How do you generate new business ideas?

The best way to develop ideas for new services or products is to consider your own problems. What do you find tedious, annoying, or inconvenient? How could you solve that problem or minimize the irritation?

Solving your own problem will ensure the problem actually exists. It’s much harder to create a solution for a problem you don’t have. If you don’t experience the pain yourself, you will have to depend on customer feedback to determine if you have solved the problem.

Even worse: You may find a great solution to a problem that doesn’t actually exist or that doesn’t cause a lot of pain. Many new businesses fail because they start with a made-up idea.  

I’ve made this mistake myself. I started a software company that calculated estimates for electricity, natural gas, and water bills based on property data, local utility rates, and climate data. Because utility costs are 20%-40% of housing expenses in most of the U.S., we expected that homebuyers would be eager to have such information. We contracted with Zillow and other real estate websites to give buyers a good picture of the total cost of ownership before they made a purchase. Contractors could also use our data to show potential customers how much they could save by installing solar or upgrading their air conditioner or heater.

Unfortunately, this service did not create enough value to justify the cost. I was too far away from the problem to accurately assess the value of our solution. And my desire to help reduce energy use in homes contributed to my blindness. You can avoid this type of mistake by identifying a painful problem that frustrates you personally. It’s likely you are not the only person dealing with that problem, so focus on solving your problem or looking for ways to ease your frustrations.

Is there a missing element that could fix your problem? Often, the best solutions fill gaps between existing products or services rather than creating a completely new way of doing things. Seek out ideas that are unsexy but make weekly tasks easier.

And make sure your idea passes the dog food test: Will the dog eat the dog food? In this case, you are the dog. How much would you be willing to pay for a product to solve the problem? If you would not be inclined to pay to solve this problem, then why would anyone else?

Cultivating ideas to solve your own problem at least ensures you are creating something you want. And if you want it, it’s likely some other people will too. 

Create constraints

If I gave you a blank piece of paper and told you to start writing, you might have a hard time knowing where to start. But if I gave you a blank piece of paper and asked you to list your favorite foods, you likely would have no trouble. When thinking about new business ideas, don’t get paralyzed or overwhelmed by the abundance of choices. Instead, create constraints to help you narrow your focus.

Zoom in. Focus on problems you can solve with minimal outside help and support. Your goals and the constraints you set will determine what types of ideas you pursue. I’m currently in the process of creating a new online business, and I imposed the following constraints on my ideas:

  • No investors
  • No employees
  • Must be able to work from anywhere in the world with only a computer and internet connection.

My constraints limit the type of ideas I can pursue.

Consider your own constraints. Do you want to create a lifestyle business that optimizes freedom, flexibility, and time for your family and interests? Do you want to build a company that requires investors and employees? Maybe you should constrain ideas to a specific industry or product type. 

Here’s an idea I decided not to pursue. I listen to a lot of podcasts and audiobooks. Often, I hear an idea I want to capture, but I’m doing the dishes or driving and can’t stop and take out my phone and record a note. Even though I’m experiencing this problem myself, solving it would not align with my constraints. A solution to this problem would likely require building a new software application, raising money from investors, and hiring a development team. But please let me know if you build a frictionless, hands-free solution for taking audio notes from Audible and podcasts that integrates into Notion (my preferred note taking app.) I’ll happily pay you a $10/month subscription fee.

Practice noticing problems 

Notice friction throughout your day. Look for it. The friction will often lead you to good ideas hiding in plain sight. Think about the last time you purchased a car. If you’re like me, after you narrow down your choices to a specific make and model, you start seeing the model everywhere as you drive around town. You spot the car because you are now tuned to look for it. When you pay attention, you will notice a lot of friction as you go about your day.

Identify what you don’t want

Often it’s easier to identify what you don’t want than what you do. Imagine you and I are going to dinner, and I ask you what you want to eat. Your brain thinks through all the potential options of food you like, and you find it hard to narrow down your choices. However, if I ask what type of food you don’t like, it’s likely you would give me a quick answer.

So, make a list of things you don’t want to do. Maybe you don’t want to travel for work, talk on the phone, or manage people. Then screen out new business ideas that would require you to invest a lot of time in these activities.

