Assumption #1 - The Problem
What is the need or problem that we are actually solving and is it big enough?
When I started 99Bitcoins, I aimed to solve one simple, laser-focused problem - how to buy Bitcoins with PayPal. That's it. This whole huge website that generates thousands of dollars in revenue every month started from a solution to one simple problem.
So my problem assumption was this:
I think people want to buy Bitcoins with PayPal and don't know how.
If for example you think about building a mining tutorial website, your problem assumption may be:
I think people don't know how to mine Bitcoins and are looking for guidance.
If I were opening a Bitcoin gambling website my problem assumption would be:
I think people are looking to gamble with Bitcoin.
This may seem quite simple but it's a crucial step in crafting your Bitcoin business since so many people are building products that no one actually needs.
So take a look at each of your three Bitcoin business ideas and write down next to each one of them your problem assumption for this simple question:
Why do you think people need this product?
Take your time and think this through, don't rush it. Think about what is the core reason people should use your product. For example, before I started writing this book my hypothesis wasn't, "I think people want to buy an eBook about Bitcoin," but rather, "I think people are looking for ways to make money with Bitcoin online."
Once you're finished come back and we'll continue.
Done? Great!
Now that you have your problem assumption crafted, we're going to see if we can prove it in theory. Remember, before we start to build anything we want to be able to prove in theory if our assumption is correct. After this step we will need to decide if we have a "go" or "no-go" and continue to the next assumption or pivot to a different idea.
We are not taking action just yet, we want to be as lazy as possible before we're certain we need to actually build something.
Assumption validation tool #1 - Google Keyword Planner tool
Remember that neat tool from Part I? Well we're going to use it again. Just go into Keyword Planner and type in the keyword you think people will look for when searching for your product. For example, if you think about building a Bitcoin mining software. Type in "Bitcoin mining software" and click "get ideas". Make sure to click on the "keyword idea" tab and then locate your KW's search volume on the right.
As a rule of thumb I consider anything with more than 1,000 monthly searches to count as a "big enough problem". So in this case I consider this business idea to be valid in theory since it has 5,400 searches each month. There's still a long way to go to prove that I can actually pull it off but at least it pasted the initial test.
You'll notice that the more specific your KW is, the less search volume it has. Don't be discouraged by that. Sometimes the same idea has many KWs to describe it. For example, if I were to build a Bitcoin mining rig information site, I would look for several KWs including, "Bitcoin mining rig reviews", "Bitcoin mining rig comparison", "Best Bitcoin mining rig" and so on. These KWs may not surpass 1000 searches individually but combined together they may just pass this test.
If you still can't seem to pass the 1,000 mark, perhaps the problem you are solving isn't big enough. This still doesn't eliminate the idea completely. Move to other validation tools to try and validate it.
Assumption validation tool #2 - Google autocomplete
A less quantitative tool you can use to validate if your idea solves an actual need is to see if Google autocompletes it in its search box. Sometimes even when an idea has a low search volume Google will autocomplete it. This is a good indication that this need/idea is being search for. If you try to autocomplete it and nothing comes up either try a variation of the idea or make peace with the fact that there's just no actual need for it.
Let's try to test out an idea for building a Bitcoin scam site. This is a site that reviews all of the latest Bitcoin sites.
Google autocompletes my idea only after adding "sc" and even then it's at #2 and not #1. This means that people are actively looking for this but not as much as you'd think.
The lower the idea shows up in the autocomplete list the less it is searched for. So if your ideas shows up at #4 or #5 of the autocomplete list you should take them with a grain of salt as opposed to if they were shown in the #1 spot.
Also the more words you need to type into Google to get your idea to show, the less it is searched for. I consider to Google autocomplete feature to be one of the most important validators online. If something won't show up in autocomplete, it's a major red light for me.
Assumption validation tool #3 - Checking for competition
Another great way to see if there's a need for your idea is to check for existing competition. People tend to think that competition is bad but the opposite is correct - the lack of competition is what you should be afraid of. The chance that you thought of an idea that no human being on earth thought about as well is slim to none. Meaning if you don't find ANY competition to your idea it probably means that there's no money to be made from it.
The ideal situation is to find some, but not a lot of competition.
Check Google's organic and sponsored results - Do a quick search on Google either for the problem you are solving or for the solution you are offering and take a look at the organic results that come up (not the ads). But since Google results tend to vary according to location, I'm going to show you a neat way you can check for results in a country other than the one you're located in.
