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Starting a business - sources of business ideas

Author: Jim Riley  Last updated: Sunday 23 September, 2012

Starting a Business - Sources of business ideas

Where does an entrepreneur come up with the idea for his/her business?  In practice there are many ways in which the business opportunity and idea is first spotted.  As we shall see, sometimes luck plays a big part; at other times there is a role for approaches which encourage deliberate creativity.

Here are some of the main sources of business ideas for start-ups:

Business experience

Many ideas for successful businesses come from people who have experience of working in a particular market or industry.  For the start-up, there are several advantages of applying this experience to a new business:

  • Better and more detailed understanding of what customers want
  • Knowledge of competitors, pricing, suppliers etc
  • Less need for start-up market research
  • Entrepreneur is able to make more realistic assumptions in the business plan about sales, costs etc
  • Industry contacts, who might then become the first customers of the start-up!

All of the above help the business planning process and you could argue that they reduce the risks of a start-up.
On the other hand, you might argue that “familiarity breeds contempt”.  In other words, detailed experience of an industry means that the budding entrepreneur doesn’t have a fresh perspective.  Someone who is new to a market may be able to exploit approaches that have worked in other industries to make an impact with the start-up.

Personal experience

Many ideas come to entrepreneurs from their day-to-day dealings in life, or from their hobbies and interests. For some of us, frustrating or bad experiences are a source of irritation.  For the entrepreneur they might suggest a business opportunity. 

It is often said that one of the best ways to spot a business opportunity is to look for examples of poor customer service (complaints, product returns, persistent queues etc).  Such examples suggest that there is an opportunity to do something better, quicker or cheaper than the existing products.

Hobbies and interests are also a rich source of business ideas, although you have to be careful to avoid assuming that, just because you have a passion for collecting rare tin openers, there is a ready market from people with similar interests!  Many people have tried to turn their hobby into a business and found that generates only a small contribution to household income.


Simply observing what goes on around you can be a good way of spotting an idea.  Often an idea will be launched in another country and has not yet been tried in other, similar economies.  When Stephen Waring was in the USA attending a wedding, by luck he sat next to someone who ran a household service business (treating lawns).  After some brief market research, Stephen found out that there was no similar business in the UK, so he launched one.  It has since become a hugely successful franchise business – Green Thumb.

It is worth looking at some other examples of how successful start-ups got their ideas in order to appreciate the diversity of sources.  Here are some good ones:



Where the Idea Came From

Glasses Direct

James Murray-Wells

James was fed-up with being charged “rip-off prices” for prescription glasses.  He researched the supply chain and found he could offer consumers the same product at substantially cheaper prices by selling direct.

King of Shaves

Will King

Will found traditional wet-shaving painful due to his sensitive skin.  His girlfriend suggested using oil to smooth the process.  An oil-based solution to shaving was developed and is now a world leader.

Tyrrell’s Crisps

Will Chase

Will needed to find an alternative use for the output from his loss-making potato farm.  He added value to the potatoes by turning them into premium-priced crisps.


Fraser Doherty

Fraser turned his grandmother’s recipe for sugar-free jams into a best-selling grocery brand.

Beautiful Vending

Neil Mackay & Richard Starrett

Neil & Richard spotted the potential for grooming machines whilst working in entertainments industry.

Jo Jingles

Gill Thomas

Gill made a lifestyle choice to move out of the corporate world and set up her own business. She combined her personal interest in teaching music to children with an idea for a franchise format.

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Revision quizzes for business students

Starting a Business

Sources of Finance for a Startup
Cash Flow Forecasting for a Startup
Creating & Protecting Business Ideas
Startups and Understanding the Market
Market Research for a Startup
Locating the Startup Business
Choosing a Legal Structure for a Startup
Employing People in a Startup
Generating and Protecting a Business Idea
Using Breakeven in Decision-Making


Breakeven Basics
Costs, Revenues and Profits
Business Costs
Using Budgets
Using Breakeven in Decision-Making
Investment Appraisal Basics
Financial Strategies
Measuring and Improving Profit
Improving Cash Flow
Working Capital
Balance Sheet
Income Statement
Financial Efficiency Ratios
Profitability Ratios and ROCE
Liquidity Ratios


Products & Brands
Place (Distribution)
Price Elasticity of Demand

Business Organisation

Basics of Business Growth
Business Activities
Legal Structure Basics
Sole Traders and Partnerships
Limited Companies
Generating and Protecting a Business Idea
Organisational Structures


Working in Teams
Communication Basics
Communication Methods
Workforce Planning
Recruitment, Selection & Training
Employee Motivation
Organisational Structures


Operational Objectives
Critical Path Analysis
Scale and Resource Mix
Lean Production
Capacity Management
Customer Service Basics
Managing Quality
Operational Decision-making
Using Technology in Operations
Working with Suppliers

Economic Environment

Economic Sectors
Government Spending & Taxation
Interest Rates & Monetary Policy

Business Strategy

Leadership styles
Business Culture
Change Management

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