Find your niche

Don’t chase the latest hot trends. Avoid competition. What are you good at? What have you done that gives you a unique perspective? Where can you build a personal monopoly because of your specific knowledge? Start with the smallest niche possible and expand out only after you gain traction. Even the biggest successful companies started by focusing on a niche. Amazon started with books. Facebook targeted students at Harvard. Airbnb rented out blow-up mattresses for conference attendees who could not find hotel rooms. Try to find the smallest viable audience that shares your painful problem.

Build your idea muscle

Become an idea machine. After you have identified a problem, then start generating creative ideas for solutions. Build your creativity muscle. Muscles get weak and flabby unless you put them to work. Exercise your creativity muscle to generate more and better ideas. Creativity requires practice. 

Create an idea habit. Invest 10 minutes a day generating new ideas. Hat tip to James Altucher for sharing his daily practice of writing down 10 new ideas every day. Yes, I said 10. Make your brain sweat. Let your imagination run wild and write down all of your ideas. Don’t worry if most of the ideas are terrible, and don’t limit yourself to business-related ideas. This daily practice will help strengthen your idea muscle. You may be surprised to discover how creative you become when you stop limiting yourself to only good ideas.

Describe your idea in 50 characters or fewer

Complex ideas are a sign of muddled thinking or a made-up problem. Ideas need to be clear to spread. Use clear and concise language to describe your idea. Entrepreneurs who think and communicate clearly have a big advantage because your idea must be clearly defined in order to sell, recruit, and raise money. Creating a 50-character limit forces you to distill your idea down to its simplest form. 


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Surround yourself with optimistic people

New ideas are fragile. And good ideas usually don’t sound good in the beginning. Ideas need to be nurtured, so don’t keep them secret. It’s rare for anyone to steal your idea. And 99% of the work is in the execution, not the idea.

Surround yourself with smart, creative people and share your ideas freely. Explain your projects to help you refine them and get feedback to improve them. Don’t waste your time hanging around people who make you feel stupid for sharing bad or silly ideas. 

Combining ideas creates innovation.

In biology, male and female genes combine to form the embryo. The re-combination principle also applies to ideas and technology. Every new idea is a combination of other ideas, and new technology is a combination of other technologies. Apple did not invent silicon chips, the touchscreen, batteries, GPS, or any of the dozens of other technologies that combine to create the iPhone. It just combined existing technologies in a new and novel way.

Mix and match ideas and experiment with new combinations. Be playful with this exercise. Some of the combinations may not make sense. But you may be surprised when you create a combination you had not previously envisioned.

Size matters

If you can’t identify the immediate next step to test your idea, then it may be too big or too far out of your circle of competence. Try to break the idea down into smaller pieces. 

Sell before you build

Talk to potential customers about your idea. Don’t build a minimum viable product (MVP) or invest significant time in an idea without trying to sell the value to your target customer. Start by crafting your message. The exact language you choose to describe your product and the value of your offer will help you and your customer understand what you are selling. Test your idea by trying to sell it to a customer before you write a line of code or build anything.

Be creative. Create a landing page with your offer and try to sell the product. You don’t need to fulfill the order. Put customers who click the call-to-action button on a waiting list. Call customers or meet them in-person and speak with them one on one. Beware—they will lie to you unless you are presenting a specific offer and price. If they bite, get a letter of intent to purchase your product when it’s ready.

Test lots of ideas

Experiment a lot. Don’t be attached to the outcome. Most of your ideas will fail, so you need to develop the correct mindset to learn fast and move on. Edison tested 6,000 plant materials to find the right type of bamboo for the filament of a light bulb. Mozart was a prolific composer and wrote over 600 compositions across multiple genres, but only a select few of those compositions are known by most people today. 

Let ideas evolve slowly

Let ideas simmer. Don’t rush to create a company. If you get good feedback from customers on an idea, consider turning it into a project, but keep expectations low. Iterate on your idea and build momentum. Work on the project as long as possible before turning it into a company. The moment you create a company, expectations change and financial commitment increases. 

Now it’s your turn

Notice friction throughout your day. If you approach this task in the right mindset, it can be addictive and fun. Flex your idea muscle to generate lots of creative solutions. Combine ideas and identify ways to test them quickly with minimal time investment. Start with language to sell the value and gauge interest. Enjoy the creative process and, most importantly, have fun.


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