How to find the best business ideas
Some of the best business ideas are crazy. Others are plain boring. There aren’t any magic rules for finding the good ones. Your best shot at picking the right idea is to make sure it’s a good fit for your personality and your skills.
About the idea
Maybe you already have a lot of business ideas but you can’t pick one. Or perhaps you want to start brainstorming. There are just two things to remember about business ideas.
They’re allowed to be crazy
Amazon started selling books online when everyone was perfectly happy going to the store and keeping their credit card details off the internet.
Airbnb invited users to let their homes to complete strangers – people they might never meet.
They’re allowed to be mundane
You might take an existing product or service and do your own version of it at a lower price, or in a different location, or with some other minor tweak.
Or you might find a weird little niche that no one else has explored yet. Throx did that. They sell socks in threes so people don’t need to worry about losing one in the laundry.
Tips for landing on the best business ideas
As you come up with ideas, you need a way to pick the good ones. It's an important choice because your next step is to invest time, energy and possibly cash exploring that idea. These three tests will help you decide on the best ones for you.
Find ideas you're passionate about
Does the idea excite you? If you’re wildly passionate about your business then you’ll have much more energy and focus.
Choose a business idea that fits with your skills
Do you have years of experience, qualifications, contacts, or a special talent to use to your advantage? The more you do, the greater your chances of success and the less you have to pay someone else.
Make sure you can make money from your idea
You’ll need a plan for turning your idea into revenue. Some ideas can be monetised in many different ways.
Find a small business idea you’re passionate about
Examine the ideas circling your mind. Do a few stand out as something you’d really like to try? Bring those to the top of your list. If you’re only just starting to brainstorm small business ideas, then focus first on areas where you have a passion.
If you’re passionate about what you’re doing, business will be much more fun. You’ll also find it easier to get up early, work late, and battle through obstacles. Plus your mind is better at absorbing information that genuinely interests you, which could help you learn faster.
Choose an idea that fits with your skills
It’s much easier to get a business off the ground if you can do a lot of the early work yourself. Otherwise you’ll have to hire a lot of professionals, and that’s going to get expensive.
Idea for an app? You should be able to develop a minimum viable product on your own. Want to open a hospitality business? You should know a thing or two about the service industry.
Relevant skills and experience will also be a big plus when it comes to getting finance. Lenders won’t even consider backing you unless your CV convinces them you know what you’re doing.
You don't have to be a total expert before you start. It’s okay to learn on the job. But when you look at all the steps required to start your business, make sure you can take responsibility for a good chunk of them yourself.
How to make money from your small business idea
Once you’ve chosen your best business ideas, you need to figure out how to turn them into cash. That’s what a business model is for. It’s your plan for making money.
Business models are many and varied. Some types of business make money by selling goods to consumers (retail), others by selling goods to shops (wholesale), and others by leasing goods. Some businesses make money by charging clients an hourly fee for a service, while others charge a flat fee. These are just basic examples of business models. There are all sorts of creative variations.
Business models generally fall into broad categories like retail, manufacturing, software-as-a-service, professional services, and so on. Many categories have general rules about:
what customers are charged for
average markups on products or services
reasonable operating costs
Mixing business models
Your small business idea might lock you into a particular business model. If you open a shop, you’re going to operate pretty much the way other retailers do. But your business might allow you to mix up a bunch of business models.
If you’ve invented a product, for example, you might manufacture it, supply it to retailers, and sell it direct to customers through your own store. Try to investigate the business models that apply to you. An accountant familiar with your type of industry can give you great insights.
Remember that you're just choosing between business ideas at this stage. You don't need a full financial plan yet. But make sure you ask yourself:
can I realistically make money from this idea?
do I need special expertise (such as wholesale experience) to make the business work?
Once you've picked an idea to explore further, you should get a financial advisor to help work out the business model in more detail.
The best business idea is the one that fits you
When deciding on a business idea to pursue, make sure:
you’re genuinely excited by it, because you’ll spend a lot of time on it
you can carry it out (while doing a lot of the work yourself)
you have a plan for monetising it
Once you’re satisfied you can pour energy and skill into it, and you can see a financial return for those efforts, you're ready to move to the next step. Start thinking about how to start a small business.
Reproduced with the permission of Xero.
Xero is software designed to make life better for small businesses and their advisors. Its online accounting platform provides the foundation on which businesses can build a complete business solution. It connects businesses with their bank, accounting tools, their accountant, payment services and third-party apps, so everything is securely available at any time, on any device.
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