15 Characteristics of a Good Business Idea

The best business ideas generate high profits and involve low risk. Unfortunately very few such opportunities exist. However, here are fifteen characteristics of a commercially viable idea.

1. Identified market need or gap – the idea must meet a clearly identified market need to be commercially viable.
2. No or few existing competitors – the more innovative the product/service and markets, the fewer competitors, and the higher the price you are normally able to charge. However, remember it is always possible that there are no competitors because there is no viable market for the product/service.
3. Growing market – it is always easier to launch a business into a new or growing rather than declining market. Of course it may be that you are launching a business that will create a completely new market.
4. Clearly identified customers and a viable business model – if a business does not know who it is selling to it won’t know how to sell to them, which means it probably will not succeed. And remember it may be selling to more than one market segment. The business model should be built up systematically to appeal to these target customers.
5. Low funding requirements – the lower the funding requirement, the easier it is to start-up and the less you have to lose if the idea does not work.
6. Sustainable – the business must be built on solid foundations so that it has longevity.
7. High profit margins – the more innovative the product/service and its target market, the higher the margin is likely to be.
8. Effective communications strategy – once you know who you are selling to, and why they should buy from you, you need to be able to communicate a persuasive message to them and build a loyal customer base.
9. Not easily copied – if it can be, protect intellectual property. However, often getting to the market quickly and developing a brand reputation is the best safeguard.
10. Identifiable risks that can be monitored and mitigated – the future of a start-up is, by definition uncertain. Identifying risks is the first step to understanding how they can be monitored and then mitigated. The more strategic options you have identified the greater your chance of success.
11. Low fixed costs – low fixed costs mean lower risk, should volume reduce. It gives you flexibility. A combination of high profit margin and low fixed costs (high profit, low risk) is always very attractive.
12. Controllable – putting in robust operating and financial controls increase the chances of survival and success and ultimately will add value to the firm. The major imperative in the early years is to monitor and manage cash flow.
13. Management skills that can be leveraged – the entrepreneur needs to have the appropriate management skills and, if they do not, they need to acquire them or recruit or partner with others with the appropriate skills.
14. Scalable – small projects can usually get off the ground easily but bigger projects can be problematic because they are just ‘too big’. In which case, you need to see whether the project can be broken down into smaller projects that can be implemented when the original idea is proved – scalability. The idea is to avoid as much risk as possible for as long as possible – but to make sure you do not miss the window of opportunity completely. This is all a question of judgement and changing market conditions, so you need to remain flexible and think through how you might scale-up the project when it proves successful.
15. Financeable – if you do not have sufficient resources yourself, the project needs to be able to attract finance.