Assumptions are elements of your proposed business that you believe to be true, but have not yet proven. As Oscar Wilde said, “When you assume, you make an ass out of u and me.” In essence, assumptions are leaps of faith. They translate directly into risk, so the more assumptions you make, the riskier your startup. Examples include things like the number of visitors to your website that you expect will convert into paying users, a customer’s average lifetime value, the length of the sales cycle, or even more “obvious” things like your price point. When you first start, you will make (literally) hundreds of assumptions. The point of a feasibility study is to convert enough assumptions into facts to demonstrate that you have a viable business opportunity. Your risk tolerance will determine how many assumptions are “enough.”
When exploring any new business opportunity, enumerate as many assumptions as you can think of. Put the list in order, from highest risk to lowest. Then, start converting the make-or-break assumptions into facts as quickly as possible.
There will be assumptions that you can’t prove or disprove without launching, so learn as much as you can before launching. If you find that your assumptions are solid, keep moving forward. If not, don’t ignore the warning signs. The next best thing to succeeding is failing fast, which allows you to converse your time and capital for a business that will work.