© 2022

Value hypothesis v Growth hypothesis: how to approach a business idea scientifically

In my last post I resolved to use the techniques described in The Lean Startup as a way of directing my focus and evaluating my ideas. In fact, “evaluating my ideas” is the sum of what I need to be doing, all of the time. Ideas for products should be expressed as testable hypotheses, and then tested. “Progress” is how many of these hypotheses I’m testing, and how effectively.

To that end, I present a discussion of idea #5, the “HR Tool For Restaurant Managers” in this manner.

This idea came out of a chat with my friend Mark, who, funnily enough, is a restaurant manager. Let’s be honest here, it was his idea, and he was nice enough to share it with me. Cheers, Mark 😎.

As mentioned previously, it’s an industry where hiring is hard and staff turnover is high; on-boarding a new team member involves them completing a series of stages or milestones, with management signing each of them off. Some of these milestones will be statutory requirements such as Completed Level 2 Food Safety Training (which anyone who handles food at work is obliged by UK law to complete), some are restaurant- or even site-specific, such as Watched our video about using the POS or Had the chat about uniform and signed the form to say they understood.

When you consider that each “role” on the team (e.g. server, front-of-house, head chef, etc) will have a different set of required milestones, that these requirements may change over time, and that a busy restaurant may have tens of people in each role (many of whom at any given point are new) it’s easy to see that keeping track of all this manually could quickly turn into a quagmire of paper, folders, post-its and to-do lists.

Value Hypothesis

At its simplest the value hypothesis is:

“There as a problem [as described above] and I/we can build a solution”.

To expand on this a little:

“Restaurant managers spend considerable time and effort keeping track of the various onboarding milestones relating to the new members of their frequently-changing staff teams. A SaaS could be devised which would reduce this time and effort to the extent that managers would pay a monthly subscription fee.”

It occurs to me that even if managers are not prepared to pay a monthly sub, there is still a way of monetising this idea:

“… A free-to-use SaaS could be devised which would reduce this time and effort to the extent that a significant number of users signed up. This user-base could in future be monetised via targeted advertising (presumably by staff training suppliers).”

And there is always the option of a hybrid solution with some combination of freemium with paid & ad-free tiered membership.

The point is, that there is a problem here and one to which a solution is not impossible to imagine.

So how could this hypothesis be put to the test?

  • Maybe the biggest competitor is not a competing SaaS but Google Docs (or similar) and – worst case scenario – it turns out for some reason to be impossible to make something that’s enough of an improvement on this to attract many users. This I doubt but I’ve included it for the sake of completeness.
  • I have, so far, only spoken to the one restaurant manager (Mark). Maybe, for some reason I can’t see, this is not a universal problem. To find out I should speak to more managers from a range of restaurant types and gauge the extent of the problem.
  • We know of an existing product called “Flow Hospitality Training” (Google it: I’d rather they didn’t see lots of bunch of referrer: tomfallowfield.com in their traffic logs right now 🕵️). This does seem at first glance to be a large product, possibly loaded with features which not everyone needs and possibly quite expensive. I should find out the cost and feature scope of this product.
  • Maybe there are more “competitor” products I haven’t spotted, I should have an exhaustive search.

Growth Hypothesis

The growth hypothesis depends largely on whether we choose to pursue a subscription based SaaS model or a free-to-use, ad-supported model (or some combination of the two), but either way, the following growth hypothesis should be tested:

“There are a great many restaurant businesses in the UK and in fact everywhere. These are often small, independent businesses, and as such are fairly accessible to a sales operation. Staff turnover is generally high (I don’t know the numbers, I should find out): if somehow the product could be made to travel with staff members as they changed employer – “check out my training profile at the following link” – some fairly low-effort growth could be achieved.”

Specifically if the product were free to use:

“Offering a thing of value (see above) at zero cost is easy to do. Once the correct features were built we would be able to sign up many free users fairly quickly; after a threshold was met, suppliers of training (and related services) would pay to display ads to restaurant managers. Information about which courses were needed, and even about exactly when specific certificates were due for renewal, would be very useful to advertising clients.”

If the product were subscription-based SaaS:

“As a paid service, growth could be achieved by using some (to-be-tested) combination of: word of mouth with “talk triggers”, referral programs, freemium model, free trials, tiered membership to capture more revenue from larger restaurants, paid and unpaid influencers, content marketing, partner programs with complimentary services, lead magnets, cold approaches and other more traditional sales techniques, PPC/SEO, etc.”

It is easy to imagine that there are online communities of restaurant owners and managers that could be infiltrated used to gain exposure – while being seen to diligently add value and not be too pushy, salesy or spammy (definitely Snow White’s least favourite dwarves).

