Process of Assumption-based Planning
The steps of assumption-based planning are:
- Identify assumptions: Collect all assumptions implicit, explicit, primary and derivative, out of the (business) plan.
- Determine criticality: Try to quantify the assumptions as much as possible in order to determine which assumptions have the greatest (financial) impact.
- Design tests: Design a test for every critical assumption. In a test design you state how to test the assumption and what proves the assumption wrong or right.
- Schedule tests: Every critical assumption needs to be tested, but not all assumptions can be tested in the present. So future assumptions tests are scheduled in a test schedule. Some possible reasons to schedule a test in the future are a lack of information in the present or a dependency on the test outcomes of other tests.
- Test assumptions: Then an assumption is tested this results in a test outcome, which proves the assumption right or wrong.
- Reassess plan: Based on the test outcomes and the test schedule one might decide to reassess the venture plan and update the business plan with the new insights gathered in the ABP process.
- Plan re-testing: The assumptions need to be re-tested regularly if not constantly. There should be a retest schedule of every critical assumption.
- Create or update the assumption plan: The assumption plan holds all data gathered during the ABP process.
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