Developing an Idea for a New Business

Last Updated May 2, 2007 3:19 PM EDT

There are lots of reasons to start your own business. Maybe you're motivated to do something important. Or perhaps you're tired of working for someone else and want to control your own destiny. Either way, you'll need a good idea.

Start by breaking down the big picture into more manageable pieces. Decide if starting your own business is the best way to achieve the goals you are really after. Then look at your skills and knowledge to be sure you have what it takes to see it through. Consider your current occupation. Could you do your present job working for yourself instead of your employer? Or would you prefer to apply your skills and knowledge in new ways and start a business unrelated to the career you are leaving?

Once you decide to take the plunge, being sure your idea stands a chance to succeed in the marketplace will be your biggest challenge.

What You Need to KnowI'm not that creative. How can I come up with new business ideas?

Not all ideas are entirely new products and services; there are also opportunities for innovations and ideas that lead to shortcuts and efficiencies. Check the state of the art by researching your idea online. Visit your local library to examine current periodicals for industry reports and the location of business incubators that may be able to help you think through your idea. You might also want to discuss possibilities with a professor from a nearby business college. Don't forget an obvious resource: your friends and family. Tell them about your idea in detail, to see if it stands up to public scrutiny.

Do I have to start completely from scratch?

No. Obviously some businesses offer the world something that's never been seen before, but most successful companies make their money from adapting or re-thinking an existing business idea. Incremental improvement can be as lucrative as a breakthrough idea. For example, Michael Dell didn't invent the portable computer, but by mastering a new niche, he made buying a customized computer via mail order into a personal fortune. Today, the huge company that bears his name is a testament to how effectively he developed his own business idea. Be ready to modify your idea in light of what you learn and incorporate viable perspectives from colleagues and friends.

I am eager to serve my local community's needs with my new business. How can I pinpoint what people want?

Think about difficulties you may have had yourself trying to obtain things for your home, work, or free time. Think about times when you've urgently required a service, and then found that it was not available. Could your new business target that issue and solve it for local residents? Have you found a way to acquire parts or products that were hard or impossible to find locally? Think about the things that you, your neighbors, and your friends most frequently complain about. Listen to people talking at the gym or in the supermarket checkout line. Then ask yourself whether there is a way of providing a local service or product for any of these needs, and whether there is a worthwhile market to be developed.

If you're interested in offering products or service to other businesses in your neighborhood, ask them what they want! Do some research to find out what they find difficult to source. A new business park may host small and medium-sized firms, all of which need a way to feed their staff at lunchtime, but none of which have their own cafeteria. Maybe you could set up a deli or sandwich bar on the property. Or there might be room in the market for a local messenger or delivery service linking the industrial park with other businesses.

There is a lot of small business competition locally. What is the most effective way to zero in on realistic business opportunities here?

Before you think about business options, consider your locality it more detail. Is it urban or rural? What are the demographics of both residents and visitors? A golf shop, for example, may be an excellent idea if you live somewhere with an older population with time on their hands and a large number of tourists. Or, you may want to consider opening an outdoor environmental or recreation center in a rural area. The staff of your local tourist office can be a great source of information here: ask them for their views and any suggestions they may have for market opportunities in the area. Most states also have a department of tourism and most large cities have a convention and visitors bureau. Both of these resources can help you identify business opportunities.

I'd like to act as a distributor. What is the best way of researching potential suppliers?

Distribution is a popular option for small businesses and many new firms start out by selling items that are created by other companies. A number of opportunities exist to distribute Fair Trade goods or to import products from abroad. The Internet is a great tool to source products from abroad that would be competitive in the U.S. Check out offices of Trade and Industry Promotion in each country. This information and trade assistance is also available through each country's consulate in the U.S. They have regular listings of businesses willing to manufacture products for export or seeking partners to distribute their products abroad.

What to DoConsider Ways to Turn Your Interests into a Commercial Venture

Often, skills you acquired from pursuing a hobby could form the basis of a business. If you're a great cook, say, you could think about running a catering service for time-poor people who wan to entertain at home. Of if you're a keen gardener, you might consider starting a garden design business.

Consider Working from Home

If you have caring responsibilities for children or other family members and at home a lot as a result, you could to set aside space to begin a consulting practice. If you have sales experience, one other potential option is for you to sell other companies' products over the telephone. There are also an increasing number of opportunities to do contract office work using your computer and Internet connection. This can range from accounts work right through to translation, freelance writing and consulting.

Acquire a Business That Is Already Up and Running

Finally, you don't have to start a business completely from scratch: you could purchase one that exists already. If you choose this option, be sure to find out why the owner is selling. Even if the seller is retiring, remember to find out why he or she decided to retire at this point. For example, is it just time for that person to step back, or have sales been dropping or a big customer gone elsewhere? Have an accountant look closely at the business's accounts before you proceed with your purchase. To find a business for sale, look at your local paper, community web site, or relevant trade publications. You might want to work with a business broker to reduce your risk.

What to AvoidYou Give Up Too Soon

Ideas can take time to develop, so don't get downhearted if you have no sudden flashes of inspiration. Remember too that the valuable time you put into planning will help you avoid problems later and increase your chances of success.

You Don't Do Enough Research

If you don't do market research, you'll greatly increase your possibility of failure. Research will save you time and money. Be sure whatever you do, you will be adding value for your customers and clients. Choose a business idea that keeps you interested in improving your product or service. It is good to stretch yourself and to learn new skills but don't stretch yourself too far.

In the early stages of developing your idea, be sure to keep in close touch with your customers to see if the promised results were forthcoming. Integrate their feedback into the continuing development of your business idea.

You Don't Invest Enough Money

Most new businesses will require up to five years to begin making a profit. The worst way to go out of business is through bankruptcy. You need to have a large enough financial stake in your new idea to insure you can reach your market and give it a fair chance to succeed. Don't expect early returns and don't let fantasy outstrip reality. You will need resources for unexpected costs that escaped your initial business plan. Those costs might include the need for larger or more expensive space, more highly paid employees, shipping and receiving expenses—almost anything that you either underestimated or didn't anticipate. You should try to have enough financing to sustain you through at least six months to a year once you open for business.

Where to Learn MoreBooks:

Bragg, Andrew and Bragg, Mary. Developing New Business Ideas: A Step-by-step Guide To Creating New Business Ideas Worth Backing. Englewood Cliffs, NJ: Financial Times/Prentice-Hall, 2006.

Sandler, Corey and Keefe, Janice. 101 Small Business Ideas for Under $5,000. Hoboken, NJ: Wiley, 2005.

Web Site:

U.S. Small Business Administration: www.sba.gov