Entrepreneurship often feels like a sliding scale between science and complete guesswork. It’s preferable to be absolutely sure of the result of every action you’re taking. Unfortunately that’s impossible. It would take too long to be sure of every result and it’s not worth testing every possible action.
Therefore, we make a lot of assumptions when the impact of being wrong is small. If the impact of being wrong is large, we often run tests to be confident that we know what’s going to happen.
Risk vs. Negative Impact
This highlights a very important fact about assumptions that most people don’t think about. There’s a difference between the risk of being wrong and the negative impact of being wrong. It’s critical that you’re able to know and recognize the difference.
Let’s start by talking about risk. Most people consider entrepreneurs to be risk takers but the ones I know aren’t. In fact, being an entrepreneur isn’t about taking risk. Being an entrepreneur is about minimizing risk and thereby maximizing the chances of success. As you analyze a course of action, the best way to go about it is to identify what the chances are that specific events will take place or which outcomes may come to pass. You should at least spot-check the risks and impact associated with the assumptions you are making.
Assumptions are ideas that we accept as true without proof. In our everyday life, we make plenty of assumptions, most of which are trivial and the negative effects of our incorrect assumptions are usually limited. For example, I assume that when I get up in the morning, there’s probably going to be coffee, half & half, sugar and a Fiber One protein bar available for me.
Most of the time this is true but when that assumption proves false, the impact is small enough that it doesn’t make a material difference. Sure, it can be annoying to run out of sugar for my coffee. But, I can make small adjustments or go without if I really needed to so the negative impact is minimal. Running out of coffee is worse than running out of sugar, but I tend to keep track of that more than the sugar in an effort to minimize the downside.
Every assumption we make has the potential to be correct or incorrect and there is an impact which will be felt if we’re wrong. If the risk of an assumption being incorrect is high, we tend to gravitate towards running validation experiments before accepting those assumptions as fact. If we don’t verify our assumptions, we are more likely to lose precious time correcting the situation after we discover that we’re wrong. In addition, there’s the added risk that we may spend time and effort trying to correct problems that wouldn’t exist if we had taken the time to validate our underlying assumption.
This is a very subtle, but very important point regarding faulty assumptions.
Faulty Assumptions Increase Negative Impact
Here’s an example. Let’s say you believe that a paid advertising campaign might be effective for increasing revenue and profit for your product. You run a series of experiments to test the idea that paid advertising might be a valid opportunity.
In this case, you’re using science and hard data to help produce the proof which will validate the idea one way or the other. However if you start running paid ads with the intent to keep tweaking things until it works, then you’ve made an implicit assumption that it will work and you just haven’t figured out how yet.
It’s critically important to recognize you’ve made the assumption that paid advertising will work and have intentionally moved on to the next step. Knowing this will prevent you from going down a rabbit hole looking for a solution that can’t be found for any problems you might run into that may simply be the result of a faulty assumption.
If your assumption turns out to be wrong and you didn’t recognize that you made the assumption to begin with, it will take exponentially longer to identify that you have a fundamental problem which stands in your way of success. You’re putting yourself in a position where another marketing channel could get you the results you’re looking for dramatically faster, but you can’t achieve those results because you’re hyper focused on a local maximum rather than the global maximum.
The assumption you’ve made will increase the negative impact felt from being wrong because it will take substantially more time, effort and resources to identify the actual problem and then backtrack to identify a solution.
A rather simplistic example of this is that a customer calls to say their credit card is being declined on your site for a new order. After hunting through your code and the API calls to the credit card processor, you realize that the database server wasn’t running and thus the credit card payment couldn’t be logged in the database. You assumed the database was up and running without even thinking about it. Then you wasted time looking at unrelated aspects of the application.
If you hadn’t assumed the database was up and running to begin with, it would have taken a fraction of the time and effort to fix the problem.
Unquestioned Assumptions Lead to Inaction
So far, we’ve talked about the time and resources you could be wasting because of actions taken based on faulty assumptions. Now let’s talk about how to deal with the opposite problem.
How do we contend with actions we don’t take because of assumptions we’ve made? Furthermore, how do we recognize when we’re making implicit assumptions that discourage us from taking those actions?
The most dangerous assumption is one that we’ve made that we don’t even think to question because we don’t realize that we made that assumption in the first place. Fortunately, there’s an inventive technique you can use to to quickly identify these previously unknown assumptions that prevent you from taking action.
