Why do entrepreneurs go into business? What purpose do you hope to achieve when you open up a shop and ask customers to come and patronise you? What exactly do you have that you think other people want? Most entrepreneurs open shop and find themselves under pressure to succeed despite the number of years they have been in business. Worse still, some open shop today and expect to make a profit kill in the first one year of operation; this is not only an unrealistic expectation but also one guaranteed to make you close shop faster than imagined.
Your work as an entrepreneur at the beginning is not to make a profit but to test your assumptions. What are some of the assumptions that exist?
- People want what you have and are willing to pay for it.
- There are enough people to make it profitable for me
Every organization has to pass through these 3 phases of success:
Paper Fit – this is the business plan stage where everything looks good on paper. The business plan is designed for success. Capital is introduced in the first year and more often than not, profit is also made in the first year.
Market fit – this is the test tube phase where the product is just introduced into the market. This phase can be deemed successful when those who promised to buy before the launch of the product actually put in money to buy.
Bank fit – this is the stage where the product is actually monetized but this is also where the challenge is. Where a start-up passes this stage, it can be said that the business has tested its assumptions and are working towards improvements and stabilization.
That people have a problem and you can see that problem and even have a solution does not mean that they actually want that problem solved. As a start-up, it is better to start lean and this implies:
- Never invest a lot of capital into the business within the first 1-2years. Let your business remain in the testing stage.
- Have a Board or partners that you can be accountable to; people who will advise and correct as you go on.
- Reinvent yourself – as you continually test your assumptions, don’t be afraid to make the necessary changes even if it means changing completely from that line of business.
- Never jump without a guard rope. Don’t venture into a business without a fallback – this could be contacts that may be necessary for those open doors you need.
Once your assumptions have been tested over time and proved as facts, that can become part of the organization’s value proposition or pillar.
What are some of your own assumptions when starting a business? How did they pan out over the years for you? What changes did you make along the way? What or who helped you make those decisions to change? Share with us in the comment section below.
Enjoy extraordinary week!