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While entrepreneurial success is tied to careful feasibility assessment, business modeling and planning, never underestimate the role that luck plays in an entrepreneurial journey.

I am not suggesting that aspiring entrepreneurs just sit and wait for an opportunity to come to them like a bolt of lightning out of the blue. As the Roman philosopher Seneca pointed out long ago, luck is the crossroad of preparation and opportunity.

Preparation comes from the development of what I call the process skills.

Entrepreneurs have a better chance of success if they learn fundamental business skills, such as accounting, marketing and managing people.

They also benefit from learning specific process skills tied to starting and growing a business, such as how to assess opportunities and translate them into business models.

Opportunities come from the development of content skills that come from our experiences in life. The best ideas for possible businesses most often come from jobs we have held, from our hobbies and interests and from our social network.

If we pay close attention, it is out of these experiences that we'll notice customers who aren't getting what they want or who are missing the service they expect. This is what creates the gaps and pain in the market that entrepreneurs can capitalize on with a new business.

There is one important caution regarding the opportunities that come from our experiences, though. Don't become a slave to the status quo. Be ready to be surprised.

Luck is not the only element that leads to entrepreneurship. We also need to be ready for serendipity, which is when we find opportunity not by plan, but by accident.

The examples of the role of serendipity in entrepreneurial success are many.

For instance, the original plan for PayPal was to build a payment platform for the old hand-held Palm Pilot devices.

And 3M sticky notes came from an adhesive that did not work as well as it should have.

The key was that in both of these examples, while the original plan did not work, an entrepreneur was willing to pursue a surprising new direction that did work very well.

Entrepreneurial success can be the result of a path we did not expect.

While our experiences are important, we have to be careful not to get stuck in the old, traditional ways of thinking. And we must never become a slave to our original ideas.

So, the formula for success is quite often a combination of hard work and preparation, of the experiences we have in life and more than a few surprises.

Never underestimate the role of luck and serendipity in entrepreneurship.

A student come up to me before class the week before their business plans were due this past semester looking very dejected.  

"My concept just can't work," she said.  The more she tried to pivot the business model, the more she uncovered evidence that convinced her that she had reached a dead end.

This is what is known as a teachable moment.

Aspiring entrepreneurs go through an arduous process between the initial spark of an idea to the eventual launch of a business.  

They start by sifting through the various ideas they have to find the one that has the most promise.  Many ideas may appear promising at a first glance, but careful assessment helps to sort out those that have little promise. Eventually, the entrepreneur selects a product or service they hope will be accepted by the market.

The next step is for the entrepreneur to take the idea and begin to build a business model.   

The primary goal of business modeling is not to try and rationalize starting a business based on your idea.  Instead, the objective is to discover all of the challenges, flaws, and gaps that need to be addressed if you have any hope of moving from a good idea to a successful business.  Business modeling is a process of finding problems and fixing them by altering and expanding the operating framework needed to launch the business and, when necessary, pivoting the concept based on what is learned about your customers and what they really want.   

When developing a business model, you may reach a point where you realize that no matter what you do, it just won't work.  This realization can happen very late in the process even at the point when you are developing a written business plan based on the business model.  If that happens, no matter how much time and effort you have put into the project, you need to be decisive and abandon it.  

But this is much easier said than done.  You have spent countless hours talking about the business with friends and family.  You have shared your idea with advisors and mentors.  You may have even pitched the idea in business plan competitions and to investor groups.  It feels like your reputation is riding on getting the business launched.  There is a sense of inevitability that launching the business is what you are going to do.

But do not ignore the evidence.  Have the fortitude to walk away.  The fact that you have spent countless hours getting your idea to this point is not a reason to keep moving ahead.  

So back to that teachable moment....  

As class started that morning I asked the student to share her story with her classmates. I then looked her in the eyes and emphatically said, "You did a great job!  You stayed true to the process and had the courage to acknowledge that your concept just won't work.  Congratulations!"

