’s credibility and lead to sanctions, boycotts, and image damage.
The result? Long term credibility shaken, more necessary than ever today to retain customers and partners.

3. Team demotivation and productivity drop
Hasty or wrong decisions, such as assigning unrealistic goals, poorly managed organizational changes, or lack of transparency, reduce motivation and fuel discontent among employees.
According to TusciaFisco:
“Unpopular decisions or lack of transparency […] can cause demotivation, discontent and an increase in turnover.”
Less engaged employees work less and explore fewer creative solutions. In a competitive context, this reduces operational efficiency and hinders the company’s ability to adapt and innovate.

4. Legal risks and compliance: the silent bomb
Errors related to contracts, regulations, and partnerships can result in costly disputes and legal sanctions. For example, non compliance with regulations, contractual violations, or legal disputes can generate high legal expenses and damage the company’s reputation.
All it takes is one overlooked clause or a missed regulatory check to trigger lawsuits and fines: direct costs add up to reputational damage and time wasted in court or urgent negotiations.

How can you reduce the risk?

The truth is that no one can avoid all wrong decisions. Making mistakes is part of action, but what really makes the difference is having tools to minimize the probability and above all the impact of errors.
Today, technology offers truly interesting solutions: predictive analysis, simulations, artificial intelligence. They don’t just calculate numbers, but make visible what we often ignore, helping us weigh choices better and prepare backup strategies before even proceeding.
Reducing the impact of wrong decisions means investing in:

• Quality data: The efficiency of the decision making process grows with the availability and reliability of data.
• Predictive models, AI and Decision Intelligence: Gartner identifies Decision Intelligence as one of the most important emerging approaches, supported by key technologies, to improve the accuracy and timeliness of business choices.
• Method and evidence based culture: Going beyond instinct and constantly comparing alternative scenarios allows you to anticipate risks and predict impacts.

Simulation plays a central role. It allows you to evaluate scenarios in advance, decide better and react faster because it lets you explore options before acting, make more informed decisions and respond more clearly to changes. It is like a bridge between intuition and method, between vision and concreteness, and it allows us to train strategic thinking so we don’t have to wait for the market or the error to test our choices.

It’s clear, then, that reducing the risk of a wrong decision requires method, data, and the right tools, and making decisions in a company has become an increasingly complex exercise. Variables increase, markets change rapidly, and every mistake can turn into a significant cost, not only economic as we wrote in the previous paragraphs.

And it is precisely on these foundations that Decision Intelligence was born: a discipline that integrates data, predictive analysis, and human capabilities, allowing you to simulate scenarios and evaluate in advance the possible consequences of choices.

It is not about replacing entrepreneurial intuition, but strengthening it with concrete evidence. In practice, Decision Intelligence, through simple and accessible methodologies designed for those who are not experts in data or technologies, enables you to

• Cross reference heterogeneous data sources in real time
• Simulate alternative scenarios before acting
• Evaluate impacts, opportunities, and trade offs
• Make faster, more informed, and measurable decisions

McKinsey has shown that companies using simulation models achieve 20 to 30 percent better performance than the average in their sector, with the same resources.

And today, even Italian SMEs can access these tools, thanks to tailor made platforms, simple and concrete.

Platforms like WhAI were created precisely for this: to help companies and professionals navigate in a simple way through the thousands of choices every day with awareness, reducing costly errors and optimizing time and resources.
So, how much does a wrong decision really cost?
More than you think, but today you can choose differently.

Do you want to understand how much a wrong decision could cost your company?
Contact us for a free demo.