Generating Ideas

June 15th, 2012 by Steve Pavlina

As we go through this passive income series, you may start getting ideas for how you can create new streams of passive income. How do you know which ideas are worth pursuing?

Keep It Simple

It’s easy to bite off more than you can chew with your first passive income idea. If you already have a track record of successfully completing large projects, then don’t let me stop you. But if you have a tendency to get discouraged and give up too soon, I suggest scaling down your ambitions. Start small by tackling a simple project that you’re confident you can actually complete.

It’s better to complete a 30-page ebook and sell it for $7 and generate a few sales per month than it is to tackle a 200-page writing project and never get it done. The former provides some genuine value to people; the latter will merely frustrate you.

Treat your early projects as training for your success muscles. The greatest predictor of future success is actually past success, so think about creating some simple successes by taking on modest projects and getting them done and released. Once you’ve done a few of those, then consider scaling up and tackling bigger projects. Even with seemingly simple projects, you’re going to learn a lot. You’ll get faster, and then it will be easier to scale up and tackle larger projects.

It’s so easy to underestimate how long things will take by overlooking details. With some of my early game projects, I’d estimate that I could crank out a particular arcade-style game in 2-3 weeks, but in reality it would take me 6 months. There are so many hidden steps that are easy to gloss over with an off-the-cuff estimate, such as creating the installation program, creating the music and sound effects, writing the documentation, setting up the online ordering system, etc.

If you’ve never created a passive income stream before, your first project may involve lots of one-time steps like setting up an online shopping cart. But once you’ve done that initial setup work, you can create similar streams with greater ease simply by plugging them into the same system.

Try not to get overly excited about making a killing with your first passive income project. Put your attention on learning the ropes and generate a nice little stream. Then you can scale up by creating more streams. If you can generate even $50 a month with your first stream, I’d say you’re off to a good start. It’s generally harder to go from $0 to $50 a month than it is to go from $50 to $500 per month.

Inspiration vs. Market Research

There are two main schools of thought on how to pick income-producing creative projects. One is to go with your gut and do whatever inspires you. If you get an idea for a new project, run with it right away. The other idea is to research what people actually want to buy and then create something for that target market. This is the classic “find a need and fill it approach.”

I tend to get the best results by combining both approaches. First, I saturate myself in trying to understand what people want. I can do this via online research, surveys, or just talking to people. Over the years I’ve met hundreds of my blog readers face to face, especially at workshops, so that helps me better understand their needs and what I can provide that will be helpful to them.

If you have your own website or existing audience that you can use for market research, that’s a great place to start, but you can just as easily gather information from other websites.

When I was creating computer games, I started out by making simple arcade games because those were relatively easy to design and create. My games didn’t sell well though. So I did some market research, looking for where there was strong demand for new games from customers, especially in genres that I was interested in. I spent hours on game download sites (where game developers would post their free demos), observing which categories got the most downloads. I downloaded dozens of demos to get a sense of what else was out there, how popular various games were, and what I might be able to contribute that would be unique enough but also familiar enough to sell well.

That’s when I settled on making a cerebral puzzle game. The low end market for puzzle games was very crowded, especially with match-3 types of games, but I could see that the smarter end of the puzzle game market was underserved at the time, yet there was still some decent demand. People were downloading a lot of so-so games in that category. So this research helped me realize that if I made a decent game in that category, it would probably sell well.

I think this type of mental saturation was a good place to begin because it helped me narrow my focus, so generating ideas wasn’t an overwhelming task. I could then think about creating something in one of the sub-genres where I perceived good opportunities.

After that I began brainstorming some potential design ideas. I find that taking in a lot of input really helps when it comes to generating ideas. When I do this, I notice gaps in other people’s creations that help me see where I could take things in a different direction, thereby contributing something unique.

Once I had an idea that inspired me, it still took a lot of work to implement it. To create that game took about 4 months of solid design effort just to create a 5-page design document. Everything else — programming, artwork, music, sound effects, level design, testing, and release — took another 2 months. In its first month on the market, this new game sold more than my previous 4 games combined, and several months later it was earning 10 times what the other games were earning. That’s the power of market research. If you sell something people actually want to buy, you can do a lot better financially.

How to Do Market Research

I’m not really too particular about how I conduct market research. There are so many variables that you can get bogged down in analysis paralysis if you overdo it. I take a pretty light-weight approach to it.

Mainly I look for two things:

  1. What are people already buying?
  2. Where are there gaps with relatively high demand and low supply that I could potentially serve?

