Without them, your business will be like a ship without a sail, just sort of drifting aimlessly until it inevitably fails.
Assumptions are normal. We all make them. But the wrong ones may have consequences. In business, assumptions are also made. Today we will explore more in-depth into these “Assumptions” or as they should be called, “The Critical Assumptions.”
A brief and concise explanation of Critical Assumptions.
There are Critical Assumptions that determine whether a business is successful or not. Critical assumptions are facts or characteristics that must be true in the real world for your offering to be successful.
These assumptions are often based on a customer need, an industry trend, or a technological capability. It is important to verify these assumptions before moving forward with a business plan or strategy.
For instance, a company might assume that customers prefer a product with certain features, but further research may show that customers are actually looking for something different.
More details:
Let me explain using an example.
Let’s say you are a beginner to business and you want to start a business of your own. You’re looking around the town you live in. As you write down ideas on what business you could start, you notice something. There are no restaurants near the residential area. Actually, the nearest restaurant was a local dhaba 5 kilometers away.
These are the assumptions you make. This means that residents had to travel long distances to get a restaurant meal, making going out to eat an occasional treat, rather than a regular occurrence.
- You assume people will actually come to your restaurant and eat and that there is a market for it.
- You are willing to bet that at least 150 people will come to your restaurant every day and spend at least ₹300. (Doing some math you calculate that thats ₹45,000 per day. So one month will be approximately ₹13,50,000)
Let’s say all of these assumptions are false. What will happen?
- Almost no one will come to your restaurant as you thought people wanted a restaurant but didn’t.
- Because of your first assumption being false, your second failed as well earning you less or no money than expected.
As a result, your business has failed. So that is why you should shadow test your business using a minimum viable offer. We’ll get to that in the next blog. (Stay tuned)