How to identify a good business idea

If you want to start a small business, you’ll likely wonder if your idea is capable of success. Knowing how to identify a good business idea is essential to starting off on the right foot. 

Building your business on a strong idea makes it easier to succeed. You’ll be able to access an audience and convince people to purchase from you. Also, you may have better access to funding sources if your concept is profitable. 

This guide will cover how to identify a good business idea, including:

• Knowing the signs of a good business idea 
• Identify a problem (and solution)
• Consider your skills
• Doing the research 
• Making it specific 

So you’ve got an idea and think you can turn it into a business. But what are the key signs of a successful business idea? 

A good business idea should:

• Have a target market. 
• Be in demand. 
• Offer a unique solution. 
• Be well thought through. 
• Reflect your skills. 
• Be capable of earning a profit. 

Looking for these signs will help you determine if your concept is worth moving forward with. We’ll cover the best ways to test it. 

To determine if there’s a target market for your business, you’ll need to identify a common problem that your idea solves. 

To find a problem, consider your personal experiences. Is there something that often disrupts your day or slows down your productivity? 

Then go beyond yourself. Ask your friends and family if that problem affects them too. Do a quick Google search to see if many people feel the same way. You may even want to send out a survey, such as a Google Form.

The app Blossom is a good example of a problem-solving idea. 

The problem: People without green thumbs struggle to keep their houseplants alive. 

The solution: The plant care app offers beginner advice tailored to your plant species. It also analyses pictures to tell you what the plants need. 

Still, your solution might not be the only one in the market. So, your business idea should have a unique selling point to set it apart. 

A unique selling point makes your product or service different from or better than competitors. 

It approaches the problem in a way that people haven’t considered before. Or it targets a smaller audience to solve a more specific problem. 

Looking back to Blossom, the app was one of the first to offer photo scanning to analyse your plants for specific care advice. 

So when considering the idea, remember to identify: 

• The problem.
• Your solution.
• How your solution is unique.

A good business idea reflects your skills. If you have a background in this industry, you’ll be better prepared to make the most out of your concept. 

Say you want to start selling hand-poured candles. Ask yourself what skills you have that would come in handy. Then, if there are some skills you could develop or refine, look into training for those.  

You might take a course on professional candle making or small business management. Or, you could read books to support your knowledge. 

Here are some great places to strengthen your skills for your idea: 

• Courses– Udemy or LinkedIn Learning are great resources.
• Videos and podcasts– Youtube and Spotify offer a variety of options. 
• Books – Amazon or Waterstones sell books on nearly everything.

Knowing how to identify a good business idea takes a bit of research. With introductory market research, you can understand your business’s potential. 

With research, you can determine:

• Target audience – who will buy your goods or services.
• Main competitors – how many similar businesses you’ll need to overcome to stand out.
• Market trends – industry developments that affect your idea, such as advances in technology, social causes, or current events.
• Market demand – how popular your product or service is and who’s talking about it. It might be essential to daily life or more desirable.  

If you have a hard time pinning down these things, it can expose weaknesses in your business ideas. Similarly, many competitors and low demand might be a red flag. 

But finding a clear target audience and steady growth in the market can signal a promising business idea. Plus, research can help you find a niche that solves your problem in a new way. 

If you’re unsure where to start your research, you might look at: 

• Market statistics and trends – find these on platforms like Satista and Google Trends.
• Competitors – Google similar companies and look for products on platforms like Amazon. 
• Public opinion – Look to social media and use surveys or focus groups.

A good business idea is specific. So, as you develop it, consider these questions: 

• How will you make money?
• What precisely will you sell?
• How will you acquire the goods and services? 
• Where might you market it? 

Building upon your initial solution will help you bring the idea to life. The more specific you are, the easier it will be to sell it. As a result, you can turn your business concept into profit.  

For example, say you might want to start a bakery. You’ll need to determine: 

• Where you’ll set up shop.
• What baked goods you’ll sell. 
• If you’ll sell coffee and drinks as well.
• If you’ll offer seating or only do takeaway. 
• What unique business strategy will draw in customers.
• Which social media channels will reach your audience.

Answering these questions allows you to give your idea legs so it can start to run.  

Once you identify a good business idea, you can look to the future. The first step is to create a plan, which you can learn more about with our guide on how to write a business plan. 

But to succeed with your new business, you’ll also need to organise your finances. Why not try Countingup’s 2-in-1 business current account and accounting app?

It automates time-consuming bookkeeping admin for thousands of self-employed people across the UK. 

Save yourself hours of accounting admin so you can focus on growing your business. 

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