Wouldn’t it be great to know if your business idea was going to work before you dripped a single drop of sweat into it?
Wouldn’t it be neat if there was a way to test business ideas in their early stages in such a way that you knew with absolute certainty that all the hard work in front of you was gonna be worth it?
That would be really helpful, right?
Here’s the thing:
There kind of is!
It isn’t a future-sight tool that prophecies a business’ success or failure, and it isn’t a business structure that you can scaffold around any idea to guarantee its profitability and longevity.
The answer is actually much simpler.
It is a methodology of running many short business experiments that systematically uncover the right paths sooner, with less pain, and having spent less money.
The execution of this simple idea, on the other hand, may not be as simple. Being a ruthless scientist about my passion project can feel cold. After all, I’m giving birth to something–It’s hard not to care about it.
On the other hand, it’s much worse to be negligent about the development of my child.
So, if I must cage my “idea-babies” in a “worth-vetting” framework, it help if:
a.) The framework and its parts feel somewhat human.
b.) I understand precisely why I’m doing this.
This article will explain why tests are so important, describe the vital components of a controlled business experiment, and show how to run these experiments fast so you can speed through testing and get to MVI (minimum viable income) as soon as humanly possible!!!
We recorded a podcast about this too!
Listen to the episode:
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Why Are Business Experiments & Tests So Important?
Earlier I mentioned that tests “help uncover the right path sooner, with less pain, and having spent less money”. This cannot be understated! As entrepreneurs, each of these three are precious resources. To illustrate:
- Time: For me, finding success is always a race against some clock. If I don’t take off the runway and soar soon enough, my idea gets stuck on the tarmac…sometimes forever.
- Pain: This is the first clock. Entrepreneurs have a higher tolerance for failure and hard work than most, but we all have our limits. If I hit that limit before finding the success formula, I stop. Maybe my idea lives to fight another day, maybe not…
- Money: It takes it to make it. Money is literally the fuel for the metaphorical vehicle I’m trying to get airborne. If I run out, I stop. Also, if I’ve got a separate engine that’s creating fuel while I’m burning it (i.e. a day job), I’m still at risk. I must be sure the fuel is burning no faster than I’m creating it…otherwise (again)…I’ll run out of runway.
I can feel a couple eye rolls here: “Get on with it! Fuel is obviously a must. I know if I don’t have it I stop. Duh duh DUH!!!”
Hmmm…but mayhaps not so duh…
Passion, excitement and ambition often take the wheel without notice. Fundamentals and simplicity fly out the window. All of a sudden the end of the runway is in sight, I’m nowhere near take-off velocity, and it’s too late to put on the brakes.
We all must re-establish a respect for the basics if we are serious about building a business.
The stakes are real, the pain is real, but so is the triumph!
- We’re trying to build a business
- We want to do so responsibly
- Avoid unnecessary pain
- Avoid unnecessary costs
- Vet our ideas FAST
If the odds of hitting a home-run are low, and the chances of failure are high, let’s speed this process up in a painless way eh?!
Let’s run some business experiments!
The Anatomy of a Business Experiment
The value of an experiment is not measured in successful results. An experiment is valuable simply if it has results!
But, these results must have data integrity. This just means I can trust the quality of the data. To help make sure my results have data integrity my business experiments should include some important components. I’ve personified these components and assigned them body parts. This is partly to help you remember, partly to keep this cold data-driven process warm and human…
… and partly because it was a cute metaphor and a fun exercise. Sue me 😉
Your experiment “body” should be made up of the following five parts:
The “guts” is my hypothesis. The first step in any business experiment is to make a guess or prediction about some result. Guessing or predicting is usually associated with intuition. And intuition is usually associated with the gut.
Here are some examples of what a hypothesis or guess could look like:
- Predicting the effectiveness of a sales pitch.
- A prediction about where my ideal customers are located.
- A guess about a business structure–product vs. service for example.
- Theorizing about a secret teeny tiny industry niche.
- A suspicion about a product add-on working better than a new product.
