How to Come Up With Winning Startup Business Ideas
Coming up with a good startup business idea can be tough. I faced that challenge for years, until I learned from other entrepreneurs—through many camps, seminars, and conferences—how to successfully identify problems and create the right solutions. Once I developed this new mindset, everything changed.
Now, I can think up so many business ideas that it can be hard choosing just one to pursue!
But I understand how intimidating it can be, as a new and aspiring entrepreneur, to think of your first business idea. You may not know where to start, where to find problems to solve, or how to solve those problems.
That’s why I’ve condensed everything I’ve learned over the years about great startup ideas into one clear, powerful post. If you follow the three-phase process outlined in this article, you can learn how to think of great startup business ideas that fit your financial and lifestyle goals and put you on the path to successful and rewarding ventures.
Let’s get started!
Phase 1: Laying the Groundwork for New Startup Business Ideas
To get started, we are going to dive into how you can set yourself up for success, starting with your environment. We’ll also go over some actionable assessments and strategies to discover your passions, strengths, resources, and what industries you may want to enter. This will help you immensely when it comes to finding a problem to solve in Phase 2, and when you design your solution in Phase 3.
If you want to think of the best startup business ideas possible, you need to first create an environment that will allow you to be inspired. Your environment will also give you the clarity you need to do some deep thinking.
You’ll want to be in the most comfortable position possible, which is different for everyone. It could be a bean bag chair and a whiteboard in a quiet room, or it may be a more formal setting such as a study room at the local library.
I also recommend that you make sure you have enough space to move around and walk. If you are sitting too long, you won’t be able to think of successful ideas—you need to get your blood flowing.
Having a computer, pen, and paper is also going to help during your brainstorming process. A computer is handy because it allows you to quickly research or look something up if you need clarification. The pen and paper is to write out your ideas so you don’t lose them.
Lastly, allocate one to three hours for a brainstorming session for your idea. If it is shorter than an hour, you may not have time to get into the rhythm. But I have found from experience that sessions lasting longer than three hours tend to become counterproductive, and can create more anxiety and frustration than business ideas.
Now that you have your environment all set up to do your best thinking, we’ll get into the assessments.
Assessment Exercises: Find Out Which Startup Ideas Are Realistic
These assessments are designed to help you develop a realistic business idea that you can actually execute. A realistic business idea is one you can start. If you only have $1,000 to start a business, thinking big and trying to rival Elon Musk with private space flight may not be the way to go. So many businesses fail or never see the marketplace because the founders have unrealistic ideas of what they are capable of. The point of these assessments is help you avoid this. There are four assessments to make:
- Personal Passions
- Strengths and Capabilities
These will all help to guide you in discovering the ideas that will best fit your lifestyle and financial goals as an aspiring entrepreneur.
The information that you discover from these assessments will play a key role in how you choose and execute new business ideas. It will also give you a step up from your competition, as most new entrepreneurs skip this very important phase of the process. The alignment of your personal goals with your business idea is critical for long-term success.
The Personal Passions Assessment
The first assessment is intended to help you discover what you are truly passionate about. Studies have shown that if you pursue what you love, you will become successful.
Also, in the beginning, you may not be making any money for months, or even a year or two. If you aren’t passionate about the idea, it is going to be hard to get out of bed in the morning when the money isn’t coming in the door.
If you are lucky, you may already know what you are passionate about. However, if you are not 100% sure, you first need to ask yourself some question
- What are things that seem to make me the happiest when I am doing them?
- What results, goals or life achievements bring me the most satisfaction?
- If I had $300 million, what would I be spending my time doing? (This will help you answer without money fogging up your vision; you don’t always want to focus only on the money.)
- What subject could I read 500 books about without getting bored?
This second set of questions is designed to be answered by three close people in your life. It is important that you get other perspectives from the people who know you well
- When are times that you have seen me happiest and what was I doing?
- What results, goals or life achievements do you think bring me the most satisfaction?
- What subjects or topics do you always hear me talking about?
Once you have these answered, you will be ready to move on to the Strengths and Capabilities Assessment.
Strengths and Capabilities Assessment
Knowing your strengths will help you in many ways. For starters, it will help you know how you can add value to the market. For instance, if you are an app programmer, you can bring a lot of value to the development of apps for people and companies. This will influence your first business idea in huge ways. Knowing your strengths also helps to identify your weaknesses, which is crucial information to know when it comes to executing a business idea.
To help you think about what to include in your strengths and weaknesses lists, try answering the following questions about yourself:
- What am I good at?
- What have others complimented me about?
