When it comes to business, too many first time entrepreneurs spend too much time at the outset sitting at a computer and planning and not enough time in the field testing their business plan’s assumptions. For many first time entrepreneurs, business planning is seen as a step that must be completed in its entirety before they attempt to execute the plan.
In reality today the business environment changes so frequently that many business ideas and concepts that made sense last year are obsolete today. Therefore it is paramount that you test your leap of faith assumptions.
I love to hunt, and as a hunter, I spend a lot of time and money on my equipment, (rifles, bullets, bows, and arrows) to make sure that everything is well aligned and will produce consistent results. Writing a business plan is like making sure your equipment is tuned for maximum performance.
However, a key to any hunting success is hitting your target, which requires constant feedback on the location of your game animal. Even the most perfectly tuned weapon must be aimed properly to produce a quick and humane kill. The aiming process is where testing your assumptions come in
As a small business mentor, I often recommend that a person complete a business plan before taking the leap, especially when it comes to quitting a day job and going all-in on a business idea. While it remains sound advice to write a business plan prior to committing significant personal and financial resources to a new business, there is a case to be made for testing your ideas and assumptions to see if they resonate with your prospects before even undertaking the effort of writing a formal business plan.
While the principal goal of a business plan is to think through the whole business idea and align all the businesses efforts toward a single common goal, the drawback of an extensive business plan is that the author may have made some false assumptions and is focused on the wrong goals. All the equipment tuning in the world will not do any good if your aim is not true.
From the beginning, even before you undertake the effort to write a business plan, you must list your leap of faith assumptions and test them to validate that the market will accept your business idea.
According to CBInsights analysis, 42% of businesses fail because there was no market need for their offerings. Based on their research this was the number one reason for business failure by a wide margin. Just because you like your idea does not mean the world will embrace your vision.
According to Eric Reis, the author of The Lean Startup, entrepreneurs need to follow the lean startup methodology to remove the uncertainty of their seminal ideas by following a process.
The Lean Startup methodology involves designing a series of experiments to test the leap of faith assumptions that are pivotal to your solution. By measuring the results of your experiments with real customers you begin to learn if your assumptions are in fact valid or bad assumptions requiring a pivot or to leverage your contingencies.
The consensus that writing a business plan is a prerequisite to starting any business is false, since the business plan is not a static document that is only developed on the front end. The business plan requires constant attention and rewriting to keep it aligned with the ever-changing needs the business fulfills. Continuing to test your leap of faith assumptions using a lean startup methodology is therefore paramount for a business to conduct regularly
In truth, most entrepreneurs never complete a business plan and “just do it” with little or no formal evaluation of their ideas. The successful entrepreneur knows that throughout the life of the business their plan needs to constantly evolve.
The entrepreneur needs to test their new assumptions to see what sticks and amend the plan based on the results of these tests. The mindset of “execute the plan” should be more accurately stated as “Plan as you execute” to reinforce the idea that business focus requires constant attention.
How often do you test and update your business assumptions?