Next steps

As you can see breaking down a business idea into hypotheses like this is a very effective way of generating a useful to-do list at what could otherwise feel like an exciting but rather unsettlingly freeform time.

Re-reading the above I can easily see what I should be doing next - testing the value hypothesis, by researching the field and chatting to the people who would be its users.

Following this, the next step would be to create a minimum viable product: what would be the simplest solution to this problem that would actually provide some value to customers?

What should I be doing with my time?

A problem?

So I mentioned in my first post that I might have ADHD – it’s far from official but it’s a strong feeling that I have. One of the symptoms (I guess in absence of a diagnosis I should say “one of the things about me”) is that I find it hard to evaluate the relative important of competing demands on my time.

Over the last ten years of my life I have become very good at managing this (and hiding it) within the scope of running Ugli. Not a naturally well-organised person, I’ve managed to find the right tools and the right routines to get done what I’ve needed to get done, and to keep Ugli’s projects moving smoothy through the sausage machine.

‘Progress’ in my old life (which is actually continuing alongside my new life) was measured in terms of:

  • Sales enquiries followed up on, proposals written
  • Development progress checked up on
  • Client needs met
  • Team needs met and general administrative duties done

If all of that was under control there was nothing stopping me going to the pub. Apart from my children.

Now that I’m in a world where a) Ugli work seems to be slowing down, and b) I’m newly obsessed with this project to launch one or more recurring revenue businesses, things are very different, and I’m finding this confusing.

It is really hard now to prioritise tasks, to plan, to figure out which if any of these ideas to pursue, how to do so and in what order. I veer between gloomy “imposter syndrome” and an optimistic urge to just pick one and get building (a terrible idea!). Partly I’m just not used to having so much to do, and partly it’s very hard knowing which bits to do first.

A possible solution?

I’m halfway through reading The Lean Startup (among a bunch of others … see ADHD comments above) and the approach it recommends to building a startup seems to offer a remedy for this problem:

An idea for a new business is essentially a hypothesis, and as such it can and should be tested. Eric Ries talks about the value hypothesis (“my product/service will generate value for its customers”) and the growth hypothesis (“my product/service will reach new customers and grow at a good rate”).

So for my “Admin product or concierge service for … campsite owners” (idea #1 in my list) the hypotheses would be roughly as follows:

Value Hypothesis

“We are able to devise and supply a service to campsite owners which will save them sufficient administrative time and/or money that they would be prepared to pay for it with a monthly subscription of £x per month.”

Growth Hypothesis

“Campsites are sufficiently a) numerous and b) easily-contacted and c) under-served by similar offerings that it will be possible – in time – to sign enough of them up to the service at £x per month to a) cover costs and b) make an attractive profit.”

Ok so there are still some variables in play (ie. “£x per month”, “in time”, “costs” and “attractive profit”) but if both of those statements hold more or less true then ladies and gentlemen we are in business. And, while I won’t 100% know whether they are true until I’ve set up the business and am banking the “attractive” profit, a very good indication of the truth of these statements can be obtained from some simple investigations and experiments (“validated learning” in the terminology of the book).

(To this end I have had cold-call conversations with (so far) ~15 campsite owners and the response has been quite encouraging: they are easily contacted, they do spend a lot of time doing coms and admin, this coms and admin could be out-sourced to a team I put together (perhaps offshore though this is not unproblematic). It remains to be seen how much that service would cost, and how much if anything the campsites would pay for it. But more on this in another post.)

In general the resoundingly clear answer to my AHDH-induced state of not knowing what on earth to do with my time, now, is … distil my business ideas into the kind of hypotheses described above, and test the hell out of them until I know which ones are true.

So let’s do that then.

Why build in public

A few people have asked me recently why “build in public”. The most common concern seems to be that ideas will be stolen. This has forced me to think it through.

I think for me the biggest benefit is just that – that writing about what you’re doing makes you think about it more. For example it was in the process of listing my ideas in the previous entry that I realised I was acting like a key in search of a lock. A solution in search of a problem (in search of a community). Backwards. Since then my thinking has been more that I need to go back to first principles and follow the path of

Audience > Problem > Solution

So writing helps with the old thinking (teach what you learn, learn what you teach).

Storytelling engages people and builds trust, it brings people along for the journey. It will also potentially build an audience, and begin to generate some interest around what I’m doing. I mean, you’re reading it, aren’t you. And if you are maybe other people will too. This blog will become a platform from which the first of my products is launched.

