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How to come up with a great idea for your startup
The first step in starting your business is deciding what exactly you want to do. You might already have a fantastic idea. If so, great! You can skip ahead to Chapter 2, but we recommend reading through this chapter to see if your idea aligns with some of these guidelines.
First, let's look at some startup stats to give you some context.
Now that you have some of the numbers, it's time to think of an idea. But before you dive into ideation mode, it's good to take a step back and think about a few key questions.
Why do you want to start a business?
Let's get one fundamental truth straight before we continue: starting a business is going to be hard work. It might be the most challenging endeavor you've ever taken on. That's why it's crucial to understand the "why" behind your business.
For some entrepreneurs, it could be that you have an idea you feel must be shared. It could be that you're passionate about solving a problem. But for most entrepreneurs, the real motivation comes down to freedom.
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Freedom has a powerful allure for most of us; freedom to set our own schedule, to determine our own future, to build something the way we want to, to have financial security.
Part of your reason for starting a business may be to head towards the kind of life you want. It could also be about escaping the life you currently have. Either one is a powerful motivation.
Let's address another important point: money is just a means to an end. If money is your top motivating factor in starting a business, you may find yourself disappointed early on. You'll be putting in a lot of hours and effort for very little return. And if money is your sole motivation, you need to ask yourself why starting a business is the best path to this. Why not invest? Why not upskill to secure a higher salary? Entrepreneurship is a difficult, lonely road at times, and it's certainly not a surefire path to riches.
Ultimately, the decision to start a business has to come down to a passion that can't be fulfilled any other way. Whether it's a passion for building something from the ground up, a passion for charting your own course or a passion for a particular idea, that passion is what will keep you going during difficult times.
Before you continue, take a moment to think about your "why."
How will you fund your business?
We'll discuss this in depth in a coming chapter, but you'll likely need at least some capital to get your business off the ground. You'll need to determine whether these funds will come from your own savings, from a business loan or grant or from investors.
The source of your funding will largely depend on just how much capital you need to get yourself started. There are plenty of business ideas that require very little initial investment. But if you're going to be selling and/or developing a product, it's likely you'll need seed money to launch your idea.
Can you build your business part-time?
Not many people are in the position to quit their current job and focus full-time on a new business idea. In the initial stages, your business will probably be something you build in your spare time. Consider whether you can set aside the time required to get a business up and running, and whether you're willing to devote the amount of time it will need.
How to come up with an idea for your business
Think about things you love
The first way to generate an idea for a business is to think about ways to monetize something you love. It could be part of your current job or it could be a hobby.
A great example of this is Sam Calagione, who took his passion for home brewing beer and launched the Dogfish Head Brewery in 1996. The brand grew to be one of the largest craft brewers in the United States, and recently merged with Boston Beer Co (makers of Sam Adams) in a $300 million USD deal that saw Calagione receive stock worth around $192 million USD. That's an amazing success story for a business that began as a hobby.
Turning something you love into a business doesn't require you to have a practical skill, either. It could be a subject you've become an expert on, and your business could focus around sharing that knowledge with others.
Write down some of your knowledge areas, hobbies and skills that you're excited and passionate about. Consider whether there's a way to turn those pastimes and interests into a business.
Think about things that bother you
All of us run into everyday annoyances, both at work and in our personal lives. Whether it's a goal that seems out of reach, difficult chores we wish we didn't have to deal with or mundane tasks that slow us down, we all run into these obstacles.
Examine your own life and try to identify some of these annoyances. Think about tasks at your job that slow down your productivity, or that you dislike. How would your workday be different if someone developed a product or service to do these tasks for you?
Think about your personal life as well. Consider some of the goals you've set for yourself. What are the pain points in achieving those goals? What's standing in your way? Is there a product or service that would remove these barriers?
Think about common irritants you run into in your daily life. What chores do you wish there was an easier way to do? What daily tasks do you hate, and how would life change if a product or service took care of them for you?
Ask other people what bothers them
If you're bothered by a common task, odds are you're not alone. Take some time and ask your friends and family about their own daily annoyances and roadblocks to productivity. You're likely to find a lot of common ground, but you'll also generate some new ideas. Maybe there's an everyday irritant you hadn't considered. Maybe there's a barrier to success you haven't personally experienced, but that's common to others. Discover the pain points faced by people around you, and then think about how a product or service could address those.
Think about problems people might have in the future
A wise sage once observed, "Mo' Money, Mo' Problems." The same holds true for technology. New tech solves problems and increases productivity, but it can create a whole host of new problems.
Consider how some of the technological advancements of the last few years could lead to new problems to solve. For example, a shift to renewable energy could mean a need for new and more efficient ways to store that energy. New social media platforms could lead to new needs for privacy or new insight into how to market for those platforms. New gadgets mean a demand for new accessories.
Take a look at some of the global trends in technology, consumer goods and even society in general, and think about how these trends could give rise to new needs.
