15 characteristics of a good business idea

We will explore 15 characteristics of a good business idea. Because businesses that often fail, do so because they don't have a good business idea to start with.

29 Dec 2021

15 characteristics of a good business idea

The first step in the process of starting your own company is coming up with an excellent business idea. What you’re trying to create can be anything from a complex website or app, all the way down to simply selling homemade lemonade on the street corner! Whatever it may be, there are some characteristics that they all share. In this article, we will explore 15 characteristics of a good business idea. Because businesses that often fail, do so because they don’t have a good business idea to start with.

Many of these characteristics will only become apparent as you develop your business model. In doing this you need to be flexible and develop strategic options as you go through the process. If the preferred option turns out to be unattractive or impossible, you can then return to consider the other options you have come up with. The idea generation process and flexibility are extremely important in this case.

1. There is a market need or a gap that has been identified

A great business idea must be able to meet a clearly identified need in the market. The more specific that need, the better you as well as other people who might have similar needs will understand your business idea. This will make your company’s product much easier to explain when they try out what exactly makes the product different from all other available options right now. It can’t just do anything, it has got to solve some real problem that the current options are not solving!

2. A few or no competitors at all

The more innovative your product/service and markets are the fewer competitors there are, and the higher the price you may charge. However, keep in mind that there may be no rivals if there is no sustainable market for the product or service.

Looking at the past we see that most businesses are building on existing products which gives them unique features. However, there are only very few business ideas that are innovative to disrupt the complete market. This is, however, the ideal situation. We do see that businesses that offer something different that also fit the needs of the consumer generally succeed. Keep in mind that you may struggle when there are none or a few competitors as there might not be a market need or, what is most of the time the case, consumers are not aware of that need yet. So, convince them!

3. Emerging or growing market

As most business ideas are developed upon existing products and services there are not as many new markets that get created. Having your business idea within an emerging or growing market gives you the advantage of consumers understanding your product better while also having some form of proven demand. Those relatively new markets still provide you with the opportunity to gain a first-mover advantage and be ahead of your competitors.

Another important point (for start-ups specifically) of being in this stage of the market is more towards investors. They prefer a market that is still growing but also that the demand is proven. This will give them high returns with lower risks.

Growing market

4. Clearly identified customers

You can’t build a successful business without first identifying your customers and figuring out what they want, need, and how they want to be served. Be systematic in developing this part of the process, so that when it comes time for sales you are able to provide exactly what they need from every angle possible!

Keep in mind that you might serve more than one market segment and therefore also more than one type of customer. Try to be as specific as possible per product or service and customer group for optimal results.

5. Communication is key

Once you know who your customers are, and why they should buy from you, it’s important that your message is communicated excitingly and effectively. Because, in order to sell effectively, you need to be able to communicate and convince your customer about why they should buy from you.

If someone is interested in buying something from you, you need to talk with a happy tone of voice because this conveys enthusiasm for what’s being offered! But also be extremely clear, don’t fly around with all possibilities but focus on what the customer needs. This will be the start of building your customer base.

Communication is key

6. The concept can be funded

Make sure that your business idea can be funded. This will depend on the resources you have available and whether there’s a need for outside investment, which could come from investors or other sources such as loans. It is great to have inspiring ideas but if there is no way it can be funded, it is hard to even start.

7. Funding needs are minimal

Funding requirements are a major challenge. If you have less of an initial investment, it’s easier to start up and try out new ideas without risking too much!

If you have a more capital-intensive idea, start with a minimal viable product (MVP) to test it out before making the final product. 

For example, you want to create an innovative app and you have identified the market need with your target group. You can create a paper version of the app and have people interact with it to see what people think and what their behavior is. This will provide you with extremely useful information which you can use in the process of developing the real app or showing investors as part of your research and fundraising.

8. Profit margins that are high

Your margin is likely to be higher if your product/service and market are both innovative. But also the type of business you start is an important factor in your profit margins. Creating physical products has most of the time a lower profit margin compared to a digital product that can be sold infinity.

9. Fixed costs are low

Low fixed costs will give you flexibility when your amount of sales will drop as there is less risk of being unable to cover those costs. A combination of high profits margin and low fixed cost (high profit, low risk) is always very attractive for businesses who need to make quick decisions under pressure.

Different types of business models will have different financial structures. In a general sense, an digital business model has less fixed costs than a manufacturing company. Which gives the digital business an advantage when the demand drops due to an event.

10. Sustainable business model

A sustainable business idea is one that has staying power for the long-term future and doesn’t depend on trends to succeed. Businesses like Starbucks and Apple have been around for decades because they offer products people want year after year, not just one season at a time. This does not mean you cannot create a business model with seasonal fluctuation. But try to keep it as general and relevant as possible.

11. It’s difficult to copy

Protect your intellectual property whenever you can, as this will protect your idea, product, and your business. However, keep in mind that this can become quite expensive. It is therefore often more important to get to the market quickly and develop a brand reputation as this will also play a role in the customer buying decisions and is, therefore, one of the best safeguards out there.


12. Risks are identified, monitored, and mitigated

Identifying the risks in your company is key to its future. You can identify them by looking at what’s uncertain about your business model (which has a very broad range), and then monitoring those areas that need more information or mitigate their impact on other parts of the business if they arise as possibilities. The more options you have identified, your chances for success increase exponentially!

13. Controllable business

There are many ways to ensure a successful business and keep it from succumbing. One way is by putting robust operating and financial controls in place that will help you survive during difficult times when other companies might fold under pressure. The major imperative for early years businesses isn’t just about monitoring cash flow but also making sure all aspects of operations run smoothly so there’s no room left unoccupied with potential risks.

14. Your business is scalable

Starting small gives often a feeling of safety as it is easier to start and attract your first clients. However, when success kicks in (which is great of course) you are starting to feel the ceiling of your business. Big projects are starting to become problematic because they are just too big. 

It is important to think beforehand about how to tackle such a big project. Can this be done by breaking it up into small tasks? Can I use freelancers to do part of the job? Or do I even have to change the whole business model to create a scalable product? If you have a service that is time-intensive and you are the only expert you will run out of time quickly. 

Start thinking about ways your service can become scalable, for example by transforming it to a digital product or a self-help system in which you only step by once instead of the whole process.

15. Skills in leadership that can help your business grow

The right management skills can make or break a company, and if you don’t have them it’s time to step up your game. If that sounds like something exciting for you then grab some books on how to become an awesome manager! If you are not that exciting, try to look for a great manager or co-founder to further help you in this process. Because leadership skills are needed to further grow your company and scale it to the next level.



The 15 points described in this article are just some of the most important ones to keep in mind when starting a business. Every business is different and will have its own unique risks, challenges, and characteristics but it’s important to be aware of these things so that your company can flourish. Make sure you do your research, put systems in place to help you survive difficult times. And most importantly, have faith in your idea! With hard work and a bit of luck, you’re on your way to success.

Written by Julian Oude Maatman

Graduated with a Masters in Entrepreneurship and Business Development. Passioned about setting up businesses and helping other entrepreneurs around the globe

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