December 14, 2020
There are some steps you should take when validating a new business idea. Some popular validation methods are out there, and those are basically to evaluate the risks along the way, to name a few,
- Market risk (Not enough people want it)
- Financial risk (Hard to make it profitable)
- Execution risk (You cannot make it)
- Legal risk (Not legally allowed) etc etc
Of those risks, market risk is often the hardest one to properly evaluate. And most of the failed startups, including my previous company, didn’t make a fair assessment on whether what you are going to create is the right solution to the problem you are solving.
That is because to a certain problem, there are some, if not many, possible solutions. And every possible solution exists based on many underlying assumptions. Some are easy to tell whether it is true or false, but some are biases that are hard to recognize since it comes from your lifestyle, people around you, and information you consume.
It is critical to clarify the assumptions you have for the solution. Those are the real risks you should eliminate before taking any further steps because it is often the case that your solution starts to collapse in some of them.
It’s also super helpful for many upcoming steps. By having the list of assumptions needed to be true for your business idea to work, ideally ranked by importance and uncertainty, it is clear what question to ask when you conduct interviews. Not only is it clear, but also you can ask better questions because those are based on real behaviors, not the hypothetical world that you are trying to achieve with your solution. Also, you can tell who are the ideal customers are. The ideal customers are the ones who agree with all the assumptions to be true. It is much more granular and detailed compared to conventional segmentation. And you can go after them.
This process has been so useful for properly assessing whether a business idea can have a shot. So instead of a business plan, you might want to have a thesis plan.