Small businesses produce twice as many innovations as large companies and generated more than half of the 20th century’s breakthroughs.

This doesn’t happen by chance. Successful startups invest time identifying and testing business ideas that do something better than what’s available, increase competition, or disrupt a category.

Most entrepreneurs follow three steps when identifying and pursuing new business ideas.

• Generate the Big Idea

For many, a killer business idea comes from personal experience. Entrepreneurs see a problem nobody else has fixed, realize that they can do something better, or have a fresh approach to an existing need.

“If you find the need and can think of a better way of serving that need, you have a potential business,” says Morgan Taylor, co-founder of LetMeBank.

Julie Austin created her patented wrist water bottles, Swiggies, after she passed out from dehydration while running. “I guessed that, if I needed it, maybe others would, too,” she says.

Ask yourself: What am I good at? What can I offer that people will pay for?

“If your heart is in the business, money will follow,” says Willie Greer, founder of The Product Analyst.

• Determine Viability

Got a hunch that your new business idea is the next Uber, Dollar Shave Club, or Snuggie? Hold on. You need more than good instincts to be certain your product will fly off the shelves. Successful entrepreneurs use research, data, and conversations with prospects to validate or disprove ideas.

Repeat business founder Neal Taparia of Solitaire recommends assessing viability by asking three questions:

• Is it big enough to matter?
• How do you measure success?
• What problem are you solving?

Ron Stefanski of YourHouseNeedsThis.com uses Google Trends and Google Ads to see how many people are looking for information related to his idea. “If I see a need to test things out in a market, I run online ads pointing to a website that asks for an email address as opposed to selling anything,” he says.

One of the best ways to evaluate market needs and demand is to go straight to potential customers. Use a survey tool or pick up the phone and ask questions that will help validate the concept.

Online business coach Luisa Zhou recommends asking if the customers would be willing to pay for the product or service. “If they’re hesitant, you might need to interview more people to see if your business idea is good or not,” she says. “If they say ‘yes’ without hesitation, you know that your idea could become a viable and profitable business.”

Erik Rivera, founder of online therapy service Thrive Talk, beta tested his concept by offering friends and close associates a discounted rate, then soliciting feedback from them and other users.

• Turn Your Idea Into Reality

When research confirms that you have a viable business idea, you’re ready to bring it to life. How you proceed, and how quickly, might depend on your goals and whether you’re employed. Many minimize risk by launching their new business as a side hustle first.

That’s what Amy Finlay did when she started Edinburgh IFA, a regional service that connects consumers with financial advisers. “You can build it up gradually and know that it is viable without having to risk everything from day one,” she says.

While you likely won’t need fancy digs to get up and running, consider hiring help. “I regret not doing this sooner,” says Dan Bailey, who created WikiLawn, a residential and commercial lawn care marketplace. “I handled everything myself for months and, by the time I needed to add employees, I had trouble letting go of some things.”

Consult with a trusted business adviser, as well, to determine the best format for your new entity—corporation, limited liability company, and so on.

Finally, be honest with yourself. “If your idea doesn’t genuinely help someone or improve someone’s life, it’s a vanity project,” Taylor says.