Any entrepreneur will tell you that, at some point in time, he or she questioned the validity of their idea. Doubt is a normal part of the process. But how far do you go with this idea if you don’t know if it’ll work? Yes, there are many successful entrepreneurs who will tell you to just go for it, no matter what. After all, you don’t know if a company will prosper if you never start it.
While these are good points, sometimes you find yourself in a position where that is unrealistic. You might not have enough capital to first create a business and find out later if it’ll work. Maybe you’ve even taken on some personal debt or you have dependents that you can’t let down. Whatever it is, sometimes you don’t feel that you can take the risk because failure would affect not just you, personally, but others. The stakes feel higher, especially if you have children or little finances—or both.
So, what can you do? Is your only option to swallow this doubt, cross your fingers, and hope it works out for the best with so much on the line? Luckily, no. There is another path you can take, but you may need to think creatively. Keep reading to discover what that is.
In a recent episode of the Making Bank podcast, guest Ethan Mollick offers up an unconventional solution. An award-winning Wharton professor at the University of Pennsylvania, Mollick spent years studying, researching, and teaching thousands of entrepreneurs and their habits. He shares with us the number one thing that separates successful founders from those who flop: experimentation.
What does Mollick mean by this? In the podcast, he delves into how entrepreneurs can actually test the legitimacy of their idea in increments. Just like in a science experiment, if you want to prove (or disprove) that your business is something people will buy into, you can start by offering it to a small group of people—a test group.
Mollick explains that this concept derives from a practice in Silicon Valley called “lean startup method.” What he means by this is that you “experiment with customers and products as a founder, and you’re not really going to start building anything until you find demand.” You can utilize test groups to discover not just if your idea will work, but what your customer demographic is, or what kinks in your process need to be smoothed out.
Now, you don’t need to follow this method exactly, but what it has proven is that “founders who really sit down and figure out ‘what do I not know about the world that I need to know […] for my businesses to succeed?’ And then ‘how do I test those things out in a coherent way before I leap?’ do much better.”
You may feel that experimenting is just a way to avoid starting your business. Maybe you feel like it distracts you from working those long, hard hours to get your company off the ground. However, Mollick iterates that “the idea of experimenting doesn’t mean you’re not hustling. You’re absolutely hustling […]you’re not just doing anything random.” In other words, you’re working hard, and you’re working smart.
Mollick uses the company Rent the Runway as an example of this successful testing. Founders and Harvard graduates Jennifer Hyman and Jennifer Fleiss didn’t know if people liked the idea of renting used clothes that you don’t have the opportunity to try on. They also didn’t know if people would return those clothes in an acceptable manner that would allow them to rent those clothes again. Mollick explains how they created experiments to test these questions. First, they went to colleges with racks of clothes women could rent. He recounts that the founders “saw how excited they were.” They then did the experiment at another college where they let women rent clothes without trying them on, and then again when they showed women photos of the dress. They were successful both times.
As Mollick explains: “They did careful experiments while they were also learning and building out their customer base.” He continues, “that’s sort of the process. Start with your assumptions, build a set of testable experiments and then find out whether you’re right or wrong.
This process was a good way to drum up interest and create a customer base, while still learning if their idea worked. This allowed them to adjust according to the response without having to tear down their business and start all over again, wasting time and money.
From Tests to Capital
This idea of experimentation not only saves you money but might generate it. Following the Rent the Runway story, Hyman and Fleiss decided to use footage from their experiments in their VC pitch. They were able to show how excited people were and how much interested they generated. That led them to receiving capital.
Now, doing experiments itself isn’t going to guarantee you will be founded, but it can show interest in your product or service, just as it did with Rent the Runway.
Say you have capital, you start your company and you’re beginning to grow. As you continue to expand as a business, Mollick encourages you to continue testing. With each new stage of your company, you need to be completing experiments to prove—or almost more importantly, disprove—your new ideas. As Mollick says, “There was powerful research that we have that’s really clear you need to be engaging in experiments. You need to know what you’re testing about your business at all times.”
What he means by that last phase—“at all times”—is that constant assessment can only improve you as an entrepreneur and your company. As the world around you changes, you must exam how your business holds up in that shifting environment. Especially in this current state, it’s more important now than ever to be consistently reflecting, testing, and adjusting.