The end of this story is that while her initial idea did not work out, the process helped her discover several new ideas and gave her the opportunity to make several new connections with people to add to her network.  She learned the lesson that while her idea may have failed, she was successful.

One of our recent alums, Gabe Simon, is a member of the Kopecky Family Band.

The key to their business model, which Gabe worked on in our program, is to build a strong, loyal following that has a sense of community with the band.  A key aspect of delivering that value is through live performance.

I ran into Gabe yesterday at Bongo Java (my favorite local coffee shop).  It seems they are executing on their business model.  Paste Magazine named them as 18th on the 25 Best Live Acts of 2011.

Check out "Howlin' at the Moon" in the clip below (Gabe is singing the lead in this song):

Business models are developed by visualizing all of the "working parts" that make up a business.  A traditional business plan, on the other hand, is most often a formal, written document that provides details about how an entrepreneur intends the business to operate. 

Learning to develop a sound business model helps ensure that everything that is critical to the success of the business is in place and working in harmony. 

Developing the business model depends fundamentally on engaging real customers very early in the creation of the business so we have a better chance of offering what the market really wants. 

One of the biggest benefits I have seen from using business modeling over writing a traditional business plan is that it allows for adaptation.  We use what we learn from the very beginning of the start-up to make changes in our business model as we uncover who our customers really are, what they really want, and how best to put everything in place to ensure that we deliver what we promise to them.

This process is known as "pivoting" the business model. 

We all start with a clear plan in mind of what our business will be.  The problem is, most of the time our plan is either only partially right or just plain wrong.  Successful start-ups become a series of pivots to the business model we started with as we learn more and more about where our business really fits best in the marketplace.

"As a founder, keeping your company alive requires you to think creatively and independently because more often than not, conditions on the ground will change so rapidly that any original well-thought-out plan quickly becomes irrelevant," explains business model guru Steve Blanks.

A note of caution: Pivot with purpose

One of the flaws of the old business planning approach to start-ups was that many entrepreneurs got so wrapped up in the process of developing the "perfect business plan" that they never got to the point where they were able to pull the trigger and actually start the business.  This became known as "paralysis by analysis."

I am beginning to see a similar problem surface when using the business modeling approach to guiding business creation.

It seems that people are beginning to believe that since pivoting is good for a start-up, more pivoting is somehow better.  When they follow this logic, we see many entrepreneurs get so wrapped up with pivoting that they forget the goal is to get the business model right so that you can move forward.

Adjustments to the business model are important, but once the market tells us that we are finally offering the right product to the right customer, it is time to slow down the pivoting and focus on growing the business.

Never forget that the ultimate goal is not to develop the perfect business plan or the most elegant business model, it is to identify a need in the market and build a profitable business that meets this need.  Business plans and business models are just tools that help entrepreneurs achieve success. 

The stars all seemed to be converging for me as a fan of the Business Model Canvas.

I am refining the 3.0 version of my syllabus for my planning class that has become largely centered around the Business Model Generation framework.  I have never been more energized going into a new academic year.  My class no longer looks like a traditional old business planning class.  Instead, students learn to develop a business model and pivot until the cows come home.  My old slide decks have been filed away and I have all new PowerPoints with fresh lessons, images, videos, and of course, Dilbert cartoons.

I have organized a group of faculty from across the US and Canada to present how we use the business modeling to teach our students how to successfully launch a venture that is responsive to the market.  We will be offering a pre-conference session at USASBE this coming January. 

I have been exploring how we might do some research into business modeling with a few colleagues.

Students and alumni who have been using the business model generation framework have been raving about its power and utility.

And then for Father's Day, my wonderful family gave me an iPad.  Now I can finally get the Business Model Toolbox App.  I imagined connecting my new iPad to the LCD in the classroom so I had the ability to bring the business model canvas to life for my students.

But alas, even at the hefty price of $30, this app falls well short of what I hoped for. 

Is it a great tool for developing a business model?  Yes, but mostly if you work alone.  It is not easily shared unless you pass around your iPad and cannot be shown live and in motion via and external monitor or better yet LCD projector. (NOTE:  My friends at Aloompa tell me that it can work with an HDMI cable).

