How Do You Know If You Have a Good Idea for a Business?

One of the best ways to know if you have a good idea for your business is to talk with people who are currently running businesses similar to yours. Ask them what they would change about their current company culture, or what problems they had solving that caused it. You want an opportunity? Find out where there’s room for improvement and find solutions.

what is an idea that is worth a business” can be difficult to define. For some, it might mean starting a company with the goal of making money. For others, it might mean starting a company with the goal of impacting society in some way.

This post is part of our Business Startup Guide, a selected collection of our articles that will help you get up and running quickly!

How can you tell if you have an excellent business idea?

At Palo Alto Software, one of my greatest difficulties is deciding which ideas to explore and which to put on the back burner. I have the benefit of working with a group of very intelligent individuals, so fresh ideas for things we might do arise on a regular basis. I believe we are awash with opportunity, from prospective collaborations to new product and marketing concepts.

But, like any other entrepreneur, my problem isn’t a shortage of fresh ideas; it’s deciding which ones are worth investing time and money in.

This is true whether you’re a self-funded company using credit cards and loans from family and friends, or the next Silicon Valley darling with a war chest of millions in venture capital financing.

Choosing what product to create and what services to provide is a significant problem no matter who you are or how large you want to grow your company.

Of course, you could simply trust your instincts. That isn’t always a terrible thing, but guessing what your business should do may lead to disaster just as easily. And, given that the overwhelming majority of companies fail during the first five years of operation, why not take a few additional measures to see whether you really have a fantastic concept before putting your time and money into it?

Any business venture requires a significant leap of faith. You’re about to leap over a cliff, hoping that your parachute will deploy and take you and your company to success. How do you pick what to do with your time when you have so many options? How do you know what’s a good idea?

Here’s how to tell whether your concept is any good and if it’s worth taking to the next level.

Begin by writing out your main business assumptions.

Skip the formal business plan and start with a Lean Plan or a short elevator pitch to write down the essential components of your concept while you’re initially contemplating it. At the very least, you should include the following:

  • What is your motivation for doing this? What is your goal? A feeling of purpose is required for all new companies. Are you attempting to make a difference in people’s lives in any way? What are your company’s key differentiators that set you apart from everyone else attempting to create a comparable business?
  • What issue are you attempting to resolve? You must be attempting to solve a real-world issue. How can you persuade people to purchase your product or service if you aren’t addressing an issue for prospective customers?
  • For whom are you resolving this issue? Having clients who have this issue is just as essential as having a problem to address. To establish a successful company, you must first figure out who your ideal client is and how to locate them.
  • Today, how are your prospective consumers resolving their issues? This is where you should jot down some ideas for your competition. Today, what options do your consumers have? What makes your solution superior?
  • Do you believe you’ll be able to earn money? You don’t need to worry about detailed financial projections at this point, but you should perform some simple back-of-the-napkin numbers to ensure your concept is viable.

The key to this first stage is to jot down your main assumptions as soon as possible—30 minutes should enough. You don’t have to write much (certainly not more than a page). Simply get your thoughts out there so you can get a sense of your main assumptions, since the next stage is to go out into the actual world and check whether your assumptions are correct. If you need assistance with this phase, you may start by downloading our free Lean Plan Template.

2 business idea validation

Make contact with prospective consumers.

Surprisingly, most entrepreneurs skip the stage of communicating to prospective consumers about their new company concept. If you don’t speak to your prospective consumers, you’ll have a far higher probability of failing, so go out there and start talking to them as soon as possible.

You’re attempting to verify your main assumptions that you recorded in your company presentation when you interview prospective consumers. Do they really have the issue you think they do? What is their current solution to their problem? What are their thoughts on your concept?

Make sure to speak with as many prospective consumers as possible to obtain a variety of perspectives. You’ll also learn a lot about your clients’ offices and workplaces, how they operate, and how they make purchasing choices and shop.

You should revisit your pitch as you learn more about your prospective clients. You may change how you define the consumer issue, how you solve it, and even how you compete.

3 business idea validation

If you have one, show a prototype of your product to potential consumers.

Try to provide an example of your solution if you can and it makes sense for your company. If you’re developing a product, you may be able to provide a prototype or some photos of what it looks like. If you’re selling a service, explain the outcomes and deliverables you’ll provide if your prospect hires you.

Ideally, you want to get your prospective consumers on board with your concept and have them criticize it. The more realistic your concept is for your prospective consumers, the better feedback you will get.

4 business idea validation

Determine how much individuals are willing to spend.

Try to find out what your prospective clients are willing to spend for your solution while you speak with them. This may be difficult since, in a perfect world, everyone would want everything for free!

Instead of asking directly, there are a few methods you may use. If there are rivals in your market, you may first look at their price before deciding how you want to set yourself apart. You may also price your product or service depending on the value you provide to your client.

When you’ve settled on a pricing, ask your potential consumer whether they’d buy your product or service right now at that price. People may respond positively straight immediately, or they may tell you what they believe the price should be. You can also determine whether the client feels they’re getting a good bargain or if your pricing is a bit of a stretch if you pay closely.