Sometimes it’s hard to answer #1 directly because you probably don’t have access to other people’s sales figures. But you can often use other public data to make some educated guesses. I didn’t know other game developers’ sales figures, but I could go to download sites and see how many downloads each demo had and how many games there were in each category. I could then calculate average downloads for each game in a a particular category. If I saw that one category had triple the per game downloads of another category, well… it wasn’t hard to surmise that one genre might make me triple the sales of another genre.

I could also look up traffic rankings for a developers’ website to see how popular it was (such as with Alexa.com). And I knew many developers personally, so I had a general sense of who was making money and who wasn’t. All of this information combined to give me a decent idea of where there was good money to be earned and where there wasn’t.

During the late 1990s and early 2000s, I could see that developers of casual games were typically doing pretty well. Friends were making six figures a year selling card games and puzzle games. Today those markets are even bigger, especially with the expansion of tablet and cell phone games.

It can be a tricky balancing act between making something that inspires you and making something that people want to buy. There’s surely some luck and randomness involved too. But I’ve seen situations where results are 10, 20, or 50 times better when creators finally agree to give customers what they want instead of trying to convince customers to want what’s been created.

Do I think you should sacrifice your artistic integrity to satisfy the public? No, I don’t think it’s necessary to do that. I think most people who feel they must choose one or the other are creating a false dichotomy due to limiting beliefs and blocks to making good money. I didn’t feel I had to sacrifice my art to please others. In fact, I felt that paying more attention to what other people wanted made me a better artist. I liked having more customers to appreciate my creations.

If you think you have to choose one or the other, I encourage you to question whether that’s really true. Can you take the pulse of what other people want to buy and then focus on pursuing inspired ideas that will land somewhere in the general vicinity? I think that’s doable.

Much of the time when artists claim to be undiscovered geniuses and lament that they can’t make money doing what they love, I think the likely truth is that their art just isn’t very good yet.

I think some of the best art is developed with a strong social component, meaning that there’s ongoing feedback between the artist and the patrons.

Making Reasonable Trade-offs

Another advantage to knowing what people want is that you know when you’re going against those desires to some extent, and you can make this choice consciously without any self-delusion.

Based on surveys I had done, I expected that the Conscious Success Workshop would sell a lot better than the Conscious Relationships Workshop earlier this year. And that is of course what happened. CSW got twice as many registrations as CRW.

I could predict in advance that I’d earn more money doing something other than a relationships workshop. I accepted that, and I still felt inspired to do such a workshop, even knowing that the decision would mean earning less money. I felt that a smaller group would be better for this topic since it would be more intimate.

So in this case, the research gave me an idea of what to expect. I could make an informed choice, and there wouldn’t be any disappointment with the lower sales.

It’s nice to get an idea of what the trade-offs are when you put other concerns ahead of making money. Then you can ask yourself if the freedom to create what you desire is worth the financial impact. There’s no right or wrong way to make these decisions. It’s a matter of personal preference. You can make different choices over time and see how each type of project plays out.

Taking Risks

With new and untested ideas, there’s always some risk involved, but everyone has a different level of risk tolerance.

If you’re less risk tolerant, then I would put more effort into market research, so you do a better job of aiming where the demand is. That way you don’t waste your time creating something that no one wants to buy.

If you’re more risk tolerant, you can take the chance of doing something new where it’s hard to conduct market research. Success is far from guaranteed, but you might just stumble upon some previously unknown demand.

This is a matter of personal choice, and your preferences may change depending on what else is going on in your life. It’s like any form of investing. Do you want to play it safe and deal with relatively predictable outcomes, or do you want to take a chance and explore uncharted territory?

Both Site Build-It and the Getting Rich With Ebooks program I mentioned earlier explain how to conduct online research using various tools in their specific domains. So SBI provides tools to help you see where there’s good potential to create a money-making website, and GRWE helps you research potential topics for ebooks where you can expect good sales.

That said, if you’re more of a risk taker, you can bypass these tools and go with whatever inspires you. You might hit upon something new that works, but you could just as easily end up with a total dud. Who would ever want to do that?  I sometimes like doing that. It can be exciting to try something new and see what happens, assuming you can handle it if it doesn’t work out so well. This is especially doable for small projects where the downside isn’t so terrible if it doesn’t perform.

Since I have enough streams of passive income to support me, I can afford to take more chances with new income streams. But if I was just starting out, I might be more conservative and make sure I’m tackling projects where I can predict strong demand.

A lot of this research can be done with free tools and public information. For example, you can see how well any book is selling relative to any other book by checking the sales rankings on Amazon.com. For all kinds of products now, you can get a decent idea of how well any particular product is selling just by looking at public data. This is not difficult if you have decent Internet skills.