There's a great tool by Google called the Ad Preview Tool. Again you're going to need a Google Adwords account to use it but you should already have one by now if you've been doing your Keep in mind that none of the links in this preview are clickable but it still will show the results. If you want to investigate a specific result just go ahead and type its name in your own Google search. Above is an example for the query "Buy Bitcoins" in Spanish search from Google Spain.
Assumption validation tool #4 - Checking forums (Reddit, FB, Google+)
There are many UGC (User Generated Content) websites for Bitcoin which hold tons of information. The most popular ones are BitcoinTalk, the SubReddit Bitcoin, Google +'s Bitcoin community and Facebook's Bitcoin community.
Visit these sites and ask around. You don't even have to say you're thinking of starting a business you can just say you're looking for a service that does XXXXX and if anybody knows of such a service.
But wait! This way they will be able to steal my idea!!
If only I had a dollar each time I heard this sentence. The quality of an idea doesn't lie in the idea itself but rather in its execution. Most people won't waste the time or the effort to try and steal your idea and even if they do you better make sure you execute it better, because if you don't a competitor will come along eventually.
The value you'll get from sharing your idea with the community and other people is much more valuable than the risk you take by sharing your idea, even with strangers.
Assumption validation tool #5 - Check marketplaces
If you're creating some sort of a product, whether it's an information product or any other Bitcoin related physical product check out different marketplaces like Amazon, eBay or Etsy. For example, before I started writing this book I looked for other books on Amazon and Clickbank (a marketplace for digital products) related to Bitcoin.
Reading reviews of similar products like this eBook already gave me amazing feedback on my idea before I even wrote the first word. I also saw that there is competition for my book but that it's not fierce, which is awesome since that's exactly the spot I'm looking for.
Chapter 5.1: Assumption #2 - The Solution + Goal
Once you're done with your problem assumption, it's time to move on to the solution assumption. In this step you'll need to assume what solution can help solve the need you validated in the first step and what outcome will happen as a result of that solution.
Going back to 99Bitcoins' example my proven problem assumption was:
People are looking for ways to buy Bitcoins with PayPal.
My new unproven solution and goal assumption was:
A written guide that reveals a way to buy Bitcoins with PayPal will get 2% of its readers to actually buy Bitcoins using this method.
Notice that my solution assumption consisted of two parts - the solution and a goal. For example, in my solution assumption I chose to write a written guide. I could have also chosen to do a video guide or a podcast. Why did I go with a written guide? Because it was the easiest solution to perform. Remember we want to be lazy.
The goal was that people will sign up to the Bitcoin exchange I recommend in the guide. Why do you need a goal? Well in order to prove a solution hypothesis we're going to actually build an MVP and measure the outcome. If we succeed in achieving our outcome goal then the solution is a "go". If we fail it's a "no-go".
Notice you need to be VERY precise about the goal. For example, I described my outcome as 2% of all readers will buy Bitcoins using my method. In Chapter 6 I'll show you exactly how to measure sign-ups but for now just craft your outcome.
Why did I choose 2% as my goal?
Well according to rules of thumb, anything you try to sell online will end up having a 2% conversion rate. Meaning if you try to get people to buy Bitcoins - 2% will actually buy them. If you're not trying to sell anything but rather just trying to get people to enter some information, like subscribe to an email list, the benchmark will be 10%. There's no underlying logic - it's just a rule of thumb.
So you can either use these rules of thumb as you goals or come up with your own goal based on your personal experience. Just make sure to be very measurable in your outcome's definition. Something like "Getting people to sign up" won't cut it.
Going back to some examples from the first part, if you think about building a mining tutorial website your problem assumption may be:
I think people don't know how to mine Bitcoins and are looking for guidance.
My solution and goal assumption could be:
If I hand out a PDF guide about mining Bitcoins to my blog subscribers, 10% will sign up to get it.
And finally If I were opening a Bitcoin gambling website my problem assumption would be:
I think people are looking to gamble with Bitcoin.
And my solution and outcome assumption could be:
If I open a Bitcoin casino, 2% of the visitors will end up gambling.
These are all just examples, and there are a million different assumptions I could make. For now I just want you to craft only one problem assumption and one solution and outcome assumption.
