Successful entrepreneurs leave room for luck, but they also have a keen awareness that business isn’t happenstance: there’s a disciplined method as well.
We express that method in The Business Infinity Loop™, illustrated by two loops circling back and forth through each other, growing stronger each cycle.
Business as Hypothesis
One of the concepts we introduce while designing business models with entrepreneurs, is that every business is a hypothesis: a theory that it can create more value than it consumes. That difference is “profit”, and it’s the necessary lifeblood to create the future.
A business’ hypothesis is first expressed in its business model: the explanation of how it creates, delivers, and captures value. We use a powerful tool to visualize the nine components of any business model, and evaluate how effectively they’re working in unison.
The hypothesis is then translated into the economic model: the financial inflows and outflows that correspond to the business’ design. It’s critical that entrepreneurs do this step: define the hypothesis, get as real as you can, and make sure the business finances actually work on paper. If they don’t, you need to back up a step and reconfigure your business model until the financial numbers work.
The Loop™ as Experimental Method
If every business is a hypothesis, then The Business Infinity Loop™ is the experimental method: the process by which entrepreneurs test the hypothesis, extend their learning, and strengthen through continual evolution.
Visually, the right half of the Loop is your economic model or forecast – your theory of what the company’s finances should look like in the coming period(s). It’s based on your understanding of the market, new initiatives you’ve introduced, the interdependent calculations of your cost and revenue structures, etc. With good insight and modeling, you can construct a forecast that isn’t pie-in-the-sky, but a boots-on-the-ground useful tool.
But the forward part of the finances is only half of the Loop – you now need to track and see how your hypothesis actually played out. This is the left half of the Loop (you might even call it the feedback loop) – it represents the accounting function. Here’s where the day-to-day revenues and expenses get captured as the business and economic models are brought to life. It’s built transaction by transaction, each being processed through the lens of the economic model.
With both your forward- and backward-looking loops in play, the most important point becomes the intersection, where they meet. This is where the smart entrepreneur sits, and this is where learning and adaptation occur. After a period of time has elapsed, the entrepreneur takes stock: how did the hypothesis compare to reality? Or stated differently: how did the economic model projection, compare to the actual accounting results?
In this question is the fertile space where all or parts of the hypothesis are confirmed or disproved, and where new hypotheses can be suggested to evolve the model in new ways. Without this question and pause, the business has no way to learn and adjust its bearings; it becomes locked in a single direction, guaranteed to run out of ground, sometimes later, sometimes sooner. But as long as this space of interpretation and reflection is preserved, the cycle begins anew: update the forward looking forecast, run with it a bit, revisit, and revise. Done well, with each completion of the circuit, the business is learning, adapting, and refining its ability to create value in the market – the power of The Business Infinity Loop™.
Entrepreneurism as Discovery
Armed with an easy-to-use financial projection and accounting tool, and combined with a routine of structured reflection, you’re empowered with a method to uncover value in the marketplace. Rarely if ever is entrepreneurism a flash of brilliance followed by instant success; it takes at least a few years to be an overnight sensation. 😉 A spirit of exploration linked with a method of learning, means your business will thrive for years to come.