There are two audiences involved – the one for whom my product will solve a problem (e.g. campsite owners) and the audience of fellow founders – and building in public has the potential to serve both.

And won’t people steal your ideas?

Actually, startup ideas are not million dollar ideas, and here’s an experiment you can try to prove it: just try to sell one. Nothing evolves faster than markets. The fact that there’s no market for startup ideas suggests there’s no demand. Which means, in the narrow sense of the word, that startup ideas are worthless.

~ Venture Capitalist Paul Graham (emphasis mine)

Ideas, until they have been validated, are easy to come by. They are untested hypotheses. And if someone else can build your idea better than you can, then maybe you should let them.

My current list of early-stage ideas

“It doesn’t make any sense to make a key and then run around looking for a lock to open.” ~ Seth Godin

The field is wide open at this stage but I have various ideas for SaaS and SaaS-adjacent products. I am happy to share them here on the basis that writing them down helps me to think critically: ideas are cheap and execution is everything.

So without further ado:

1. Some sort of admin product or concierge service for … campsite owners

  • Campsites are small owner-operated businesses and are easy to approach
  • Early signs (lately I’ve been spending time cold-calling these guys) indicate “admin” or “volume of communications” to be pain points. There are lots of booking tools on the market but managers have told me they still spend “hours a day” or “1/3 of their time” handling bookings, answering questions etc. during peak season
  • Our service would route phone calls, email and live chat to our team (possibly offshore) who would take bookings and deliver a managed diary to the on-site team

2. Some sort of pricing tool for … electricians / tradespeople

  • The HGV crisis, Brexit and COVID have created price volatility for raw materials and parts for electricians (and presumably in other trades)
  • Our product would be a pricing or quoting tool which allowed the trader to put together a quote with up-to-date prices for the materials required, and line items for their own labour etc.
  • An early, minimal version of this could bypass the software angle and have our team – I keep saying “our team” and clearly there isn’t a team yet, so I guess I mean “me” – receive the info via a voice call from the trader and put the quote together by looking up the prices manually (ie. “concierge MVP” in the terminology of The Lean Startup)

3. Some sort of remote admin service for … tradespeople

  • There are many SaaS products for small trades businesses but they are all DIY tools that would require the user to sit at a computer. We know that tradespeople are time-poor and possibly many of them not enthusiastic about admin or computer-based activities
  • Therefore perhaps there is scope for taking some of this undesirable desk-bound admin off their hands
  • Diary management, quoting, invoicing are all repetitive, replicable tasks which could be carried out by a remote personal assistant (I hate the term virtual assistant)

4. Some sort of recurring revenue model service for … website owners

  • A powerful early inspiration for this whole project was Dan Norris and his startup project WP Curve (and his book The 7 Day Startup). WP Curve offered all-you-can-eat website maintenance for USD99 per month (or some such amount) and grew very fast before being sold for a large sum to GoDaddy. Cheers to that!
  • Life at Ugli has improved considerably since we begin focusing on recurring revenue. Previously we’d offer things like “3 years free hosting” to get the initial project over the line, these days it’s almost the other way round. The initial project (ie building someone’s websites) is far more competitive and painful, while the ongoing work (ie looking after someone’s existing website) tends to be both more fun and more lucrative. Also a predictable revenue stream, even a modest one, is a many-splendoured thing.
  • Website owners, on an ongoing basis, tend to require:
    • Hosting
    • Backups
    • Security updates & patching
    • Website maintenance, bug fixes & content changes
    • SEO (consultations, ongoing work and position reports)
    • Content creation (see #6 below)
    • Server health checks & reports
    • Ongoing testing/reporting for persistent errors
    • Periodic redesign work
  • Some or all of these services could be “productised” into a replicable, monthly deal and offered to owners of websites, perhaps websites in a particular category (e.g. Drupal, WordPress, or e-commerce). Processes would be documented and the work off-shored to enable rapid scaling.

5. Some sort of staffing/HR tool for … restaurant managers

  • Brexit and COVID have made it very hard to hire and keep staff in the hospitality industry and staff turnover is high
  • Each new staff member requires training in various areas and a series of certifications (e.g. first aid, food hygiene) and in a fast-moving restaurant setting it can be hard to keep track of who has received which ones.
  • A simple SaaS / micro-SaaS product could simplify this process and show at-a-glance information
  • A later development could be to connect to training suppliers from within the product or even buy in and resell the training

6. Some sort of content creation machine for … website owners

  • Content is king and presumably always will be. Google’s algorithm will continue to improve, delivering high-quality results to search users. How do you become one of those results? You show Mr. Algo that you are high-quality, which means you publish plenty of good, relevant content that people love to read and share. But what business owner has the time to produce all this content? That’s where we come in.
  • It seems to me there’s a healthy gap between the cost of having text – even of a high quality  – produced and the value of that text to business owners and website operators.
  • Alongside text creation, more value could be added in the form of strategy, editing, publishing and deployment, image sourcing etc..

