Good ideas create impact. They provide value to people.

Once we’ve thought of an idea, we don’t need to convince ourselves it’s okay. Our egos will take care of that.

We need to find out whether other people think it’s good and if it will provide them value.

How do we do that? With evidence.

The first thing to do is define it. If we can articulate our concept and share it with other people, we can learn if it’s valuable.

If we get good feedback, we might be onto something.

If the response is meh, we are either talking to the wrong people, or our idea sucks.

In the science world, they call this hypothesis testing.

The definition of a hypothesis is “a supposition or proposed explanation made on the basis of limited evidence as a starting point for further investigation.”

Given most ideas are commercially driven. For this article, I will explain how to create a business hypothesis.

If your idea is not for profit or maybe not even for humans, you can still use this process as a starting point.

The Business Idea Framework

Broad strokes here, but most ‘business’ ideas revolve around ‘solving a problem for someone.’

So, a simple way to communicate new ideas is to articulate the three stakeholders of that sentence.

 •  Person
 •  Problem
 •  Solution 

Once we have an idea, we should think about who would find it valuable (who), why they would find it useful (problem), and how it provides that value (solution).

1. Person – Who’s the person we are solving the problem for?
2. Problem – What problem are we solving?
3. Solution – How will this solve that problem?

Using my first business venture as the case study, I’ll show you how this works.

Business Idea’s And Cherries

I grew up on an orchard.

During our family orchard’s early years, my Mum set up a roadside stall as an extra revenue stream.

It was slow going at first, but over time, demand for this fresh from the orchard fruit took off.

Over 15 or so years, the roadside stall progressed from an unmanned, honesty box operation generating $100 per day; to a retail operation with five staff turning over more than $10,000 a day at its peak.

Watching this happen gave me the inspiration for my first business idea.

I began to wonder if people without access to a nearby fruit stall would want to buy freshly picked fruit.

With my cousin’s help (he had the business nous), we thought we could create a business that provided people access to our orchard fruit without travelling.

We had an idea that we thought was good, but we needed some validation. (You can read our full case study on validating business ideas here)

Writing Your Business Idea Hypothesis

At the time, perhaps like yourself now, we didn’t know what to do next.

My Dad suggested we should find some potential customers and talk to them.

We needed to know whether people would be interested in and prepared to pay a premium for access to freshly picked fruit.

We had a rough idea of the business we wanted to create, but we needed to clearly articulate it and share it with people to get feedback.

The Person

First, we needed to know who our potential customers were—I.e., who would be interested in our idea.

We wanted to find people interested in buying freshly picked fruit. So, we reverse-engineered our idea to try and identify these people using basic demographics to qualify them.

1. Gender
2. Age
3. Location
4. Income

We guessed that Mum’s would be the most likely to purchase fruit in a household, so we targeted females.

We looked at the orchard fruit stall’s typical customers and estimated them to be, on average, 45 years of age.

We figured those living furthest from our orchard would be the most interested in what we had to offer. So we thought Auckland would be a good starting point.

Summer fruit is relatively expensive compared to other snacks and vegetables. So we thought those with medium to high incomes would be our most likely customers.

In summation, we arrived at “Mums living in Auckland in their mid 40’s with medium to high household incomes”.

The Problem

We face ‘problems’ every day. But only a few problems motivate us to find a solution.

We knew the fruit we could sell to people were better quality than supermarket stuff. But we weren’t sure if that was a problem people cared enough about to search for it and pay a premium.

We asked ourselves this question:

 •  What are the top 3 challenges our potential customer faces when completing their relevant job?

Adding context to this question, we came up with ‘What challenges are people facing when they want to buy good quality fruit?’

These are what we came up with.

1. They couldn’t afford them.
2. They couldn’t get access to them.
3. They didn’t know how to tell the difference between good quality and average or bad.

We didn’t think we could solve the affordability problem, but our idea did align with access and quality issues. So the problem we identified was “gaining access to guaranteed quality fresh fruit.”

This was all based on our assumptions.

Don’t overthink this exercise. Once you start talking to people, you’ll spot any gaps in your assumptions. 

THE SOLUTION

Finally, we wanted to know if our idea was the right solution for our potential customers’ problems.

Again we focused on simplicity here and used two questions to find a solution.

 •  What solution was going to excite our potential customers?
 •  Would they be willing to pay for it?

We thought ‘door to door’ delivery was a solution that would excite our potential customers (Ecom was relatively new in 2010), and we thought there was a good chance they would be willing to pay for it.

 •  Note our original idea was to provide people with access to freshly picked fruit. Thinking through this question, we were able to refine it to door to door delivery.

HYPOTHESIS

We combined these three elements Customer, Problem, Solution, to form our hypothesis.

 •  Customer = Mid 40’s, Mums living in Auckland with medium to high income
 •  Problem = Gaining access to quality fresh fruit.
 •  Solution = fresh fruit delivered to your doorstep.

“Mums are living in Auckland who wants access to freshly picked quality fruit and will pay a premium for us to deliver it to their doorstep.”

We kept our hypothesis simple and tried not to overcomplicate it. The aim here was to articulate our idea quickly so we could find potential customers and start talking to them to test our idea.