How to find small business ideas that work for you

Published Tuesday 4 November 2025

Table of contents

• What makes a good business idea
• Find a small business idea you’re passionate about
• Choose an idea that fits with your skills
• Make sure there’s market demand for your idea
• How to make money from your small business idea
• Evaluate barriers to entry and startup costs
• The best business idea is the one that fits you
• FAQs on finding business ideas

Key takeaways

• Evaluate business ideas using four key criteria: they must solve a real customer problem, align with your passions and skills, have a clear revenue model, and be realistically achievable to start.

• Leverage your existing skills and expertise to reduce startup costs and improve success rates, as this allows you to handle key tasks yourself initially and build credibility with customers and lenders.

• Validate market demand before investing time and money by talking to potential customers, conducting surveys, and researching competitors to confirm people will pay for your solution.

• Consider multiple revenue streams to strengthen your business model, such as combining retail sales with wholesale distribution or mixing hourly consulting with monthly retainers and online courses.

What makes a good business idea

Evaluating business ideas requires systematic testing before you invest time and money. Use these criteria to identify the strongest opportunities:

• It solves a real problem for customers
• It fits your passions and skills
• There’s a clear way to make money from it
• You can realistically get it started

These points help you focus on ideas with real potential.

Find a small business idea you’re passionate about

are those that genuinely excite you and align with your interests. When you care about your business, you are more likely to succeed.

Why passion matters

• Motivation: You’ll find it easier to work long hours and overcome obstacles
• Learning: Your mind absorbs information faster in areas that genuinely interest you
• Persistence: You’re more likely to push through difficult periods
• Authenticity: Customers can sense genuine enthusiasm for your product or service

Choose an idea that fits with your skills

Skills-based business ideas leverage your existing expertise to reduce startup costs and improve success rates. You can start by handling key tasks yourself.

Why skills matter:

• Lower costs: Less need to hire expensive professionals early on
• Faster launch: You can move quickly without waiting for others
• Credibility: Lenders and customers trust your expertise
• Better decisions: You understand the industry challenges and opportunities

Skill to business examples:

• Tech skills: App development, web design, IT consulting
• Creative skills: Graphic design, content writing, photography
• Service experience: Hospitality, retail, customer support
• Professional expertise: Accounting, marketing, project management

Make sure there’s market demand for your idea

Your idea is more likely to succeed when there is real demand in the market. Find out if people are looking for the solution you plan to offer.

Ask yourself a few questions:

• Who are your potential customers?
• What problem does your idea solve for them?
• Are they currently using other solutions, and are they happy with them?
• Would they be willing to pay for your product or service?

You can find answers by talking to potential customers, running online surveys, or looking at what competitors are doing. This research confirms there is demand for your idea.

How to make money from your small business idea

A business model is your plan for generating revenue from your idea, and it’s important to understand your legal obligations from the start. For example, in the UK you must register for Self Assessment as a sole trader if you earn more than £1,000 in a tax year. Your business model sets out how you charge customers and run your operations.

Common business models

• Retail: Sell products directly to consumers
• Wholesale: Supply products to other businesses
• Service-based: Charge hourly rates or project fees
• Subscription: Recurring monthly or annual payments
• Marketplace: Take commission on transactions between others
• Freemium: Offer basic service free, charge for premium features

Understanding business model categories helps you benchmark pricing and costs against industry standards.

What to research for your chosen model

• Pricing structure: How competitors charge customers
• Profit margins: Typical markups in your industry
• Operating costs: Expected expenses as percentage of revenue
• Payment terms: Industry standards for invoicing and collection

Mixing business models

Multiple revenue streams can strengthen your business by reducing dependence on a single income source.

Examples of mixed models

• Product business: Manufacture + wholesale + direct retail sales
• Service business: Hourly consulting + monthly retainers + online courses
• Content business: Advertising + subscriptions + affiliate commissions
• Software business: One-time sales + monthly subscriptions + custom development

Getting expert advice: An accountant familiar with your industry can help you identify the most profitable model combinations and structure them properly, especially when navigating regulations like HMRC’s Making Tax Digital (MTD) programme, which has new requirements for VAT-registered businesses.

Quick viability check before committing to detailed planning:

Essential questions

• Revenue potential: Can this realistically generate your target income?
• Required expertise: Do you need specialized knowledge you don’t have?
• Market size: Are there enough potential customers?
• Competition: Can you differentiate from existing options?

Next step: After you choose your best idea, work with an accountant to create financial projections and set up your business model.

Evaluate barriers to entry and startup costs

Some businesses are easier to start than others. Understand the challenges you might face before you commit. These are called barriers to entry.

Check for these barriers:

• : How much money will you need for equipment, stock, or software to get started? In the UK, a government-backed personal loan of up to £25,000 is available to help individuals fund their new venture.
• Competition: How many other businesses are already doing something similar? Is the market crowded?
• Skills and regulations: Do you need special licenses, qualifications, or training to operate legally?

Businesses with low startup costs and less competition are often easier to start. Knowing the barriers helps you plan with confidence.

The best business idea is the one that fits you

Your ideal business idea combines three essential elements:

Final checklist

• Passion: You’re genuinely excited about the opportunity
• Skills: You can handle the core work yourself initially
• Profit potential: You have a clear plan for generating revenue

When your chosen idea ticks all three boxes, you’re ready to move forward. The next step is developing a proper business plan and setting up your financial systems.

Ready to start your business?Try Xero for free to manage your finances from day one. Our cloud-based accounting software helps new businesses track income, expenses, and cash flow – so you can focus on growing your idea into a successful venture.

Read more in our guide to online small business ideas.

FAQs on finding business ideas

Here are answers to some common questions people have when looking for the right business idea.

What is the most successful type of small business?

Success depends on many factors. Businesses that provide essential services, such as accounting, IT support, skilled trades, and health and wellness, often do well. Find a niche where you can offer real value to customers.

Which business is best to start today?

Start a business that meets current needs. Online services, such as digital marketing, freelance writing, or virtual assistance, are in high demand. Businesses focused on sustainability, home improvement, and local delivery are also growing. Match your skills to what people need now.

How do I know if my business idea will work?

Test your idea on a small scale. Talk to potential customers and get their feedback. Create a basic version of your product or service, called a minimum viable product (MVP), to see if people will pay for it. Their response shows if your idea has potential.

Should I start with a low-cost business idea?

Starting with a low-cost idea is a smart move, especially for first-time entrepreneurs. It reduces your financial risk and helps you learn how to run a business without a large investment. Service-based businesses, such as consulting, tutoring, or freelance design, often have low startup costs and are a good way to begin.