Posted May 5th, 2012 by Nathan Furr with No Comments
In a recent post, I talked about how pivoting can kill you. Pivoting is a popular term for a fundamental entrepreneurial process—it describes how entrepreneurs change quickly when they find out they are wrong. The point of the post was that while pivoting is a fundamental part of your search for an opportunity, sometimes entrepreneurs make so many tiny pivots that they forget the big changes that could lead to a bigger opportunity. This post is part of a series on basic processes followed by the “new entrepreneur” and the hidden traps that sometimes snare entrepreneurs. Let’s continue the theme. First I’ll share the basics of the new entrepreneur. Then I’ll share the trap I see entrepreneurs fall into.
The Basics of Testing Your Ideas
As an entrepreneur, you have to start by recognizing that whatever you believe is just a guess. Not the actual facts. If you had the facts, you could move forward with more confidence and radically increase your chances of success. So let’s start by turning your guesses into facts. How do you do this? Identify your guess (let’s call it a hypothesis) and design a simple, inexpensive, rapid test to see if your guess has any merit. How do entrepreneurs in the field do this? Develop a virtual prototype and test it with customers. For example, software entrepreneurs create a “mock-up” of the software on paper or in PowerPoint. Product entrepreneurs create a “mock-up” out of clay, plastic, or parts from Home Depot. If you are really early in the process, don’t even waste your time with a prototype, just start talking to customers.
How to Save Yourself $100,000 or More
Unless you have been in the industry you are targeting for 15-20 years, I guarantee you will find out two things. First, that your guess was wrong. Second, after you find out that you are wrong you will discover how you could change and turn your guess into something customers will want. In other words, you will find out that despite your utter confidence in your idea, it was just a guess, but now you have some facts you can act on! Finding this out early can save you $100,000 or more. Finding it out late can cost you success.
While this process sounds simple and works astounding well. There are two fundamental fears that stop entrepreneurs from actually following the basics. First, finding out you are wrong. It is hard, very hard, to have the courage to get in front of customers and find out you are wrong. But unless you never plan to launch your business, you will have to do it one day. You can either do it now or later but waiting till later will kill your chances of success. Second, entrepreneurs are scared their crappy products and ideas will ruin their chances to win customers. In fact this fear has some grounding in reality. It would ruin your chance if you are going after the entire customer base at once. Herein lays the trap.
The Hidden Trap: Going After too Many Customers
Entrepreneurs are driven, almost by nature, to go after as many customers as possible, as soon as possible. But when you are testing your ideas, you have to remember it is a TEST. You don’t test your ideas on the whole world, you choose a small sample, learn from the test, make changes, and test again. Even after teaching students for a whole semester, and emphasizing that you test your ideas on a small group, I still have students say things like “test your ideas with as many customers as possible.” Nope. Test your ideas with a sample of customers, pivot, then retest, until you have the facts. Don’t go after too many customers at once.
Originally posted on 4/26/2012 by Nathan Furr on the Forbes blog
Tags Entrepreneur Scaling
Written by Nathan Furr