- Testing the viability of creating a book from a blog
It can be a guess or prediction about anything!
The overall scope and timeline of a business experiment is heavily influenced by its hypothesis. So, the smaller-scoped the hypothesis (the guess), the faster the experiments will cycle through. The faster my results come in and reveal conclusions, the faster I can iterate and make a new guess based off those conclusions.
Once I have finished testing many small guesses, I can cherry pick the successful ones and stitch them together.
This delivers a decent degree of certainty about the success of my overall business! Each individual idea-brick in my business-building has been found structurally sound. I can now build with confidence!
My guesses sometimes lean heavily on my gut and intuition. However, the more data and research I can back up my guess with the better. Maybe I don’t need to guess at all. Maybe the answer (or half of it) is already out here! Has anyone tried testing this specific guess before? What kind of success did they have? What did they learn?
Standing on the shoulders of giants when I make my guess ensures I don’t accidentally exhaust myself reinventing the wheel…which I have absolutely done before :-/
Before I launch into testing my guess, it’s good to have some guidelines and boundaries.
It’s good to have some structure. I call these the “bones”.
Here are some business experiment structure examples:
- How long should I run this business experiment?
- What’s the max money (if any) I should allocate?
- What will “success” look like?
- What will “failure” look like?
Pretty basic stuff. I have disregarded this step before some of my business experiments in the past…
…I usually wake up in six months, having spent a mountain of cash, wondering feebly “Should I keep going, or should I pull the plug?”
There are few worse places to be as an entrepreneur!
Unless I erect a simple skeleton.
Use the bullets from above. Add more if you like. Whatever you do, build some bones.
Now that I’ve gotten everything all nice and neat, it’s time to introduce the “variables”. I have decided that the “heart” best personifies these “variables” because as entrepreneurs, our other “loves” tend to be the most common distractions. These are the sources of the most curveballs.
(This particular metaphor is a bit of a stretch. Bear with the comparison)
Here are some examples of passionate distractions (and complete departures):
- A product idea…in the middle of a time-sensitive service-selling experiment.
- I stumble upon a great design style when building a short landing page…and want to rebuild my entire website from the ground up.
- The shape of a book begins to appear…during a sharply strategized, 90-day content schedule.
- I begin entertaining a formal partnership…with a prospect I was about to sell.
- Or simply, “Hey! That person’s business over there looks cool! Let’s scrap all of THIS and just do THAT!”
There are few things more wonderful than being surprised by a new passion. Inspiration can strike like lightning and I am already sprinting towards the new, shiny, glorious idea.
Sprinting away from…wait, what was I working on again?
Oh ya, my current business…that I’ve committed countless hours and dollars to already!
I’m not prescribing distraction elimination, but rather distraction preparation. Isn’t the point of having a heart to embrace passion? But what if a passion presents itself when you have other plans?
Do not be so calculated that you obliterate all curiosity. Do not strive to eliminate distraction. Instead, plan for it.
The beauty of planning for detours, distractions, and delays, is that it disempowers them. If I know obstacles are likely to get in the way, then I can build them into the plan right from the start. This is the same as bringing an umbrella when the forecast is iffy. I do the prep work at the beginning so when it rains, I’m covered
The only downside to these things is when they block my previously planned path. The easiest way to make sure they don’t get in the way, is to make way for them.
Plan for the variables. Account for them.
When they present themselves (not “if”), I can entertain my curiosities within boundaries without risk of derailing the whole train.
Remember the rigidity of the “bones”? It is the hands that maintain this stability during the experiment. The “hands” are meant to control the “control groups” set out during the experiment’s structure. To hold the boundaries firmly.
Service Sales Business Experiment Example:
- Hypothesis: I will run a sales growth test predicting that I will land one client from every conference I attend.
- Time: I will allow 3 months, beginning my experiment in July and ending it in October 2019 on month after the conference.
- Expense: I have allocated $3000 for travel and lodging.
- Success: I project that each client will gross $5000, netting $4000. I have also decided that “breaking even = success”, and that warrants another go.
