Assumptions

As we talk about transitioning from employee to entrepreneur, we think about everything from which products to offer to marketing, sales funnels to opt in pages. These are all very important topics indeed.

I read about a topic on a blog post the other day that I think is something we don’t talk about often enough: assumptions. I agree with the author: assumptions is one of the things we often get wrong when starting a business. And getting certain assumptions wrong can have a major impact on our business. As you can imagine, incorrectly assuming can significantly waste time and money.

Assumption defined

 

An assumption is a thing that is considered to be true, real or certain without proof. And naturally,  assumptions have a degree of risk. The challenge is taking the time to answer objectively if you are making particular assumptions. Let’s look at some examples.

Assumption examples

 

Can you think of some common assumptions we sometimes make as new entrepreneurs? What about these:

• Assume that you have to do everything for your business as you transition from employee to entrepreneur
• Assume a particular sales conversion rate when forecasting revenue
• Assume software applications integrate with other software applications
• Assume there’s a market for your product or service
• Assume the first version of your product is the version your customers will want

How to handle assumptions

 

Because we don’t want to invest too much time and money into incorrect assumptions, we want to come up with a way to handle them. One way is to turn each assumption into a hypothesis, identify any associated risk if it’s wrong and then test it.

I’ve created a table using some of the above examples.

	Risk	Test Hypothesis
Assume a particular sales conversion rate when forecasting revenue	Revenue and profit miss due to less sales than expected	Test by tracking sales conversion rate; objectively analyze and adjust rate as needed
Assume applications integrate with other applications	Have applications/software that don’t work together and then have to purchase more applications/software; increase in expenses and reduction of profit	Specifically ask other users and software companies about integration before purchasing
Assume there’s a market for your product or service	There is no market or it’s not profitable	Blog publically/survey customers/ask question related to new product to see if there is interest, ask for preorders

 

Does this make sense? Can you see how addressing assumptions, help reduce the chance of wasted time and money?

Due to the newness of our business, we will deal with a lot of assumptions early on but we will always be looking for assumptions as we run our business. That doesn’t ever really go away.

What assumptions will you test? Please share in the comments.