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1. HOW CAN
ENTREPRENEURSTEST
THEUNDERL
YING
ASSUMPTIONSOF
THEIR VENTURES
.

2. 01 Saves Time
02 Saves Money
03 Corrections Can Be
Made Early
WHYis this important ?

3. In the words of J ON FJ ELD
" Failure alone does not teach. If there are an infinite
number of bad ideas, eliminating one get us no closer
to a good idea."

4. THEPROCEDURETO TEST
Step 1
:Identify the assumptions
Asses factors that have to be true for the venture to succeed
Split large assumptions to manageable ones
Ensure that the assumptions are at a level of details allowing
testing

5. THEPROCEDURETO TEST
Step 2: Determining a sequence for testing assumptions
Prioritize assumptions based on three factors
1.Severity
2.Probability
3.Cost of resolution

6. 1
. Severity
Severity is the amount of damage or harm that an assumption could create
on the enterprise, if not true
If everything else is equal
and
severity of assumption A>severity of assumption B
then
test Abefore B

7. 2.Probability
Assumption that have a lower probability of being true should be tested first.
If everything else is equal
and
probability of assumptionA <probability of assumption B
then
test Abefore B

8. 3. Cost of resolution
Asses what evidence is needed for resolution and find simplest, lowest-cost
way of gathering that evidence.
If everything else is equal
and
Cost of resolving assumptionA <Cost of resolving assumption B
then
test Abefore B

10. DESIRED RATIO=
Severity * Probability assumption is false
Cost of resolution
This ratio creates a ranking of assumptions
Highest-risk, fastest / cheapest-to - resolve
assumptions are ranked first