Inspiration First

Sometimes I get inspired ideas before I’ve done any market research. In those cases I can still do some research after the fact to validate or invalidate the idea. Maybe I’m excited about it in the moment, but the question is: Will it sell?

For instance, a few years ago I got the idea to offer personal coaching, but I didn’t know exactly what to offer or what to charge for it. It felt like an inspired idea that I should pursue, but I had a lot of uncertainty about it. So I decided to do a test by offering a 1-hour consultation on eBay and inviting people to bid on it.

The auction reached $1000 before eBay pulled the plug and killed it. Apparently eBay doesn’t let you offer intangible items for sale. Generally they do a poor job of enforcing this policy since there were plenty of other intangible items listed, but my auction was probably a bit too high profile to duck under their radar.

Fortunately the auction lasted long enough to convince me that there would likely be some decent demand for coaching, so I began offering that service. I don’t promote it much because I know it’s beyond the price range of most people, but it’s there for those who want it.

So this was an example of how the inspiration came first, and then I did a little research and testing to validate it a bit more before committing to it.

As another example of this, I’m in the process of booking a new 3-day workshop in Las Vegas. This one will be unlike anything I’ve done before. It will have no set topic, no pre-planned content, no pre-arranged exercises, and no written materials or handouts. This will be an experiment in co-creating a transformational experience with the audience. Our challenge will be to go with the flow of inspiration the whole way through — and still to make it an engaging, growth-stimulating experience for those who attend.

So this will be a workshop where we’ll have a lot more flexibility. I’ll be facilitating it, but I won’t wield such tight control over how it turns out as I have at previous workshops. It’s going to be a balancing act to keep us in the sweet spot of creating inspired growth experiences without descending into chaos.

At the January CSW workshop, someone asked me to share a goal or project that I felt would challenge me, and I shared the basic idea for this workshop. Then I quickly dismissed it as impractical. But who’d actually want to go to a workshop like that? I said. It seemed like it would be an interesting experience for me as a speaker, but I couldn’t imagine too many people wanting to sign up for it, especially since I couldn’t realistically tell them what to expect.

But someone replied, “I’d actually go to that.” Then someone else said “Yeah, that sounds like fun.” A quick survey revealed that about 2/3 of the people in the room were interested in attending such a workshop. I was shocked that so many people resonated with the idea. It always sounded like a crazy idea to me. That got me thinking about it more seriously. Could I actually do this?

For additional validation, I talked to some speaker friends about this idea, and a couple of them told me, “Yeah, I did a workshop like that before.” I asked them how it went, and each of them said something like, “Best workshop I ever did. People loved it!” They told me that the spontaneity of it made it work very well. They also pointed out that the people who are willing to attend such a workshop are the kinds of people who will ensure its success; it attracts people who can help co-create a cool experience for everyone.

After a few more conversations about the idea, I finally decided to go for it. It’s a risk because I really don’t know how to sell a workshop with no set topic, where we’ll be going with the flow of whatever inspires us in the moment. Part of me still thinks it’s a crazy idea, but this is another case where I feel the coolness factor of doing something new outweighs the certainty of having semi-predictable sales. For all I know, the idea might turn out to be a homerun. The only way to know is to try.

This is actually another way to conduct market research. Dive in and test your idea in the real world. Then you’ll know. The benefit to this approach is that you might just stumble upon something that works really well. Then you can build around it.

The Courage Advantage

If you’re more courageous than most people, your courage can give you a serious advantage because it cuts down on competition. One reason public speaking pays so well is that so many people are afraid of it, so it’s not as competitive as other fields. So if you’re willing to go where others are afraid to go, most of your would-be competitors will surrender those markets to you.

So to summarize the ideas in this article, idea selection has a lot to do with risk tolerance. The less risk tolerant you are, the more you’ll want to rely on market research and assessing demand to guide your decisions. As your risk tolerance increases, you can afford to take on projects that rely more heavily on going with the flow of inspiration, but even in those cases, you may still choose to validate them with a little market research to give you enough confidence to get moving.

If you’re going to go through the trouble of creating something of value to share with people, I think it’s reasonable to do at least a modest amount of market research to get a general sense of what you can expect income-wise, even if income generation is just one concern among many.

What if you can’t come up with any ideas at all? Try ordering a quad shot latte — that should get a few ideas flowing. ;)

A good article to read to help counter-balance the points in this article would be What Are the Odds of Becoming a Black Belt? This will help you avoid some of the pitfalls of market research, such as getting bogged down in thinking about your odds of success instead of actually placing bets on the choicest opportunities.


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