What Makes a Good Business Idea? A Guide for First-Time Entrepreneurs

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Starting a business always begins with one thing: an idea. But if you’re like most aspiring entrepreneurs, figuring out what that idea should be can feel like a herculean task. You have so many options and so much advice out there, how do you know which ideas are worth pursuing?

In this article, we’ll break down what makes a good business idea, give you ways to create your own profitable idea, and even reveal some of the common mistakes people make when coming up with business ideas so you can avoid them.

What makes a good business idea?

Not all business ideas are viable or profitable. So, what actually makes an idea worth pursuing?

It solves a real problem people have

Every successful business exists because someone has a particular problem they can’t solve themselves. That problem is where your business steps in and what necessitates the transfer of money or value. The bigger and more widespread the problem, the bigger your potential business. But even small, specific problems can build solid businesses if enough people share that pain.

You can actually execute it

A good business idea should be possible to execute. A mediocre idea you can execute beats a brilliant idea that you can’t bring to life. So, to determine whether a business idea is a good one, ask yourself if you can realistically build this business with your current skills, budget, and time. Or if you can reasonably get what you need to build it.

It has market demand

This means people are already spending money trying to solve this problem, even if the existing solutions are terrible. A good business idea provides a service that is needed by people. This should seem obvious, but many entrepreneurs fall in love with solutions to problems that nobody actually has or is willing to solve. According to CBInsights, 42% of startups fail for this reason.

It has potential for profit

A good business idea has a clear path from providing value to getting paid. In some businesses, this path is very obvious. In others, it is not so obvious, and it may need a bit of moving around. Nevertheless, this path should exist. Otherwise, you’ll find yourself with an idea that keeps you busy but grants no reward.

It is scalable

A good business idea can efficiently handle increasing or decreasing demands without losing product quality or performance. This means that the business idea should be able to serve 10 customers as easily as it can serve 1000 without having to rebuild the whole business.

6 ways to come up with your profitable business idea

Now that you know what a good business idea looks like, we’re going to give you practical steps that can take you from having zero business ideas to a whole list of viable and profitable business ideas you can start implementing almost immediately.

1. Generate business ideas by solving everyday problems

Successful businesses start by solving a problem. In fact, most profitable business ideas are just problems reversed. To find these problems, look at your daily life, watch the people around you, study an industry you’re interested in, ask questions. Look for things that people find problematic or solutions they wish existed, then make a plan to solve those issues and that’s the seed of a potential business idea.

2. Look into your interests & skills

Your own experience can give you insights that others don’t have when it comes to generating business ideas. Write out all the skills you excel at (things like writing, design, sewing, coding) and see if you can develop any into a full-scale business. Also, write down the industries you understand or the communities you belong to. With the knowledge you have about those industries and communities, you can spot some unique business ideas.

3. Combine ideas

Take two unrelated things and combine them into a new concept, and you’ll have a unique business idea. Many entrepreneurs like John Foley, founder of Peloton, hinged on this method. He merged traditional fitness equipment with entertainment streaming technology to create a thriving business that turned home workouts into a global community experience.

4. Follow trends

If you follow trends correctly, they can give you awesome business ideas that have actual demand. Trends create opportunities, especially early. They also show you what people are focusing on at the moment, which is a good thing to note if you’re building a business. There are lots of trends going on right now, like AI, blockchain, remote work, and sustainable living. These can inspire your next business.

5. Improve on existing solutions

A good business idea doesn’t always mean something that’s never been done before. You can look at existing products and services you know and ask, How can it be cheaper? How can it be faster? How can it be more convenient? How can it target a niche audience? And pull a business idea from your answers. For example, businesses like Netflix improved video rentals and Uber improved taxis. There’s always room to innovate.

6. Observe and listen

You can get a ton of business ideas just from listening and observing your environment. Some of the world’s biggest businesses were born from simple observations. When you intentionally listen, you’ll see the things that most people overlook. You’ll note things like complaints on social media, forums, reviews, or friends and family problems, which you can turn into a thriving business.

Mistakes to avoid when choosing a business idea

Your idea is the foundation of your business. When choosing your business idea, it’s important not to make these mistakes:

1. Chasing trends blindly

Just because something is popular doesn’t mean it will last. Trends are good signals of opportunity, but it’s important to vet them properly before following them. So, always check if there’s actually long-term demand, not just hype, before hitching on a trend.

2. Ignoring customer needs

Don’t choose a business idea if it doesn’t solve a real problem or fulfill a real desire. It won’t survive. Some business ideas might look cool, but don’t actually solve a real problem; you have to be wary of those. Like Paul Marsden says, “Business is all about solving people’s problems – at a profit.” While choosing a business idea, you have to keep that in mind.

3. Choosing an idea only for money

We’ve talked a lot about building a profitable business idea. One of the key qualities of a good business idea is that it can generate a profit. So, obviously, profit matters, but if you hate the work, don’t choose the idea because you’ll burn out quickly and hate it in the end. Try to balance profitability with interest or at least tolerance.

4. Underestimating competition

It’s important for your business idea to be unique in some way, but no business is a hundred percent unique. Every business has competition, even the most “unique” ones. Don’t ignore your competition; if you do, you’ll definitely get blindsided later on.

5. Overlooking practical factors

Feasibility is one of the important factors to consider when choosing a business idea. An idea might look and sound nice, but be impractical for you. Look at the cost, location, time, and even legal requirements for starting the business before you decide.

Use Edventures to Supercharge Your Business Journey

If you’re ready to turn your spark of an idea into a thriving business but feel overwhelmed by where to begin, Edventures is here to be your co-pilot. When you sign up, you get personalized guidance and tools to build your business. Don’t just stop at an idea, turn it into a real business with Edventures.