The first source of business ideas is changing environmental trends. The most essential trends are economic trends, social trends, technological advances, and political action and regulatory changes. Changes in these areas often provide the impetus for new business ideas. For example, an important economic trend is the buying power of baby boomers. As baby boomers reach retirement age, a sizable portion of their spending will be redirected to areas that facilitate their retirement. This trend will invariably spawn new businesses in many areas, largely because baby boomers have greater disposable income relative to previous generations. The most promising areas include finance, travel, housing, recreation, and health care. Social trends are equally critical. Current examples include an increased focus on health and fitness, an emphasis on alternative forms of energy, and the increasing diversity of the workforce. One new company, Greasecar Fuel Systems, makes conversion kits that allow diesel engines to run on vegetable oil. The company is growing largely because its business idea is directly tied to an increased social awareness of the need to find alternatives to fossil fuels.^[1]

Even though you may be passionate about a particular idea or it may be an ideal fit with your interests and skills, it still has to be an idea that people need and are willing to buy.

Technological advances and political and legal changes provide ongoing sources for new business ideas. After a technology is created, products often emerge to advance it. For example, the Apple iPod has created an entire industry that produces iPod accessories. It’s now estimated that for every $3 spent on an iPod, at least $1 is spent on an accessory.^[2] Similarly, political and legal changes often provide an opening for new business ideas. An example is the No Child Left Behind Act of 2002. The act requires states to develop assessments in basic skills to be given to all students in certain grades. Shortly after the act was passed, Kim and Jay Kleeman, two high school teachers, started Shakespeare Squared, a company that produces materials that help schools comply with the act.

The second approach to identifying business ideas is to recognize problems and find ways to solve them. Problems can be experienced or recognized by people through their jobs, hobbies, or everyday activities. For example, in 1991, Jay Sorensen dropped a cup of coffee in his lap because the paper cup was too hot. This experience led Sorensen to invent an insulating cup sleeve and to start a company to sell it. Since launching his venture, the company, Java Jacket, has sold over 1 billion cup sleeves.

Advances in technology often result in problems for people who can’t use the technology in the way it’s sold to the masses. For example, some older people find traditional cell phones hard to use—the buttons are small, the text is hard to read, and it’s often hard to hear someone on a cell phone in a noisy room. To solve this problem, GreatCall is producing a cell phone called the Jitterbug, which is designed specifically for older users. The Jitterbug features large buttons, easy-to-read text, and a cushion that cups around the ear to improve sound quality. Another company, Firefly Mobile, is now selling a cell phone designed specifically for tweens, ages 8 to 12. The phone weighs only two ounces and is designed to fit into a kid’s hand. It includes appropriate limitations for a young child and speed-dial keys for Mom and Dad.

The third source of business ideas is gaps in the marketplace. There are many examples of products that consumers need or want that aren’t available in a particular location or aren’t available at all. Part of the problem is created by large retailers, like Wal-Mart and Costco, which compete primarily on price and offer the most popular items targeted toward mainstream consumers. While this approach allows the retailers to achieve economies of scale, it leaves gaps in the marketplace. This is the reason that clothing boutiques and specialty shops exist. These businesses are willing to carry merchandise that doesn’t sell in large enough quantity for Wal-Mart or the other big-box retailers to sell.

There are many examples of products that consumers need or want that aren’t available in a particular location or aren’t available at all.

There are also product gaps in the marketplace, many of which represent potentially viable business opportunities. For example, in 1997, Julie Aigner-Clark realized that there were no videos on the market to expose her one-year old daughter to music, the arts, and science, so to fill the gap she started Baby Einstein, a company that produced uplifting videos for children aged three months to three years. The company did so well it was acquired by Disney in 2001 and is still selling products under the Baby Einstein brand today.