Bear with me here, but we will need to take a quick detour on this path. We’re going to examine three different types of people in three different situations so as to provide a base set of reference examples. Then we’ll come back to the technique and show how it applies to all of them.
Unquestioned Assumptions of the Non-Entrepreneur
For someone who’s never tried to be an entrepreneur, you can identify the assumptions they make quickly by asking one simple question: Why haven’t you started your own business yet? The answers are frighteningly common:
- I don’t have the time
- It’s too risky
- I don’t have any ideas
- I’m not technical
- I don’t know how I would find customers
- I have a good job
- My spouse would kill me
- I don’t know what to do
- I didn’t think it was possible
Each of these answers basically says that they’ve never really considered it and don’t have a good reason. There’s no data to back any of it up. There’s a fundamental assumption at work here which says that that they can’t be an entrepreneur. Sometimes, parental expectations are at work while for others, it’s the fear of being different than the people around them or the fear of doing something that they really don’t know much about.
What’s more is that they’re not willing to explore these avenues to find out for sure because they’re afraid. Some people are afraid of failure and thus choose a path they feel is safely outside of their control and shields them from having to make what are viewed as risky decisions. That path is typically the full-time employee.
Keep in mind that just because someone is an employee doesn’t mean they actually WANT to be an entrepreneur. There’s nothing wrong with that path if it’s what someone wants it and actively chooses that path. However, most of us started out on the path of a full-time employee because we accepted an implicit assumption from the people around us that getting a full-time job is what we were supposed to do. Never questioning that path is the assumption we’re challenging here.
Unquestioned Assumptions of the Wannapreneur
What’s less commonly talked about is that many people are afraid of success. This is a common theme in the wannapreneur crowd. They want to build a business and will do a multitude of things that look like and make them feel like they’re building a business.
Unfortunately in the early stages, most of these activities won’t contribute to making the business successful. They go through the motions but never really try to get paying customers. This lets them do seemingly entrepreneurial things, but without the hassles of having customers.
This includes things like:
- Ordering business cards
- Designing a company website without a product
- Getting a business phone
- Setting up an office
- Attending meetups
- Configuring servers
- Building processes
- Hiring a VA
- Optimizing code, infrastructure or engineering efforts
This is a common mistake. I’m ashamed to admit that I’ve been guilty of most of these at one time or another. After all, it’s hard to be criticized if you don’t actually launch something… unless you take so long building it that people criticize you for not shipping.
When someone pays you real, honest money for a product or service you’ve created, then by definition you’re providing value. That matters more than anything else at this point and is the key driver behind every successful business. If you’re not providing value, you won’t stay in business for very long. Find the fastest way to deliver value and you’ve identified the fastest path to revenue.
The most important questions for people in this situation are these:
- What will it take to get your first X paying customers?
- What’s stopping you from doing it now?
Unquestioned Assumptions of the Entrepreneur
It would be a mistake to think that once you have multiple paying customers, you have it all figured out. I’ve spoken with plenty of people who don’t do something because they’re afraid it’s going to work. In a way, this is tied to a fear of success but it’s hard to recognize unless you look for one very specific symptom.
Someone objects to a course of action because of the problems that success is going to create.
Sometimes, we try to solve all of those resulting problems first, which seems like we’re working on the business, but in reality, we’ve simply made an assumption that this particular course of action is going to work. That hasn’t been proven yet and this is the root problem for almost everyone, whether you’re just starting out or have a successful business you’ve been running for the last decade.
If you’re trying to solve problems you don’t have yet, then chances are good that you’ve come full circle and are making an assumption that what you’re doing is going to work and that success is going to create other problems.
Let that happen. Don’t solve problems you don’t have because doing so is merely delaying your success. The fact of the matter is that if your assumption is flawed, you might never have to solve those problems at all.
Identifying Your Unquestioned Assumptions
Now that we’ve gone through those three different scenarios, here’s what I want you to do. We’re going to help you identify your own assumptions that you’re not even aware of that you’re making. In order to accomplish that, you need to do two things:
- First, write down 3 things that you aren’t doing right now that you probably should be.
- Then, for each thing you “should” be doing, write down why you aren’t doing it.
As you write down each reason, it should become clear that there are certain assumptions you’ve made that you’ve never thought to question. Eliminate these assumptions and you’ll find that your roadblocks to success will move out of the way.