- What have others had to help me with on more than one occasion?
- Which projects and tasks seem to drain my energy?
- Which projects have I spent hours on without getting tired?
- What are my hobbies, and why do I like doing them?
This image below includes some examples of the types of strengths that are common among certain generations, taken from Gallup polls. Are there any that fit you within your generation?
This assessment is used to see what you have to work with when starting a business, as this will play a crucial role in what type of idea you should be thinking of. There are six important resource areas that you need to think about. An inventory of your resources will ensure that you are creating a realistic business idea. Take some time and review your access to the following:
- Free resources in area
- Government resources
Industry & Sector Assessment
This is where things start to get really fun—choosing the industry for your startup business idea! Combined with your resource assessment, this will help you understand what options are out there, and whether you have what it takes to pursue them.
There are too many industries to list them all (an extensive list of industries can be found here), but they fall into two general categories:
- Heavily regulated industries
- Lightly regulated industries
Each category has pros and cons.
Heavily regulated industries get the benefit of having higher barriers to entry for new companies, due to the high costs of maintaining and complying with regulations. As a company operating in a heavily regulated industry, less competition can enter, creating a stabler market. For example, the financial industry is heavily regulated and there are high costs to starting a company because of the mandatory financial reserves and the licensing requirements that are needed to operate. Other heavily regulated industries include oil & gas, mining, health care, food products, and telecommunications, to name just a few.
The benefits that new companies have in lightly regulated industries are lower costs and lower risks to entry. If there are lower capital and licensing requirements, it is going to be easier to start a business. However, with lower barriers to entry come more competitors in the market. It is easier to start a business in a lightly regulated industry, but it can be harder to maintain the company in the long run, because of the increased competition.
Some examples of lightly regulated industries include online or in-person retail (both clothing and goods), and most technology sectors like the internet of things, online communications, social networks, etc.
To choose the right industry, you will need to review your passions, strengths, abilities, and resources. For instance, if you have available resources such as money and connections to funding to enter a regulated industry, you will have a lot more options than someone with no money or no connections.
Also, make sure your passions match the industry you want to enter. If you are passionate about artificial intelligence, that may be the industry you should enter. If your passion is soccer, consider a business related to sports and soccer.
Now that you have completed all of the assessments, it is time to find a problem to solve.
Phase 2: The Problem Discovery Process
All good business ideas solve problems, so the best way to think of a great business idea is to find problems to solve. There are lots of ways to find problems. However, over the years I’ve discovered that there are only a couple of techniques that actually yield solid results.
Use the News
My favorite and primary technique for finding problems is following the news. This is very powerful and I highly recommend it, because the news presents problems that large groups of people face. Also, new information is published by the minute, so this gives you a continuous and fresh source of information for problem discovery.
To begin looking for a problem to solve, choose your favorite credible news source. Having credible news is extremely crucial, because if you have wrong or fake information, your ideas will flop.
Some credible news sources include:
Once you have decided on your favorite news source, you will need to narrow down what news to read. There is a lot of information out there, so it is important to stay focused.
Most news outlets have different sections that are dedicated to particular interests. Look at the indexes of your favorite publications and find the section(s) that best cover your chosen industry.
For example, if you are interested in the healthcare industry, there is usually a healthcare section within the overall business category. If you choose artificial intelligence, the news related to that sector would be located in the technology section of most credible news outlets.
You’ll want to find three to five articles related to the industry. These news articles should be about both large and small problems that consumers or businesses may be facing. To show you what type of news headlines you should be looking out for, I’ve given you some examples, below.
The following is a snippet from the front page of the sustainability section in Reuters. The headline on the left explicitly states that there is a crisis, which implies that there is a problem to solve. Specifically, a global water crisis. Ideas that result in solutions to this problem, even those that start off modestly, can have major impacts.
The headline on the right is another type of article that is stating a problem related to climate change. This is another problem where innovative solutions can lead to major positive impacts.
This picture below is from the cover of the BBC News Health section. The highlighted article on the left discusses problems around fibromyalgia and potential solutions. This is a great example because the article recommends a potential business idea of setting up a Tai Chi class specifically for people with fibromyalgia.
The other two highlighted articles on the right are also examples of problems that are revealed in news articles. Looking out for these types of articles will help you identify problems that need solutions.
This last example below is from the Wall Street Journal. The highlighted article at the top is a great example of problems in technology. As you can read from the headline, robots have a hard time handling things with care, and consequently, innovative solutions are needed to overcome these limitations.
