The First Step in Starting Your Business: List Your Assumptions

Since I’ve worked around startups a lot, people frequently come to me asking for advice about pursuing a startup idea they have.  Usually the advice request is centered around how to get started with building or implementing it:  “I have idea X, but I don’t know how to get started making it work.”

Having been the guy who had idea X and spent two years of my life building idea X only to find out no one wanted it, it’s my personal crusade to never let my friends build idea X before they find out if someone wants it first.

The whole Lean Startup movement talks a lot about minimum viable product, but you still have to decide what the minimum viable product is for idea X.

My consistent advice for the first step is to write a list of assumptions.  An assumption is anything you don’t have direct data for.  It’s remarkably hard to do, because you have already convinced yourself that most of your biggest assumptions are true, so you have to force yourself to write them down.  I open up a word doc and actually write them down in a list.

I was working on a concept of “TurboTax for personal bankruptcy” for a while, and my assumptions included:

• People going bankrupt have an internet connection where they could fill out the forms online
• They haven’t filed for bankruptcy yet because they can’t afford a lawyer and the forms are too complicated/intimidating to do it themselves

It was a much longer list, but you get the idea.

Once you have the list of assumptions, the next step is to order the assumptions from most risky to least.  In the example above, if they didn’t have an internet connection, filling out our forms would be really hard.

Next, do whatever you can to prove/disprove those assumptions.  Usually this involves interviewing a few prospective customers.  In the bankruptcy case, I put an ad on craigslist in the gigs area saying I was looking for people considering filing for personal bankruptcy and I’ve give them a $20 amazon gift certificate in exchange for up to 30 minutes of their time.  This worked, and I was easily able to interview a few people.  It turns out that if you’re really strapped for cash, the internet is the absolute last thing you give up because it’s your lifeline to the outside world.

One of the assumptions in my list turned out to be a deal breaker so I ultimately didn’t move forward with the business, but I saved myself a massive amount of time and money building the product that would have ultimate failed.