The business idea: The foundation of every venture

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How to find the right business idea

People often think they need an innovative and creative idea that sets them apart from all the other companies on the market before they can start a business. Indeed, the entrepreneurs that get the most attention these days are heading up disruptive hyper-growth startups.

But, it’s not always necessary to reinvent the wheel to be successful in business. Viable ideas can arise from current social trends, changing lifestyles, lack of customer service or an increasing demand in the market that is outstripping supply.

The discovery phase

Above all, don’t rush into anything when setting up a business. Go step by step, inform yourself well and don’t be afraid to take tips for starting a business from experienced entrepreneurs and advisers. Deciding your business’s name and legal form can’t be done lightly. But, before you do anything, you must find a viable business idea. Which, in essence, involves asking whether or not an idea can have success in the marketplace.

Ask the right questions

There’s no set formula for coming up with a stellar business idea. However, asking the right questions is your best bet:

1. Think about what you lack in your everyday life. What could make your day-to-day life easier?
2. Consider what annoys you frequently. What product could get rid of this annoyance? Would the product also add value to other people’s lives?
3. If you could change something about a product, what would you do differently or better?

New business ideas often come about because someone is dissatisfied with what’s on offer and wants things to change.

Your current situation also plays a role in the establishment of your business. You can theoretically build a business under almost any circumstances. But, depending on your starting point, the financing models and possibilities for applying for various subsidies also vary.

Turning old into new: Evolve existing business models

Every company has its origins in a good business idea. However, it is a fallacy that every business idea must always be brand new, innovative or particularly original. The success of a business, how it positions itself in the market and whether it prevails against competitors depends on many other factors.

Often it is enough to riff off an existing idea or a business model established on the market, redesign it or combine it with other ideas.

The key is to know the existing marketplace and to be informed about current trends and social developments. This allows you to expand and adapt the existing offerings to better suit the customer.

Tap into current trends

All industries and spheres of life are changing relentlessly. New products enter the market all the time, and these, in turn, are constantly creating new gaps in the market. Good ideas often emerge from a current trend. Monitor things vigilantly, and don’t hesitate to take advantage of new directions the world may head towards.

Example 1: CouchSurfing

The company “CouchSurfing”, for example, developed from an already existing concept. This is a social hosting network that was founded in the USA in 1999 and quickly became known all over the world. Members use the website to offer free accommodation to travellers or to look for a free place to sleep themselves. Especially for young people with little money to spare, the CouchSurfing concept offers a cheap alternative to expensive hotels. Sharing your home with travellers is a trend that continues today and has even been taken up and developed further by other companies.

Example 2: HelloFresh

Another successful startup story based on a trend comes from the food sector. For some years now, it has been observed that the consumer behaviour of many people is constantly changing. The trend is increasingly moving towards consuming fresh food instead of ready-made products. Three founders took advantage of this market development a few years ago and founded the company HelloFresh in Berlin. The company develops recipes and sends them together with the required food in a so-called cooking box. The concept was so well received by consumers that HelloFresh has now become the world’s largest delivery service for food as per recipe.

Of course, it helps if founders already know in which industry they want to start their own business. If this is the case, they can specifically search for developments in the corresponding sector. It can also be helpful to include studies and analyses from market research institutes, which can provide information about developments and trends in the market. Additionally, trade fairs and events are valuable sources in the search for market gaps and business ideas.

Get started directly with a market-tested idea: Open a franchise

If you want to start your own business but don’t have your business idea, a franchise could be a perfect fit. In Germany alone, there are more than 1,000 franchises, which means there are already more than 1,000 business ideas for you. Whether it is a clothing shop, a fitness centre, a supermarket chain or in gastronomy, franchise systems are widespread and have many advantages:

1. Founders don’t need to have a business idea but can use an already market-tested concept from a franchisor.
2. Business operations start immediately.
3. Franchisors grant the franchisee a licencing right for a fee. This includes the use of the corporate identity, and the trademark rights and allows the distribution of the goods or services.
4. Founders also benefit from the franchisor’s know-how and marketing strategies.

However, there is one major disadvantage: A franchisee is bound by a host of rules which can be restrictive.

Alternatively, you can also become a franchisor if you run a business with which you want to expand quickly.

An extension of the franchisor is the so-called master franchisor. As such, you acquire licences from foreign companies to establish them in your own country.

Tried and tested: Take over a business

If you want to start a business but don’t have a viable business idea then see if any established businesses are on the market. You may find a family company that no longer have family members to run the business and have little choice but to sell the operation.

The biggest advantage of taking over a business is that the company is already established on the market and has a customer base.

Discover untapped potential: Discover business ideas at the DPMA

If you are still looking for a business idea, you can have a look at the homepage of the German Patent and Trade Mark Office (DPMA). Many unused ideas were filed there but never exploited. There’s could be an exciting idea for your new business just waiting to be discovered.

1. How to start a business in Germany:

   1. Develop a business idea<<<
   2. Advice and preparation
   3. Choose a legal form
   4. Name check by IHK
   5. Notarisation at the notary’s office
   6. Open a business bank account
   7. Commercial register entry
   8. Trade registration
   9. Registration with the tax office
   10. First steps as an entrepreneur

Put your business idea to the test: How good is it really?