The second entry I highlighted in this screenshot outlines the problem that social media is creating in society and the psychologically related effects on individuals. This problem could be explored for many different business ideas, from social media addiction help, to online personal data security solutions.
How to Use the News
When you are scanning the news, beware of outdated articles. If you come across an old news article, it will likely be based on old data and may not be as relevant as a news article on the same topic with current information. Try a search using a filter on the timeframe.
Also, watch out for repurposed content that is based on old data. It may look like a new and relevant article, but if only a few things have been updated, you could make mistakes due to false assumptions.
To avoid these pitfalls, make sure that the article is referencing strong supporting data and check out their sources. For example, if they reference academic papers or validated statistical findings, take the time to understand the primary sources. Your results and conclusions from your research will be much stronger and will help you make informed decisions about your business ideas.
Once you have found your three to five articles that highlight problems within the industry for either consumers, business owners, or both, you are ready to move on to the third and final phase of developing your business idea—the Solution Discovery Process.
Don’t worry if you have more than one problem, we will be assessing which one will be best for you to solve in Phase 3.
Phase 3: The Solution Discovery Process
The solution discovery phase is integral to the entire three-phase process, as this is where we develop the value that is brought to market, that solves the problem we have identified. It also incorporates all of our assessments, so we can determine a solution that’s a good fit for you.
To begin developing a solution, we are going to be narrowing down what problem you should be solving with some basic questions. Once our single problem is chosen, we will choose a business model, and choose a solution delivery system to deliver the value you can bring to the marketplace.
To help you develop a solution to the problem that you have identified from Phase 2, take some time to answer the following set of questions:
1. How would I want this problem solved?
2. How would my friends want this problem solved?
3. Is there anything else being done to solve this problem currently? And if not, why not?
4. Do I have the resources, strengths, and passions to solve this problem? (This is the most important question of all.)
These questions are designed to help you assess how the current problems could be solved—the answers will guide you in choosing one business idea to focus on.
Narrowing Down the Problem
We’ll start by narrowing down the problems we identified. If you ever answered “no” to question four, then you can cross that problem off the list immediately. As mentioned before, a large reason businesses fail is because they do not have the strengths, passions, or resources to solve the problem.
To further narrow down the problem, we need to look closer at the answers for questions one and two. If the solution you envision is far off from what your family and friends envisioned, there may be a misalignment in terms of the value you can bring to market. Any problem where there are huge discrepancies between what you think ought to be done to fix it, and what other people want, should also be crossed off the list. This is to avoid going back to the drawing board and creating countless prototypes to develop something the market wants.
Choosing the Right Solution
When your envisioned solution is very similar to the solutions from your friends and family, you know you are on the right track. For example, let’s say we identified a problem that was related to the public’s concern over personal data safety. The solution we envisioned is a consultation service to protect people’s personal data. If our friends and family came back to us with a solution that was similar to a consultation service, we are on the right track. However, if they came back with something like a device to plug into the computer, this may not be the best vision alignment.
Further Tips for Solution Development
If you are still wondering how to envision a solution in the first place, the best place to begin is looking at other solutions out there. One way to do this is to see the new startups. Angel.co is a great place to start for finding inspirations. For example, you may see a startup that provides products by 3D printing them. If the problem you are trying to solve needs highly customized parts or pieces, 3D printing could be a great solution.
Sometimes the way value is delivered for other services and products can be great inspiration for solving new problems. Let’s take the personal data privacy problem as an example again. After scouring Angel.co, I found a company that provides an online forum and mastermind group for networking, featuring experts in the niche. Could the same be set up for people who want expert opinions and to chat with others about their personal data privacy? Could be.
My last tip is simply to emphasize how important it is that the solution you think of fits your passions, skills, and resources. If you found out that creating an online forum like I mentioned above does not match your skill set, that solution’s probably not the one to go with.
Once you have decided on a business idea that solves a problem, you will need to decide on the best business model and how you will deliver your product or service to your market.
Choosing A Business Model
To help you decide on a business model, here is a short list of the generalbusiness models that you can consider in the context of your particular situation.
- Low-cost provider
Researching these options will help you select the business model that best fits with your goals, your resources, and your business idea.
To choose the best business model for the problem you want to solve, here are some tips to think about. Continuing with my previous example of data privacy, there are a couple different business models that could fit, such as the commission or subscription model.
If you were pursuing a consultation service, you wouldn’t want it to be a one time thing. This would be an ongoing service, so a subscription model would work well. A commission model would be better if you expected just one or two transactions, but the subscription model develops more recurring revenue, and allows greater flexibility in how the user takes advantage of the service. You’ll typically see the commission model used in high-value transaction businesses such as commercial real estate.
