If I knew what I am about to write below three years ago, it would certainly save me couple of thousands which I poured into my first business. But, when you are young and stupid and you think that you know everything (why to read book right?) then... well, you receive a lesson :-)
When you are starting a company, you basically have some hypothesis. You think that there is some need (or problem) in the market, which you can satisfy (or solve). Problem is, that there is much higher probability that you are little bit off or completely wrong with your hypothesis that the option of getting it right on the first time.
What many people do when starting a business (including me in the past), is that they are so sure about their hypothesis, that they are willing to bet everything what they have (sometimes even things which they don't have) on that hypothesis.
So, if the possibility that you are wrong is much higher than the possibility of you being right, am I trying to tell you not to do a business at all? No. I just want to tell you: Test your hypothesis first. Here is how:
First step is to read book called Lean startup. If you are in hurry, read further.
Second step is testing your hypothesis as quick and as cheap as possible.
This can be done by building Build-Measure-Learn feedback loop. It consist of three steps:
(1) You build so called MVP (minimum viable product) based on your hypothesis. My hypothesis is that high quality hoodies with Jordan Peterson quotes will work on very specific niche which I want to target. I am going to make one hoodie to test this. One hoodie.
(2) Before you start to sell, establish so-called KPI (key performance indicator) based on which you are going to measure your success (or failure). Write down the value which you want to achieve with this KPI (Let's say 10 purchases in first week when investing X amount of money on marketing.) Then start testing and measure your performance.
(3) Learn. Did you met your target? No? Why? What did you just learn? What was the respond from targeted audience? Did they like your idea or not? Gather any feedback which you just received and then make a decision.
Pivot - change your hypothesis based on what you just learned
or
Proceed - if you think that you've got it right, go big time with current hypothesis.
The most important metric when starting a business is how long it will take you to do one Build-Measure-Learn feedback loop.
Gaining the insight, is the most important thing! When you can prove that you found it and you can leverage it, it is easy to fund your project.
Business plans works in established businesses. Where you can easily predict the future. Our world is changing more and more day after day. People who are able to identify insights from this change and leverage it first are those who own the world.
Thanks for reading.