Define your exact idea for a “successful goal”
Success should be defined as a single, quantifiable event. So here are some good ideas for what you may consider a success:
- Get 2% of the visitors to a page to buy a product
- Get 10% of the visitors to a page to sign up for a newsletter
- Get X% of people who visit a page to share it on Facebook
- Get X% of people who visit a page to leave a comment
Here are some bad definitions for success:
Get 50 signup in 5 days
There is no relevance to time when measuring success online. I don't know how many people went through your website in that amount of time. Was it 10 people, a 100 people, maybe a 1000? That's why it's always best to measure success as a percentage of visitors.
Get enough people to buy my product
This definition isn't quantifiable and I can't measure it. What does it mean that enough people buy my product? How many people is enough?
So take a look at each of your three Bitcoin business ideas and write down next to each one of them your solution and goal assumption. What solution will solve the need you described in your problem assumption. What will solve this look like? Will it get people to sign up to your product? to buy it? to follow through on an affiliate offer you have?
Make sure to be very specific in both your solution type and goal. Will it be a website, an app, a physical product ? What is the percent of people which will perform your outcome out of all of the users?
Once you're finished come back and we'll continue.
Done? Great!
Unlike the problem assumption, we have to test the solution and outcome assumption in practice. Just asking people if they would follow through on our solution won't cut it - we need to watch them in action. Here is where our MVP will come in to play, but before we actually build our MVP there's one more assumption we should talk about.
Chapter 5.2: Assumption #3 - How will you Make Money? (optional)
The final assumption deals with the business model of your business, or how will you make money from your solution. It's important to state that while this assumption is pretty important it can also be skipped at this point and thought about later. Google didn't have a clear business model in the first few years, same thing with Facebook.
Having said that, I honestly believe that if you want to start a business you should at least have an idea of how you're going to make money in the future, even if you are not planning to implement this process today. There are several ways today you can make money online.
Sell a product
Pretty simple. Charge a onetime fee for your product.
Sell a subscription
Charge a recurring fee on a timely basis (month, week, year). This works better for a service than for a product.
Create a freemium
Create a product, give it away for free in a limited version and charge either a onetime fee or a subscription for additional features. A good example of a freemium would be Wix. They let you set up a website for free but with limited features. You can then pay to get additional features available.
Refer to an affiliate offer
This is very common if you're creating an information product or website. Just refer readers to an affiliate offer and get the commission for the sales you bring in.
Ask for donations
Always an option, although I personally don't like it.
The "how will I make money" assumption, or business model assumption in short, is closely related to the outcome assumption we talked about before. Since the outcome will usually predict if you'll make money and how much money you'll make.
Again, let's visit our 99Bitcoins' example.
My proven problem assumption was:
People are looking for ways to buy Bitcoins with PayPal.
My still unproven solution and outcome assumption was:
A written guide that reveals a way to buy Bitcoins with PayPal will get 2% of its readers to actually buy Bitcoins using this method.
And my final business model assumption was:
A will make money through affiliate commissions from the exchanges I recommend.
In this case you can see that once I prove my solution and outcome I'll also prove my business model assumption since they are basically the same. If people buy from the exchange I refer them to I also get my affiliate commission. On the other hand going back to our mining blog:
The problem assumption was:
I think people don't know how to mine Bitcoins and are looking for guidance.
The solution and goal assumption were:
If I hand out a PDF guide about mining Bitcoins to my blog subscribers, 10% will sign up to get it.
And now I need to come with a business model assumption which can be:
I will sell second hand mining rigs to my email subscribers and 2% will buy them.
So in this case the solution and outcome assumptions are still related to the business model, since I won't have any audience to sell to if people won't sign up for my list, but they are not the same.
You'll notice that I also try to be very precise in my business model assumption. I want to give an actual number of sales I can make a month. This is important since what you don't define you won't track, and what you don't track you can't optimize and improve.
The business model assumption is also something that can't be tested out in theory but has to be actually put to practice through the MVP, and that's exactly what we'll cover in the next chapter. But before that, don't think I forgot....
Homework: Validate Each of Your Assumptions
Now that you know how to create your three assumptions I want you to do the following:
- Create one need assumption for each business idea you have.
- Once created go ahead and validate it using at least three different tools. Don't just count on one tool to give you a straight answer.
- Decide for each idea if it's a "go" or "no-go" to the next stage which will be testing your assumption through lean execution (explained in the next chapter).
- For each "go" idea create a solution and outcome assumption. Be as precise as you can with both solution and outcome. I want to see numbers on those assumptions.
- Create a business model assumption for each "go" idea. Even if you're not planning on implementing it from the get-go I want you to think about how you can make money from this idea. Again, be as detailed and as quantifiable as possible.