Research growing markets
Business is all about supply and demand, so it's smart to look at areas where demand already exists. Have a look at some of the fastest growing industries, and consider staking out your business in that territory.
A good way to do this is to look at statistics from the US Department of Labor on the most in-demand occupations. Another great resource is Inc's annual list of fastest growing industries for startups.
Think about the logical progression of other businesses
Launching your own business doesn't require an entirely original idea. Your business could just be the next step in developing an idea that already exists.
Think about it this way: Facebook was not the first social network, by a long shot. Remember MySpace? Friendster? Live Journal? Mark Zuckerberg didn't invent a new concept. He took an existing one and improved upon it.
Look at the businesses that already exist and are successful, and then think about how they could be disrupted. What do you wish they offered that they don't? What are the pain points in dealing with those businesses, and how could your offering remove those? A company like Firestone didn't bother reinventing the wheel. They just made a really good tire for it.
Apply old models to new niches
A lot of businesses that have found success in the digital age are applying models that already exist to new niches. For instance, look at all the crowdsourcing platforms that have found success (this one included). Uber didn't invent crowdsourcing. It just applied it to the transport industry.
Have a look at some of the successful businesses that have brought new model to an old business vertical. In most cases, the model itself wasn't new. What was new was applying it to the industry they chose.
Consider those business models, and then think about how they could be applied to different niches. Your business could apply the crowdsourcing model to a different industry. It could be a social network for an area where one doesn't exist. Or it could bring e-commerce to an area only served by bricks and mortar stores.
Take your current job solo
In your current role, it's likely you've gained a high degree of expertise. Your employer values that expertise, which is why they hired you rather than someone else. If your employer puts value on your knowledge and skill, other people probably would as well.
Your business could just mean taking your current occupation and striking out on your own. You already understand your industry. It's likely you've made relationships with other people in your industry. Your skill is earning money for your employer. In fact, it's almost certain you earn your company more money than you cost it in salary and benefits (otherwise it wouldn't make sense to keep you). Consider earning that money for yourself.
Find a stagnant market area
There are plenty of markets that are ripe for disruption. Going back to the example of Uber, Uber worked because it disrupted an industry where there hadn't been any substantial innovation. The taxi industry is far from alone in this.
Have a look at different industries and think about the ones that have remained stagnant for a long period of time. How could you bring new innovation to that industry? It could be, as we discussed before, applying a model that's already worked in another vertical.
Do it better and cheaper
Another way to generate a business idea is to look at industries with high demand, and figure out how you could deliver the products or services better and cheaper than the top performers.
Have a look at a company like Zappos. Zappos saw areas for improvement in the shoe sales industry. Traditional retailers had to pay for overhead costs like retail space and store fit-outs. These costs got passed on to customers. Moreover, traditional retailers were limited in their selection.
By adopting an e-commerce model, Zappos has been able to sell a wider selection of shoes at a lower cost than its traditional retail competitors. In other words, they've done shoe sales better and cheaper.
There are plenty of industries ripe for this kind of disruption, even existing online business models. Whatever the product or service, if you can deliver a better customer experience at a lower cost (while still remaining profitable), you're onto a winning business idea.
Validate your idea
Once you've come up with a business idea, it's time to test the waters and see if you're onto a winner or if you need to rethink your plan. The best way to do this is to share your idea with friends and family.
Talk to some people you trust and run your idea by them. Take their feedback onboard and see if there are ways you can refine your idea to make it even better. They may see angles or opportunities you hadn't thought of.
A quick note here: There can be some trepidation about sharing your business idea with others. After all, if it's a great idea, wouldn't someone be tempted to steal it? Yes, that's always a possibility. But the sheer effort required to launch a business makes it highly unlikely. Be shrewd about who you share your idea with, but most people probably won't have the drive, ambition or even desire to become entrepreneurs, with or without your idea.
Don't wait for perfection
Your business idea doesn't have to be perfectly refined before you start pursuing it. You're going to learn a lot along your entrepreneurial journey (and in the chapters ahead), and many of the details will come into place in time. Once you have a solid idea, move forward and begin the process of making it a reality.
Be open to change
Following on from this point, you need to open yourself to allowing your idea to evolve over time. And this doesn't just apply to the beginning of your entrepreneurial journey. Throughout your career as an entrepreneur, be open to shifting your business model as the market demands it or new idea or technologies arise.
Consider Netflix, for example. It first found success as a mail order DVD service. Now, it's synonymous with content streaming and creation. Its current business model seems lightyears from its original incarnation. But at its heart, it's still a company that provides on-demand entertainment.
Your own business may shift strategies over its lifetime. What you do in five years could look entirely different to your business' beginnings. But that's how the best companies survive. Companies die when they remain stubbornly chained to existing business models even in the face of disruption and shifting demand. Keep your company nimble and adaptable.
Every business starts with a great idea. Now it's time to put some practical logistics behind that idea. We'll tell you how in the next chapter.