The beauty of the business model canvas is that it allows you to create a large visual representation of the business on a whiteboard or on the wall with sticky notes.  Then you, your partners, your team, and your advisers can all look at the same picture and refine it, improve it, or quite often pivot it entirely.

I am glad I bought the app, as it will be a great tool to work with students and alumni one-on-one in my office.  And I know my Apple-minded, shall I call them Apple-zealot, students will likely find it a great tool to learn how to use this incredibly useful tool.

But it has a ways to go to be a true app version of the original.

So for the entrepreneur on a tight budget, bootstrapping your way to launch, I still recommend the paper version and all of the free information available on the web.

The business model for this app needs a few more pivots before I recommend it as an essential tool worth $30.

Passion is what drives entrepreneurs. 

Passion is often what pushes us to take the risk to launch our venture.  Passion is also what keeps us going when we face the many hurdles and roadblocks that are inherent in almost every entrepreneurial endeavor.  Passion is what helps us break into the market and convince a skeptical market to part with their precious dollars to buy what we have to offer. 

But passion also can create an interesting paradox for entrepreneurs. 

If we let our passion cloud our vision as we assess opportunities we believe are in the market, it leads us to only see the positive evidence to support launching our venture.  I see this in my students everyday. 

Today's students, just like many generations before them, have some strongly held beliefs and values. 

For example, I see many who want to translate their passion for healthier lifestyles into businesses.  But when they are asked to objectively evaluate whether their passion for being healthy is matched by market demand, they become blinded by their strongly held vision.  Rather than look for the trends and evidence that their passion will translate into a successful business, they view the start-up as a virtuous mission to change the world.  They plan an attack of all of the wrongs in society that have created an unhealthy lifestyle, and translate their passion into a business start-up with little hope of success.

I call this Don Quixote Syndrome.

Mind you, a passion to change the world is a good thing.  I tilt at my own windmills everyday.  It is just that I have learned that most of my "causes" don't make good business opportunities. 

But this kind of passion does not always mean that they will have a ready market waiting to buy what they are selling. I am not saying that a business model based on passions such as healthier lifestyles are fatally flawed.  Rather, when they present their rationale for their business model and the value proposition they are tackling, it is rarely based on a ready and eager market.  It becomes a quest to change the way their intended markets think and behave.

While a noble goal, it is a time-consuming and expensive path to creating a successful venture.

So when your passion leads you to want to start a business, take the time to make sure that their are enough willing customers ready to join your quest.  If not, stay true to your passion, but find less expensive ways to pursue it than starting a venture that is doomed from the start.

Author and entrepreneur Steve Blank describes the business start-up process as having two phases.

In the first, entrepreneurs learn about their customers and what they want. This can be thought of as a series of experiments with real customers. It eventually leads to a business model that can be used to build a sustainable venture.

Once we learn what our business model needs to be, we can begin the second phase, which includes attracting more and more customers and building a company.

It is essential that we take our time before moving to the second phase to make certain we're building our company around a business model that can lead to successful growth.

Nashville-based Aloompa is a great example of a business that's taking its time to get things right.

In a visit to my business school class at Belmont University, two of the founders, Kurt Nelson and Tyler Seymour, told how they developed the business model for this relatively young company.

The original vision was to develop apps that would allow streaming of live videos directly to the iPhones of concertgoers. But this proved to be more difficult than they thought. However, their experimentation with the business model led to recognizing a more promising opportunity that still involves apps for music events.

They approached the Bonnaroo music festival about developing an app for attendees. To prove to Bonnaroo that the app would be something of value, they gave away the first year's version.

They used that first year to prove that the app had value and to test what features fans at the festival truly wanted.

Their success with Bonnaroo led to the sale of more music festival apps. With each new app they continued to engage the market, all of which helped them learn more about their business model and their customers.

A big, early breakthrough for Aloompa occurred when they were asked to develop a new app for country artist Kenny Chesney. This showed them that their business model could be much broader than just developing apps for music festivals.