If you want to know more about business model selection, you can check out this in-depth resource.
Once you have selected your preferred business model, you can move on to determining how your solution will be delivered to your customers.
Choose Your Solution Delivery Systems
There are so many ways that you can bring a solution to the market, and you can sometimes choose more than one. Your own goals and priorities, along with solid market research, will help you decide which delivery systems are best for your particular business idea.
Some examples of solution delivery systems that you can explore include:
- Brick and mortar store
- In-person kiosk or machine (e.g. ATM)
- Personal delivery
- Mail or courier delivery
There are pros and cons to each delivery model. Sometimes you’ll need to play around by combining different solution delivery models with different business models to get a match that fits the problem at hand.
To show you what I mean, I’ll share a personal example.
The problem I wanted to solve that fit my passions, skills, and resources was one that travelers often face. When people are traveling in between multiple countries, they tend to accumulate a lot of leftover currencies. It can be a hassle for travelers to exchange these currencies at foreign banks, due to high fees and inconvenient locations. The picture below illustrates the fees that can be charged with low amounts of currency. Almost $5!
When I was thinking of the currency exchange problem, I wanted a solution that allowed travelers to exchange currencies directly with others. I initially thought of using storefronts in central locations (such as airports where many travelers cross paths) and I considered charging transaction fees to generate the business profits.
After researching and assessing the various options, I concluded that the approach with the most potential was a commission-based business model with the service being delivered via a smartphone app. It would allow me to solve the problem by creating a system that a majority of travelers could safely access, without the logistical challenges of brick and mortar locations.
As you can see from my example, I chose a business model and then I moved on to deciding how that business model was to be delivered. The goal is to think of a solution and create a business structure and delivery system that combine to provide value for the customer and profits for the business.
Once you have put in the hard work to build your startup business idea—completing the assessment exercises, identifying problems that need to be solved, determining your solution and how you will deliver it—you will be ready to officially validate your business idea. If you want to learn how to do that, check out this article on idea validation.
Bonus Section: Mindset
You can get every detail perfect in each phase, but if you don’t have the right mindset, it could derail the whole process and potential results.
I’m going to cover three different aspects of the right mindset that you can develop to help you on your journey to becoming an entrepreneur. An entrepreneurial mindset requires resourcefulness, thinking differently, and perseverance.
None of this has anything to do with intelligence—it has everything to do with your willingness to try.
The first mindset shift that you need to make is toward becoming a resourceful person. Being resourceful means that you are able to gather the items and information that you need to get the task at hand done.
This chart below clearly shows how being resourceful can save you in the long run. People run out of money for a lot of different reasons, but one of the most common is using up available capital too quickly and not being resourceful in solving that challenge (e.g., lack of funds or having an inefficient team).
Someone with a business idea is considered resourceful if they are able to execute an idea using their own tools, money, and connections. For example, if your business idea requires basic knowledge of coding, going out and learning that skill instead of having to pay someone to do it for you, is being resourceful.
To get into the mindset of being resourceful, you’ll have to be open to trying new things and exploring all of the options that are available to you.
Thinking differently is a really helpful mindset shift if you are looking to come up with a business idea that is new and can even create entirely new markets.
I know it can be hard to simply “think differently,” so I’ve developed some exercises and tools to help you discover new ways to think of business ideas.
One fun approach to getting your creative process started is the Random Associations Exercise. This exercise is designed to be completed within 10 minutes, and is a great way to get the creative juices flowing. Just follow these three easy steps:
1. Gather two random objects that are closest to you. It can be anything at all.
2. Now think of as many alternative uses for that object as you can. Be creative and have some fun! The goal of this mini-brainstorming exercise is to think outside of the box. For example, an orange could be used as a baseball, a hacky sack, paint rolling tool, etc. What if you cut the orange in half? Or slices? What could you do with it then? Do this for both objects and write down all your findings.
3. Think of product or service ideas from the random object uses you came up with.
Every time you practice creative thinking exercises, you improve your ability to think of great business ideas.
Thinking of a great business idea is not easy, and it can take time. Don’t give up if you get stuck when you are brainstorming. Persevere through any challenges. It will benefit you in the long run.
If you get stuck along the way, try getting up and going for a walk or stretching. These small actions will get your blood circulating more and help to refresh and motivate you to get back to the drawing board!
Equipped with an entrepreneurial mindset, you can now feel prepared to discover problems that need to be solved.
How To Come Up With Winning Startup Business Ideas was originally published on Foundr.