5 business idea validation

Find individuals who believe your concept is a waste of time.

It’s easy to get only favorable comments when you pitch your company concept to friends and family. Even prospective consumers may not want to offend you by not giving you their full and honest opinion.

Finding a few skeptics is crucial at this point. Find individuals who oppose your viewpoint and have them find holes in it. Why do they believe it will fail? What do they think your flaws are?

You don’t have to address all of the flaws that these critics point out, but you should get input from individuals who believe you can better. Although not everyone will be your client, it is preferable to start into a new business venture with an open mind. Are there any possible stumbling blocks that you haven’t considered? How will you react if a potential client expresses dissatisfaction with your product?

Getting input from individuals who aren’t fans of your business concept may help you figure out how you’ll deal with these problems and what your solutions will be as you grow your company.

6 business idea validation

Find out how much money you’ll need to start your company.

You’re ideally narrowing in on a fantastic company concept as you collect consumer feedback and improve your proposal.

Before you start your company, you should vet and refine your concept to verify that it is sound.

You should be able to tell whether you have a winning concept at this point. However, you must now determine if the company is financially feasible and what you will need to get it off the ground.

This is where you’ll go beyond your first company presentation and start creating more comprehensive financial forecasts to determine how much money you’ll need to get started. Create a sales estimate, an expenditure budget, and a cash flow projection at the very least at this point. These three predictions will assist you in determining what it will need to launch your company and keep it open as you get your first clients.

7 business idea validation

Begin with a little project.

It’s tempting to jump right in and start building your whole company the way you want it to be. After all, you want to see your vision come to life that you’ve been working on for so long. You’ve been selling your idea to prospective consumers, and now it’s time to make it a reality.

If at all possible, try to resist this desire. Growing a business requires starting small and collecting feedback from consumers. You’ll be able to alter course and respond to consumer input more quickly if you start small.

Starting small also allows you to bring your solution (at least the bare-bones version) to market faster. The sooner you can go to market, the more input you’ll receive.

You’ll feel unprepared when you open your doors for business with a “start small” strategy. Customers, on the other hand, are more likely to be unconcerned. And, in the long run, the capacity to pivot and shift directions rapidly is much more important than attempting to do everything perfect the first time.

8 business idea validation

 Maintain your adaptability.

Staying adaptable is the last step to ensuring that you have a solid concept that will develop into a great company. The greatest company entrepreneurs leave their ego at the door and listen to what their customers have to say. However, this does not imply that the consumer is always correct. Not at all.

Listening and flexibility, on the other hand, allow you to adjust as you go and alter paths as required. You don’t want to respond to a single customer’s view; instead, you want to search for larger patterns in as many customers’ thoughts as feasible.

You may even come to the conclusion that some kinds of prospective consumers aren’t in your target market. You may decide, for example, that you only want to sell to larger companies, and you may change your price and marketing accordingly.


This method of determining whether or not you have a viable company concept necessitates beginning considerably smaller than you may have anticipated. It also implies that you don’t sit at your computer writing a company strategy without first speaking with your consumers.

This is the essence of Lean Planning: start with the basics of a plan and then double-check that your concept is sound before going on to the next stage.

How have you previously vetted business ideas? What advice do you offer for fellow entrepreneurs who are trying to find out whether or not a business concept is worth pursuing?

New Call-to-action

When you have a business idea, it is easy to get caught up in the excitement and forget about your actual idea. One way to figure out if you have a good idea for a business is to talk with other people who might be interested in what you’re doing. Reference: i have a business idea who do i speak to.

{“@context”:””,”@type”:”FAQPage”,”mainEntity”:[{“@type”:”Question”,”name”:”What makes a business idea a good business idea?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”A: A good business idea is one that is profitable, has potential to increase the profit margin, and provides a sufficient return on investment. Unfortunately, its hard to tell what makes for a successful business without having experience in the field yourself.”}},{“@type”:”Question”,”name”:”How do you know if a business idea is profitable?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”A: The job of a business is to produce revenue. For example, if you open up a bakery that sells cakes at $1 each and they sell out every day, the bakery will make money because it has produced revenue for its investors. Its important to note here that not all businesses are profitable though.”}},{“@type”:”Question”,”name”:””,”acceptedAnswer”:{“@type”:”Answer”,”text”:””}}]}

Frequently Asked Questions

What makes a business idea a good business idea?

A: A good business idea is one that is profitable, has potential to increase the profit margin, and provides a sufficient return on investment. Unfortunately, its hard to tell what makes for a successful business without having experience in the field yourself.

How do you know if a business idea is profitable?

A: The job of a business is to produce revenue. For example, if you open up a bakery that sells cakes at $1 each and they sell out every day, the bakery will make money because it has produced revenue for its investors. Its important to note here that not all businesses are profitable though.

Related Tags

  • how to determine if a business idea is profitable
  • what is a good business idea
  • how may the best business idea be determined
  • what makes a good business idea
  • how to know if an idea is worth pursuing