01 Oct Is Your Business Teetering on a Leap of Faith?
If you build it, they will come? Not necessarily.
Think about it — most of us make assumptions every day for all aspect of our daily lives.
This is especially true when you are planning your business. You have to start out by making assumptions about the need and market for your product or services.
These may be related to the demand for the product, cost of product, ease of development etc. Examples may be: 1) People want my product; 2) this particular segment of people want my product; 3) people in that segment are willing to pay X for my product; 4) I know all of the costs involved in producing my product….and so on.
So it’s true that you have to start with assumptions, but wouldn’t it be a good idea to test them? Especially before you invest too much time or money?
Leap of Faith
You might want to start by testing the riskiest assumption — your biggest leap of faith.
How do you do that? Determine what your riskiest assumption is. What is the one critical factor without which your whole house of cards will fall?
The next step to successful business planning is to form the hypothesis that will prove or disprove this assumption. If X, then Y. Or “If I offer X then Y numbers will buy.”
For example, your assumption might be that consumers are so motivated to buy eco-friendly clothing that they would be willing to shop on line for it and to pay more per item. How do we test that? Break it down into measurable components that can be tested. Also determine a currency (either money or an overt action or both) that is proof of buy-in.
“If I offer ladies bamboo tees online for $20, 5% of online consumers will purchase.”
We then design an experiment to test this hypothesis. If 100 emails are sent to random female buyers (in a certain demographic strata) and if 5 buy the tee (currency), then we will be favorably inclined to proceed with the next step of business planning.
Three buy the tee in the results. Is it the price? Is it the channel method? Is it the wrong target market? Do we persevere and test a lower price or change the target market? Should we separate into more than one experiment? Or do we pivot and re-evaluate the accuracy of our leap of faith assumption?
What would you do?
What are the assumptions that you are basing your decisions on? Can you form a hypotheses and test based on currency? Please share your experiences with assumptions.