How to Find a Profitable Business Idea: The "Diverge-Converge-Emerge" Approach for 2026

Ali Abdaal

Introduction [0:00]

This video targets individuals looking to achieve financial freedom, time autonomy, and creative freedom through entrepreneurship. It addresses the common question of how to find a business idea by introducing a six-step process based on the "Diverge → Converge → Emerge" framework. A free workbook is offered as a companion resource.

Step 1: Identify Initial Niche Ideas [0:49]

To develop a profitable business idea, one must understand that money is essentially an exchange of value. You need a person willing to give money to solve a problem. This leads to the concept of the "Holy Trinity" of a business idea:

• Person: The specific target audience.
• Problem: An issue this person has and values enough to spend money on solving.
• Product/Service: An offering that helps solve this problem.

The mistake many beginners make is starting with the product. It’s more effective to identify the person and the problem first, before worrying about the product. The video introduces the concept of a niche as the intersection of a specific group of people with a specific problem.

Step 2: Determine Craft Skills [04:45]

The first step of divergent thinking involves creating a list of "Craft Skills." These are skills or expertise one already possesses or is interested in acquiring, resulting from:

• 1. Skills you're good at.
• 2. Skills people ask you for help with.
• 3. Skills your employer already pays you for.
• 4. Skills you've developed to solve personal problems.

Examples of craft skills can include web design, teaching, coding, people management, business operations, automation, AI, video editing, or public speaking. The point is to gather as many ideas as possible without evaluating them. Even passions that aren't directly a skill (e.g., Harry Potter fan fiction) can be part of this collection.

Step 3: Brainstorm Potential Niches [10:22]

After compiling a substantial list of craft skills and passions, the next step is to translate these into potential niche ideas.

• Focus on Quantity: In this divergent phase, it's important to generate a large quantity of ideas without worrying about their quality ("No idea is a bad idea"). The goal is to come up with at least 10-20 niche ideas.
• Ask "Who could pay me to help them with this?": For each skill or passion, ask what person has a problem that you could solve with it.
• Identify people you know: It's easier to start a business if you know the names of your first customers. Examples include:
  • Small business owners or freelancers: They often have many problems and can justify the cost of a solution through the expected Return on Investment (ROI).
  • People in your own network: Friends, family, or acquaintances who are self-employed or hold senior positions in a company.
  • Your own audience: If you have already built an online community, their problems can be the basis for a niche.

Step 4: Evaluate Niche Ideas [14:51]

This is the "Converge" phase, where the collected ideas are evaluated. A "Traffic Light System" is used to score each niche idea based on three questions:

• 1. Do I enjoy the idea of working with this group of people?
  • Green: Yes, very confident.
  • Yellow: Maybe, have doubts.
  • Red: Weak, significant concerns.
• 2. Can I actually help this group of people solve their problem?
  • Green: Yes, very confident.
  • Yellow: Maybe, have doubts.
  • Red: Weak, significant concerns.
• 3. Is this person willing to pay for the solution to this problem?
  • Green: Yes, very confident.
  • Yellow: Maybe, have doubts.
  • Red: Weak, significant concerns.

The video recommends targeting the premium market to start with at least $2000 per customer. Markets can be broadly divided into three segments:

• 1. Luxury (1%): Customers buy based on status.
• 2. Premium (9%): Customers are willing to pay for high quality.
• 3. Mass Market (90%): Customers buy mainly on price; it's difficult to compete here as a beginner.

It's advisable to avoid the mass market and luxury market and focus on the premium market. Willingness to pay can also be determined through market research by examining competitors and their pricing.

Step 5: Narrow Down Niche Selection [22:40]

To further refine the top niches, journaling prompts are suggested:

• The 2-Year Test: Imagine working in this niche for two to three years. Which one feels most exciting?
• The No-Fail Scenario: If success were guaranteed, which niche would you choose? This helps overcome fear.
• The Mirror Test: Which niche feels most like you? Which aligns with your values and your story?
• The Fear Check: Which niche makes you a little scared, but in a good way? Sometimes what makes us nervous is what matters most to us.
• The Survival Test: Imagine you lost your job and all your savings. Which niche would you pursue if you needed to make at least $10,000 in the next 30-60 days?
• The Network Test: Look at your phone contacts, LinkedIn, and the people you know. In which of these niches do you already have connections that could lead to warm introductions?

Step 6: Define Top 3 Niche Ideas [24:04]

After diverging, evaluating, and narrowing down the niche ideas, the final step is to define the top three niches. It is recommended to use a table and note the following points for each of the top 3 niches (Gold, Silver, Bronze):

• Person: The specific target audience.
• Problem: The problem to be solved.
• Why am I excited about this?
• Why do I think they'll hopefully pay >20$ (Here one should keep the 2000$ recommendation in mind.)
• My concerns: Potential challenges or doubts.
• Additional notes.

This process is intended to give a sense of how to take an abundance of ideas and narrow them down to a potential business idea. The video emphasizes that it's important not to be discouraged by worries about willingness to pay, as there are premium offerings in every market that are in demand from people with sufficient budgets.