How Critical Assumptions Can Make or Break Your Business

“Am I working on the things that matter most?”

“How can I get more traction?”

“Do I have enough cash to keep going?”

These are just a few of the questions that keep entrepreneurs up at night. Unfortunately I’m not here to give you a magic way to erase all those worries. But I can give you one piece of advice that’ll make organizing and prioritizing your questions a little easier: work on your critical assumptions.

Here’s how:

Find the guesses that absolutely have to be true for your business to succeed.
Every entrepreneur makes guesses. What they’re doing hasn’t been done before. Ask yourself, “what do I think is true about my customer, their problems, my product, and my team?” Write down things like “I believe my customer is ____” or “I think _____ is a problem that _____ is trying to solve.” Make a long list. Then rank each guess based on how detrimental it would be if you’re wrong.

Take the top of your first list and rank those assumptions by how much or how little you know about each.
The most important word in that sentence is “know”. You need concrete evidence to know something is true. Evidence comes in all forms – from unbiased consumer feedback and third party research to prototypes and sales. But don’t be fooled into thinking you understand a customer’s problem just because you’ve experienced it yourself; in fact, you might be an outlier or you might have misunderstood the problem. The key to this step is being honest with yourself about how much you actually know versus how much you’re assuming.

Work on validating the guesses that are both highly unknown and really important.
If, for example, you think young mothers will love your new diaper bag, your most important/least known assumption might be that moms don’t have enough space is their bags. The best way to confirm your hunch is to spend a lot of time talking to moms about the problems and pains they face when they’re in transit. All of your other guesses can wait – if you’re wrong about the problem you’re solving, perfecting other aspects of your model could turn out to be a huge waste of time.

The cycle doesn’t stop. Once you’ve learned enough about one critical assumption, move on to the next. By following this simple pattern, you’ll not only prioritize your time wisely, but you’ll also be learning and adjusting your business model. That’s more than a great way to get traction – it’ll also save you time and money and help you build things customers actually want.

Want to know more about the MAGNET Incubation Center? Visit magnetincubationcenter.org to learn about membership, meet the team, and more.

Print
Posted by Brandon Cornuke in Startups

Most Recent

Thank a Librarian

October 13, 2017 by Sam Wasylyshyn

During the early 1930s, IBM developed the first modern accounting machine designed for the financial sector. However, the banks weren’t buying the IBM machines; in fact, they were just trying to stay in business, and no one was investing in new equipment. The accounting technology was new, and people didn’t understand its potential yet (thus a reluctance to invest in it). Even with this dismal outlook, IBM found an unexpected solution: libraries. Unlike the banks, libraries during the early days of the New Deal era had money to invest. After the famed New York Public Library bought an accounting machine, others followed suit, leading to more than 100 purchases by libraries across the country. Once the economy regained momentum after World War II, the business community once again had the money to invest and recognized the sheer importance of computing technology. IBM redesigned their machines to help companies complete their payroll, and within a few years, IBM became a leader in the computer industry. Have you ever experienced an unexpected occurrence similar to IBM? Was in how the product was made or how the product was sold to the market? This story covers one source of innovation known as “unexpected

Reflecting on Resins

October 03, 2017 by John Hattery

The market for plastics and resins continues to be somewhat confusing, operating under very different market conditions as compared to other raw material commodities. Though resin producers have learned the value of managing capacity to stabilize (and potentially to increase margins), the way they’ve been building up inventories is puzzling, even in the face of steady and increasing demand. The fact that producers were pushing for price increases as of August indicates that they anticipate increasing demand, decreasing capacity, or a combination of both, and have some confidence of realizing higher prices for their products. After Hurricane Harvey, demands for increased pricing have only strengthened as stockpiles are drawn down and infrastructure restarts are slower than hoped for. What can you do to keep up with these continually changing trends? Be responsible for your own defense. The best defense for a small manufacturer is to have multiple sources of resin pre-validated in your manufacturing process and pre-approved by your customers. This allows you to seamlessly shift from one supplier to another if faced with an unpalatable pricing demand. Be prepared to play suppliers against each other to ensure they remain in a reasonable margin band as market conditions vary, and

Metal Musings

September 26, 2017 by John Hattery

For the past few years, manufacturers have enjoyed declining and advantageous input costs on most commodity industrial metals – copper, zinc, aluminum, iron, tin, steel, etc. The party has most definitely come to an end. As the global economy heats up, demand for industrial metals to supply the manufacturing sector in all markets likewise increases, resulting in a steady upward pressure on raw material input costs. Barring another major economic or geopolitical crisis, we have likely seen the last of a softening commodity market for quite a while, and must prepare for a period of increasing cost pressures. Manufacturers in the USA, particularly small manufacturing enterprises, need to be aware and be taking proactive steps to prevent margin erosion due to negative purchase price variance resulting from these commodity pressures. Know what your metal purchases should cost - be better informed than the salesman across the table from you. Hopefully as a manufacturer you haven’t been a passive, price-taking buyer, or a seller allowing larger customers to dictate how material cost inputs are to be dealt with. Hopefully, you already have indexing agreements in place with both suppliers and customers. Most importantly with suppliers, because without such agreements you have