Sunk cost (as defined by Investopedia) - A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business may face, such as inventory costs or R&D expenses, because it has already happened. Sunk costs are independent of any event that may occur in the future.
It’s like this - let’s say you have a friend that is dating a girl that is clearly not right for him. You talk to him about it. He agrees that it’s not the best fit. But he feels like he can’t break up with her. He keeps talking about all the time that he’s invested in the relationship (“We’ve been dating for two years”) and all the money he has sunk in (“I bought her a car”).
He’s hung up on the sunk costs. We have a hard time swallowing that we may have sunk time and money into something that isn’t working out. But when we stay in something simply because of the sunk costs, our past determines our future.
If you’re pretty far in on something that you still believe is a good idea, that’s one thing. But if you’re in on something that you know isn’t right anymore, please don’t let the sunk costs steer your future. Sticking with something in your business that you know isn’t great/profitable/right, simply because you’ve invested past time and money into it, is a fairly secure way to ensure more loss in the future.
You don’t want your friend to keep dating the girl that isn’t right for him simply because he has already invested so much time and money into it. Why should it be any different in your business?