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How to find the best business ideas

Article provided by Xero

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.

  1. Find ideas you are passionate about
    Does the idea excite you? If you’re wildly passionate about your business, then you’ll have much more energy and focus.
  2. 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.
  3. 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.

If you’re passionate about what you’re doing, business will be much more fun.

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.

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 adviser 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.

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