Beyond Eureka

Looking for a great business idea? These five steps will take you from blank slate to booming

Robinson ended up with a massage studio after vetoing a yoga business and a gym Photograph by Bill Cramer/Wonderful Machine

By Amy Barrett

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The accepted mythology of entrepreneurship goes something like this: An average guy or gal has a flash of inspiration, funds a startup with credit cards, and eventually achieves runaway financial success. Sound familiar?

We're not going to deny the importance of the "Eureka!" moment. But it's not the only—or even the most successful—way to start a new business. According to Paul Reynolds, a visiting professor at George Mason University, about one-third of entrepreneurs have the desire to strike out on their own before they have a particular business in mind. Reynolds comes to that estimate from his experience as one of the principal investigators of the Panel Study of Entrepreneurial Dynamics, which has observed about 1,700 entrepreneurs over the past decade.

The process of coming up with a great idea for a new business need not be shrouded in mystery. Serial entrepreneurs, in particular, tend to follow a well-thought-out, disciplined process. "You increase your chances of success when you use a well-defined methodology rather than pulling an idea out of the air and running with it," says Danny Warshay, a Brown University adjunct professor and managing director at Providence-based DEW Ventures, a firm that invests in and coaches startups. A 2008 paper by James Fiet, a professor of entrepreneurship at the University of Louisville, found that training MBA students to use a systematic approach dramatically improved the wealth-creating potential of the business ideas they generated.

On the pages that follow, we outline the methodology followed by successful entrepreneurs to find, vet, and develop their ideas. We'll show you how to outline your goals for the business, brainstorm possible concepts, screen opportunities, and test your ideas' viability. Sure, you could wait for a bolt from the blue—but isn't it better to create your own?

Step 1: Set The Stage

THEORY: Your first task is to set some parameters for the new business. "You have to be clear about what sandbox you are playing in," says Brown University's Warshay. That means you need to know who will be on your team, what your goals are, and how much money you'll have to reach them.

Start by asking yourself—and your business partner, if you have one—a series of questions. First, will this be a lifestyle business? Or do you want to create a fast-growing enterprise that could eventually go public? Next, if someone on the team has particular skills you want to exploit—maybe you've got a design guru or a tech whiz—you'll want to make sure any business capitalizes on those talents. Then crunch the numbers: How much money can you spend developing the idea, and how long can you go before the business starts to generate income?

PRACTICE: In July of 2008, Joanna Robinson was working as a fundraising consultant in Washington when she decided to start her own business. "I loved the idea of building something from scratch," the 29-year-old Robinson says. "But I didn't have a widget or some product I wanted to produce."

So she got a notebook and started laying the groundwork. First, she wanted to start a business that made use of her marketing expertise and her in-depth knowledge of the young-urban-professional crowd. She also wanted to improve on an existing product rather than attempt to break fresh ground. "It's too hard to create a completely new space in the consumer's mind," Robinson says. She couldn't spend more than $15,000 to get the business launched or go more than a year without income.

After rejecting ideas for a yoga studio (too many of them in the area) and a gym (too capital-intensive), Robinson settled on Lunar Massage. Lunar offers quick massages—as short as 20 minutes, for $26—to clients who remain fully clothed. Robinson is the sole employee, and four massage therapists work for her as contractors.

Robinson likes this approach because it requires just 600 square feet, compared to at least twice that for a spa with changing booths and private rooms. And she's targeting consumers she understands. "

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