7. Website builder service for … any of the above audiences

  • As a web designer and indeed website owner many of my early ideas were along the lines of “could we build a website builder tool for ___”.
  • One could avoid being forced to compete with the massive low-cost DIY platforms (Wix etc.) by including an onboarding service or a “done for you” element. Or just attentive customer service in general (for which the DIY platforms are not famed).
  • Niching it down would not only make marketing easier (despite the smaller market) but would mean the product could focus on the particular website needs for the ___ industry.
  • Industries I have considered include
    • Restaurants
    • Campsites
    • Tradespeople


None of these ideas purports to be a solution to a validated problem, not yet. But I am working towards distilling this list into something I can run with.

The only thing (apart from recurring revenue) that the above ideas have in common is that they represent a group with which I have some small connection.

Admittedly the above is a list of keys in search of a lock (but they’re not keys I have built yet). My next (backwards?) step will be to evaluate the locks they match and see if any are particularly tempting.

NB Links to books may be contain affiliate code which earns me a minuscule sum of money should you make a purchase, so please don’t hesitate :)

The very beginning ... but of what?

“What we call the beginning is often the end. And to make an end is to make a beginning. The end is where we start from.”

T. S. Eliot

You catch me at a crossroads.

I am the owner of https://ugli.hk which is a small web design agency: our clients are mostly in Hong Kong (despite my own presence here in the UK), and our development team (3-5 of them depending on the day) is mostly in the Philippines. Previously a PHP developer – among quite a lot of other things – I am mostly concerned these days with sales, project management and (reluctantly) design; my being personally required for this work partly why Ugli is hard to scale beyond its current size. There’s only one me (or only one that I can afford to hire, anyway 🙂).

Web design is an increasingly difficult business to be in. Ugli was carried through the pandemic by three larger-than-usual clients (for whom we are eternally grateful) but the custom from these guys masked a near complete drop-off of what was previously our bread and butter: regular brochureware and e-commerce projects for Hong Kong clients in the £5-12k bracket.

Hong Kong is part of the problem: the virus has been only one of two equally-seismic and disruptive Hong Kong news stories in the last few years, and many of my contacts, made over the 12 happy years I lived there, have now left. The city, though changed, is still standing and some business sectors are doing perfectly well, but it’s no longer the place I remember and the sales enquiries are drying up fast.

But I think the real issue is as follows: as web designers we are not just competing with each other – placed as we all are somewhere between the swanky agencies and the self-taught teenagers – but are now increasingly up against ever more sophisticated “DIY website builders”: software as a service (SaaS) solutions which for a mere 5 or 10 or 25 quid a month will do for our potential clients a serviceable version of what we normally do for thousands or more.

The robots are coming.

But what am I going to do about it? Well thanks for asking, I’m going to build a SaaS of my own.

  • What is it going to do? I have absolutely no clue (yet) but I intend going to find out.
  • Which audience is it going to serve? I refer you to the my previous answer.
  • When it be launched? Give me a break, I’ve only just decided to do it. As soon as humanly possible, ok?

My plan is to “build in public” (against my instincts) so you can watch me try, fail, learn, pivot, go crazy, lose interest, grow a beard, start again, and maybe, one day, just possibly, get to somewhere worth being. I think it will help me to think straight, conquer imposter syndrome, make better decisions and enjoy myself if i remain accountable to YOU, whomsoever you may be: so I’ll be open and frank about my ideas, plans, setbacks, and any actual paying customers I manage to convince along the way.

I have nearly 20 years experience of watching clients heave and groan and push out all of their terrible — and sometimes not so terrible — ideas; swearing blind they understand the concept of MVP, while refusing to cut the cord until their baby has a degree and a full beard. Hopefully this experience will be useful to me (but maybe it won’t).

I’m devouring an absolute ton of material on the subject (and there’s such a lot of it). I will discuss this as we go along, and pass on any recommendations of books, podcasts etc. which I’ve found useful.

To spice things up I have 2 kids and suspected case of ADHD, so … will I become all-consumingly obsessed with the puzzles of developing a commercial product? Or will I write a few blog entries before becoming distracted by something utterly trivial and lose interest? Your guess is quite literally as good as mine.

So stay tuned! Or don’t. It’s going to be a wild ride! (Maybe.)