How to come up with a great idea for a Startup

Lots of people like the idea of having their own business, and particularly during these uncertain times with layoffs and job losses, now may be the perfect time to take the leap yourself. One of the things that research has shown is that there are good ways and bad ways to start a new business, and the number one part of that is how you come up with the idea for it.


People usually find their business in one of three ways. One is that they work in an industry or environment and become aware of an opportunity through the experience they have there. They see something that doesn’t work properly or they know that the service providers are all inefficient and ineffective and they know they can do it better. That’s generally a pretty good way to start a business as it is based on meeting a real, proven customer need. The second is that they wake up after having a dream about an idea or it comes to them when they are out for a run – i.e. it comes out of nowhere.


After doing a little online research, they usually find that those ideas are ones that others have already had so unless they can do it a lot better, they probably aren’t going to start a business based on that brainwave. The third is that they decide that now is the time to start a business and they start looking for ideas and don’t start one ‘til they have a winner.


It is that 3rd way that we’re going to talk about here. It is about finding a problem and a customer segment to serve and if you follow the right steps, you should be able to come up with some potential winners in just a couple of weeks.


It seems a bit bass-ackwards, but the best way to find a new business idea is to start with the customer, not the problem itself.  How do you do this?


  1. Look at your own life. You’re actually a member of many groups: you’re a cyclist, a parent, a guitar player, a photographer, a bridge player…a whatever. Identify any of these groups that you have a passion for, that is large and growing and that you have regular contact with. All of these criteria mean that you have unique insights into that group. Once you’ve gone through those, look at the groups you used to be a part of and then those you’d like to be a part of. These are the groups you’re going to start with. Use the worksheet below to identify which are the highest-ranking groups cuz you’re going to start with those.
  2. Once you’ve identified your top 3 or 4 customer segments, it’s time to move onto the next step. Look at these customers and think about the unmet needs they’re struggling with. You’re going to think of a bunch, but keep in mind that some of them are just un-solvable. There is a difference between ideas and opportunities and the key is that opportunities are ideas that are actionable. You can actually do something about them. It isn’t worth wasting time trying to build a company around a problem that you can’t fix, no matter how hard you try.
  3. Consider the difference between needs and wants when you look at the opportunities. There’s an expression to keep in mind – is that a “need to have” or a “nice to have”? You’re looking for a “need to have”, if possible, as those are the ones that people will pay to solve. By the end of this step, you should have a list of unmet needs for each of the customer segments identified above.
  4. Now what?? Now, you’re going to look for early adopters in your groups. Those are the people how already have the problem and know that they have it. They have been trying to solve the problem but their solution, while better than nothing, is not really optimal. They’d pay to have a better solution.  They’re the ones you need to talk to. How do you find them? You can look for blogs or articles or social media. Investigate conferences and support groups. And don’t forget about competitors – some of their customers are going to be your early adopters – they’ve been trying to solve the same problem through different methods.
  5. Next, you’re going to choose a beachhead – one achievable, niche market where you can, in theory, attain a significant market share. And then you’re going to test by doing customer discovery interviews. The most successful entrepreneurs test, and test and then test some more. They make assumptions about the customer, the idea, the problem and the current solution and they turn those assumptions into hypothesis. Then they test and either validate the assumptions and move forward, or they disprove and replace the hypothesis with another. Anytime an assumption is disproved, you pivot.
  6. There is a great test you’ll use again and again called the “stoplight test”. The stoplight test often uses a 40% measure. If 40% of the people you interview about your idea say they like it and would pay for it, you move forward (green). If 10% or less say they would buy, you need to pivot back and have another look at your product/service (red) and if something between 10% and 40% say they would buy, you need to see if adding additional features or removing features or replacing features brings your numbers up above the “go” threshold of 40% (yellow). This stoplight test can be used at every step of your entrepreneurship journey, from the product/service itself, to the price, to the packaging, website design, etc. 40% is the most common cutoff point, but you can set your own. Every time you run this test, you use the insight to either proceed or pivot.
  7. The final step in this ideation stage is finding the solution. Remember that the solution must be exponential to address the problem. That means that it needs to be 10X faster, stronger, lighter, cheaper, better for a customer to switch from the current solution to yours. Customers aren’t interested in the switching costs for something that is only a little bit better than what they currently use. Once you have an idea that meets the 10X rule, you’re going to create a minimum viable offer – something that lets you test the solution’s value without having to build the product itself. There’s that word again…TEST! The new way of entrepreneurship is that you don’t wait til you have the perfect product before hitting the market. Rather, you’re going to create something that lets you go out and talk to people and allow your customer to help you refine the product til it is something that they want to buy. If you forget about the customer, you might as well forget about success!


That’s the start…there are lots more entrepreneurship steps involved in building a business, but if you don’t get the beginning right, you reduce your chances of having the successful startup you’ve been dreaming about.

Elisa Palter

About the Author

Elisa Palter

Elisa has co-founded and successfully exited 2 small businesses, written business cases for Harvard Business School, and was part of the team that founded a prestigious Liberal Arts College overseas. She assists select NFP organizations with their messaging and strategy, and coaches women who are looking to become entrepreneurs. Elisa is passionate about entrepreneurship and its ability to empower individuals, particularly women.

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