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Step 1: Define your business hypothesis

5 XP

Phase 1: Preliminary Research · Step 1 of 13

Before researching anything you need a clear written statement of what you are building and for whom. This is your starting point for everything that follows.

Article​

Every successful business begins with a hypothesis, not a product. A hypothesis is a testable statement about who has a problem, what that problem costs them, and why your proposed solution is better than what they do today. Without one you are not building a business. You are buying a lottery ticket.

Most founders skip this step because they confuse excitement with clarity. They can describe their idea in a pitch but not in a falsifiable statement. The difference matters. A pitch is designed to persuade. A hypothesis is designed to be proven wrong. You want the latter because finding out you are wrong at this stage costs you an afternoon. Finding out you are wrong after building costs you months or years.

The exercise here is simple but demanding. You will answer five questions: Who is your customer? What specific problem do they have? What are you proposing to do about it? Why would they pay for it? And what single assumption must be true for this to work? Each answer should be one to two sentences in plain language.

If you cannot answer these questions clearly, that is useful information. It means you need to think more before you research more. Research without a hypothesis is just browsing. Research with a hypothesis is an investigation. You want an investigation.

Your output is a single paragraph that synthesizes these five answers into a coherent statement. This paragraph will be the input for every subsequent step in the process. Get it right and everything downstream becomes sharper. Get it vague and everything downstream inherits that vagueness.

Key Takeaways​

  • Why: Without a clear hypothesis your research has no direction.
  • What: Answer five questions about your business in writing.
  • Output: A one-paragraph business hypothesis statement.

AI Prompt​

Act as a business strategy consultant. I am going to describe a business idea to you. Your job is to help me articulate it as a clear, testable hypothesis.

Here is my idea: [DESCRIBE YOUR BUSINESS IDEA IN YOUR OWN WORDS]

Please produce a structured hypothesis with the following components:
1. The customer: Who specifically has this problem?
2. The problem: What specific problem are they experiencing?
3. The solution: What am I proposing to do about it?
4. The value: Why would this customer pay for this solution?
5. The assumption: What is the single most important thing that must be true for this to work?

Keep each component to one to two sentences. Use plain language. Do not use business jargon. If my idea is unclear ask me one clarifying question before proceeding.