There is no general answer to how good or bad a business idea is. Sometimes an idea seems groundbreaking but later turns out to be a flop in practice. Or you have an idea for which you received bad feedback in advance, but which works surprisingly well in practice.

So you can never be sure in advance what value an idea materially has without testing it in real life. However, with the help of detailed market analyses, you can gain valuable insight into the potential success of a business model. You should also find out whether there are competitors for your business idea and, if so, how they are positioned in the market. This will allow you to maximise the market potential. For your business to be fruitful, you should also find out how high the demand for your product is and whether you can generate profits in the medium term.

Critically question the idea

1. What specific qualifications, experience and skills do you have? Are these helpful for setting up or running a company?
2. What additional qualifications should you gain?
3. Which target group(s) do you want to address with your product?
4. What sets your product apart from the rest? What are the unique selling points and why should customers buy your product?
5. What does the competition do differently or better? What can you adapt from them or do differently by design?
6. How will the market continue to develop? Can you be successful in the long term?
7. How can you position yourself strategically on the market?
8. What fixed costs (accounting, operating costs, personnel, etc.) and variable costs (raw materials, external services, advertising, etc.) do you expect?
9. What is your expected monthly net turnover?

Think in advance about which form you would like your business to take. If you want to minimise the financial risk and watch how your model develops on the market, a “side gig” is a great way to go.

Seek feedback

It often happens that founders, in their rush to create a business model, ignore or do not even notice the first signs of potential problems. To minimise the risk of failure, always critically scrutinise your idea and get qualified feedback. The first places to go are invariably friends and your own family. But it’s safer to ask a neutral person with the relevant know-how for advice, such as a business startup consultant or industry expert. A professional can examine your business idea with you from different perspectives and point out problematic aspects – with the necessary professional distance.

Financing a business idea

Once you pinpoint a promising business idea, it’s time to figure out how to finance the whole thing. From the search for investors or co-founders to novel financing models such as crowdfunding, crowd-lending or bootstrapping, founding teams have numerous financing options at their disposal.

Winning over investors

One of the most common ways to raise the necessary seed capital to start a business is to pitch the idea to potential investors and get them interested in the business idea.

Investors or partners can have different levels of involvement in your business. If they are silent partners, they only act as financiers for your business but are not involved in any business decisions. In the case of co-partners, it is the other way round: the investors also want to be involved in the business planning.

Additionally, there are the business angels. These are investors who act in tandem as financiers and mentors. You can find more tips on finding investors here.

Crowdfunding

So-called crowdfunding is one of the newer financing options. This method has become a popular way of raising capital, especially for startups and smaller companies. To do this, you need to create a short presentation that convinces potential backers to invest a small sum in the company. In many cases, crowdfunding takes place via media campaigns.

Protect your business idea

If you develop a good business idea, you naturally always run the risk of someone stealing it and using it for themselves. Especially when you present your idea to potential buyers, you should be careful that they don’t get rich from your business model. However, protecting an idea isn’t easy nor 100% guaranteed. But there are some things you can do to minimise the risk:

1. When choosing your business partners, make sure they’re reputable. If your partners are already established this gives you insight into how they operate. Moreover, stealing your idea would put their reputation on the line.
2. Have all investors sign a confidentiality agreement that gives you control on the outflow of information about your idea or business model.
3. Make yourself indispensable. For example, reveal only part of the idea or business model and make it clear that you are indispensable for the successful implementation of the idea. Bring in your expertise or other partners, for instance, without whom the business model would not work.
4. If your idea meets the requirements for a trade mark, patent, utility model or design patent, you can register it at the German Patent and Trade Mark Office (DPMA).

Selling a business idea

Sometimes someone has developed a good business idea but does not want to implement it themselves because, for example, they don’t have the necessary time or capital. On way to profit from the idea anyway, is to sell it.

Selling your idea is a matter of presenting it to potential buyers as persuasively as possible. Ideally, you can back up the likely success of the idea with market analyses. These facts are very important for the buyer because if the idea bombs later in the development phase, the buyer has made an enormously bad investment.

To determine how much your idea is worth, you should first make a profit forecast. This determines the possible future value of the company that grows out of your business idea. Based on this projected value, you can estimate the idea’s value.

It can also make sense to become an investor by means of a profit share or commission agreeement instead of a purchase price. In this way, the buyer takes a lower financial risk, and you have a long-term share in the revenue generated by the idea.

Business ideas are usually sold at trade fairs, via social networks or over the internet.

Want to know more about starting a business in Germany?

The ultimate guide to starting a business in Germany:

Do I have the right residence permit to start a business?
What legal form is right for me?
Getting ready to start a business
What you need to know about starting a side (hustle) business
How to set up a business in Germany
Taking your first steps as an entrepreneur

How to get started in specific industries:

How to open a retail business
How to open a sports shop
How to open a taxi business
How to open a shisha bar
How to establish a childcare centre
How to open an agency
How to open an advertising agency
 How to start a nursing service
How to start a transport business

Master list:

The Master list of all Company Formation articles

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