They still weren't finished experimenting with what their emerging app business could become. Recently, they moved into developing apps for the Rally to Restore Sanity staged by comedians Jon Stewart and Stephen Colbert, as well as for the popular conversation game Table Topics.

Nelson said Aloompa isn't ready to hire a full-time staff and build an organization. The partners are keeping operations lean and flexible because they expect the business model to continue to evolve.

The Aloompa story illustrates that even when the market seems to be accepting a new venture, and sales start to grow, owners still shouldn't move too quickly to formalize the business. Be patient. Continue to experiment with customers. Tinker with the business model until you're ready to scale up the venture.

If business plans are marvelous works of fiction -- and they most often are -- then the specific financial goals that they are tied to are fairy tales.

Don't take this wrong.  I am a strong advocate of building a business that meets your aspirations.  You need to consciously engineer your financial and non-financial priorities into your business model.  But when I start reading plans with specific multiples of EBITDA tied to an exit event a few years out I cringe. 

Even VCs know that only 10% of plans they fund (which can be as few at 1% of plans they receive) will probably meet the goals stated in the business plans for their portfolio companies.  And yet, almost every entrepreneur seems to think their plan will hit its numbers and reach their specific goal.

I think more of us should take the approach of goal setting that Ami Kassar has set for his business MultiFunding.  From his blog:

I often get asked the question "Ami, what is your goal for MultiFunding ?"  People want to know "how big" I want the company to be, who do I think will "buy it" one day, is this a "lifestyle business", or do I "want to take it public one day."  My answer is that our goal for the first year was to survive, which we did.  My goal for the second year is to be able to keep the company growing at a pace where we can maintain excellent customer service, and to be able to make a good living while I do it.

Business models evolve as we learn from the market where our business really needs to be and what it can really achieve.  You'll be a lot happier as an entrepreneur if you set realistic goals, especially for the early stages of the business.

Once you get traction, then you can start to set more specific goals that reflect a growing knowledge about the market and your customers.  And you can more realistically temper these potential goals with your non-financial goals including those shaped by the time you want for your family, friends and community.

The music industry has been going through pretty rough times over the past several years. The disruption that has occurred is due to the Internet and other technological breakthroughs, fundamental changes in customer behavior and a chronic recession.

It has been beating down the leading companies that once dominated every aspect of the music we heard and how we heard it.

But even in a troubled industry there are opportunities for entrepreneurs willing to think outside the box. Being a successful entrepreneur in the emerging new music industry will require a willingness to forget the old business models.

Some aspects of the industry will not change: Songwriters will still write songs, and performers will still perform.

So what has changed?

It starts with what people are willing to pay for. It is a myth that consumers are not willing to pay for music anymore. They are just not willing to pay for it in the traditional way it was packaged and distributed.

Emerging entrepreneurial artists have discovered that their fans want more than just their music.

These fans want to be part of a community, have the sense of a personal relationship with artists, attend live events and have access to merchandise that shows their affinity with the band.

They may not be willing to pay for just music itself, but when the music is packaged with all the other stuff they value, they will spend their money.

The good news is that the average amount of money each customer spends via this new business model far exceeds the amount a band could hope to get simply by relying on downloads of its songs.

An example of performers finding their way in the industry with a new business model is a band made up of Belmont University students called the Kopecky Family Band.

While creating great music, they are also paying close attention to creating value for their followers through a variety of products and the creative use of social media. It all helps them connect with fans. In fact, their savvy marketing has helped the band gain national attention, including an appearance on NPR's World Cafe.

The basic structure of the industry is also changing. Success in the music business no longer requires dependence on the large companies, the labels that dominated the industry for the past several decades. Entrepreneurial artists are beginning to control almost all aspects of their "product," including production, management, and distribution of their music and merchandise. Artists have their own websites, smart phone apps and social media strategies.

There is still a large market for music, but success requires an entrepreneurial approach that is built on fundamentally different business models.