How to come up with a good idea

In the first of a new series on the what, how, when and who of setting up your own business, The Gateway starts with the basics
Commercial awareness

It's the $64 million question that's on the mind of every want-repreneur: how do you come up with an idea for a business? There's one school of thought that says: "If you have to ask, then you'll never know." But we'd say that's wrong. This view does a disservice to the craft of entrepreneurship, reducing it to something that randomly happens to people rather than the conscious decision it is. There are things you can do to come up with a good business idea, and luck hasn't got anything to do with it.

Consider what a business - any business - actually is. Look past the logo, the website and the bricks and mortar, and you'll see an attempt to solve a problem. Google is a solution to the problem of how to search for information on the internet. eBay is a solution to the problem of how to buy and sell stuff online. CNN is a solution to the problem of how to communicate news globally. Put simply: problem + solution = business idea.

How do you find worthwhile problems to solve? One way is to adopt an unruly mindset. Be a troublemaker on the lookout for wrongs to right and things to fix. Keeping up-to-date with current affairs, for instance, will help you do so. Those who followed the news last year will know that tablet computers such as Apple's iPad were among the most popular new consumer products. But most cost hundreds of pounds, a price tag that puts them beyond the reach of many in the developing world. The One Laptop Per Child (OLPC) project has come up with a solution set to launch in 2012: they have sourced relatively cheap components to build tablet computers for just £60. You may doubt whether even this much lower price is affordable to its target market, but you would be hard-pressed to argue that their idea is not a decent solution to a worthwhile problem. But they did not do anything that you couldn't have done: they saw a problem (tablet computers too expensive) and thought about what it would take to solve that problem (use cheaper components to make more affordable models).

Once you have come up with your idea, you will want to know it's a good one before committing your time and energy to it. First, spend time making sure it will generate more money than it will cost to run. No point proceeding if it doesn't meet this basic criterion (of course I'm assuming here a for-profit venture). Then follow these three steps and you can't go too far wrong:

1. Run the idea by friends and family

You need to check that your idea is not totally ridiculous. Your friends and family will point out potentially damaging flaws as they don't have any reason to give you anything but honest feedback. Listen to them - and if they have valid criticisms, adjust your idea accordingly. If you go straight to potential customers you could end up losing credibility and wasting precious time.

2. Discuss it with people with track records in the relevant sector

Unless your friends and family are experts in the field in which you want to operate, or members of your target market, their views are not strong enough to tell you whether you're onto a winner. You need someone with relevant experience to sanity check your idea. You can find these people through friends or websites like LinkedIn. Again, listen to their feedback and adjust your idea if they identify any weak areas. Remember that even if they take an axe to it, that's a good thing - it means you now know that you need to do some re-thinking or re-positioning. If the expert likes you, with luck they'll help. And if the conversation goes well, they could introduce you to potential customers, be a long-term advisor or even invest in you.

3. Introduce your idea to potential customers

So your industry expert has set up a meeting with a potential customer. A prototype with some evidence of traction is a great thing to have for this meeting. Approach it as a conversation about how your idea might be able to help them solve a problem they face - you're the tailor presenting them with a suit, hoping that it fits. Pay attention to everything they say and note any adjustments which they directly or indirectly request. You might have gone into this meeting with a good idea, but if you listen carefully you could leave with an even better one.

There you have it. Now you have a business concept that has been validated by an industry expert and customers and which should be profitable. That will be $64 million, please.

Continue learning below