- Failure: I gross any less than $3000, resulting in lost funds.
Here’s a nifty log sheet for setting up and running your own business experiment. Remember, POWER lies in SIMPLICITY!
In this example, the hands serve to control the time span, the expense allocation, and holding fast to my original definitions of success and failure. This is very very important! How often have you let out just a bit more slack, or allowed a bit more time, or thrown a bit more money in…and then a bit more….and then a bit more?
Set down guidelines. Then, stick to them!
It’s the easiest thing in the world to give in to the “sunk cost fallacy” and throw good money/time/sweat/tears after bad. Additional resources do not make a conclusively bad idea good. EVER!!!
Be objective. I must trust my past self. Past Aiden didn’t have his emotions on the line as I (the fearful, current-moment Aiden) does now, halfway through the business experiment. Past Aiden made his plans in a calm and calculated environment. The whole purpose of his planning was so I could summon a calmness, coolness, and connectedness when I need it most.
That time is now. Don’t waver. He had it right at the beginning.
Or maybe past Aiden didn’t have it right at the beginning 😉
Now, and only now, is the time to question the original hypothesis.
Because now, and only now, do I have a trustworthy and objective collection of data from which I can draw a trustworthy and objective conclusion!
This is the head. The reviewer of the full system. The final judge.
It’s hard enough keep the controls pinned down, let alone try to re-hypothesize and alter course while the business experiment is underway. The heart is almost always going to win that battle, perpetually devoted to those pesky variables.
Do your best to postpone decisions until the experiment is over and everything is calm.
It’s no easy task, but always worth striving for. In this way I can leverage the best of the head and the heart.I must use my head to plan for and orchestrate times where the heart may frolic. During these “frolicy” times, do not let the head influence the curiosity and ruin the fun.
But when the experiment is over, I must consult both.
When guessing and projecting at the beginning of an experiment, it is useful to consider how I want your success to feel as well as look. When reflecting upon a completed experiment, consulting the heart through the lens of the head will reveal how close to that target feeling I landed.
The last thing I do is review the entirety of the business experiment. I usually conduct a full postmortem, but here are some quickie questions too:
- What went well?
- What didn’t?
- Is it clear why?
- How could we do things differently?
- Should I try it again at all?
Feel like running a deeper postmortem? We’ve got you covered!
Embrace the objectivity of the answers to these questions. Consider the heart-string these questions tug at. Write it all down, date it, and file it! This is stuff you need to keep close by and easily accessible.
This information should always be fresh in mind when new ideas pop into existence…lest they accidentally find themselves on the launchpad with your life-savings and psychological well-being in the cargo hold.
Now It’s Your Turn to Run a Business Experiment!
Alright! You made it! You are officially a business scientist…spoiler: you always were 😉
Now it’s your turn to conceive of, build out, and run your own business experiment.
To get you going, here are 7 things you could run experiments on:
- Can my audience pay for my product/service? Will they?
- Where might there be additional low-hanging-sales-fruit?
- Is my topic really resonating with my audience?
- Could a temporary partnership with a competitor benefit both businesses long term?
- Is there a social platform that might be better for my topic or audience?
- Could doing less still pay the bills, but feel better?
- Could doing more non-money-focused work actually inspire or drive my money engine?
Don’t forget to grab the free log sheet! Practice fleshing our some of these ideas above, then run your own.
The Next Right Thing
- There is a process you can use to predict your business’ success.
- It’s not cold and it allows plenty of room for curiosity and creativity.
- This process is designed to minimize time, money, and pain.
- This process is designed to maximize the repeatability of success, when you find it.
- These business experiments can be iterated upon and repeated…and iterated up on and repeated.
Run an experiment. Learn. Iterate. Run another. Learn more. Iterate again.
Each business experiment loop will shed a bit more light on the larger strategy. Build upon each successful measure and discard the flunkers. Eventually your business will be flood-lit with proven approaches.
And then you’ll know exactly which stack o’ sticks to pour the gasoline on.
All that’s left is to light a match 😉