Do Young Entrepreneurs Need MBAs to Succeed?

Some great entrepreneurs have a master’s in business administration; others don’t. But many aspiring business owners still trade in their pinstripe suits and briefcases for hooded sweatshirts and backpacks in pursuit of an MBA degree — including me. As someone who started out in corporate America, got an MBA and is now an entrepreneur, here are a few things to consider before heading back to campus.

What’s right for you?

Though many job seekers hope for a position within a large company, few opportunities in this market environment offer the financial prospects, satisfaction and exhilaration that working at a startup can provide. So how do you weigh the entrepreneurial route against the others options available?

Let’s use investing as an analogy for risk-taking: Taking a corporate job is like investing in fixed-income securities (e.g. bonds) that offer a steady and predictable return, while starting your own business is like investing in stocks — there is unlimited potential, but also a higher risk profile. Miss the mark and you’re left with nothing. With this perspective, having an MBA in your back pocket doesn’t sound so bad after all, right? Not so fast…

Opportunity cost, and the cost of opportunity.

I’ll be the first to honestly say it: having an MBA can put you at a significant disadvantage in becoming an entrepreneur. Why? Not because it doesn’t help you achieve your goals efficiently, but because of what getting into an MBA program represents:

     

  1. You are giving up a lot of your time. Every minute you spend working on your personal venture is a minute of salary you’re foregoing. Your opportunity cost increases once you have an MBA because you can command a higher salary in the marketplace,  so it’s more expensive to take an entrepreneurial risk and start a business of your own afterwards.
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  3. There’s pressure. MBAs are notorious for groupthink mentality, and after graduating from the program, it’s very hard to stay true to your own path while your friends are skyrocketing through their corporate careers, living comfortable lifestyles and enjoying the status that comes with a prestigious firm. In the meantime, you are CEO of a two-person company and eating ramen noodles.Peer pressure doesn’t only happen in high school.
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  5. Lastly, MBAs are taught to be fed, not to hunt. Yes, you’ll graduate with a repertoire of great tools, fancy communication skills, and a heck of a network. However, there aren’t any classes that specialize in cold calling customers, persuading skeptical investors, resourcefulness or bootstrapping — the skills startup founders need to thrive.

Consider a “Master’s in Business Entrepreneurship” instead.

Despite all that I’ve just said, getting an MBA can work to your advantage because it’s a fantastic time to actually start your own business – if done correctly. You’ll find yourself pursuing what I call a “Master’s in Business Entrepreneurship:”

     

  1. Rarely ever again will you be surrounded by the resources you’ll have while in school. Programs like Wharton, Harvard and Stanford offer terrific resources for aspiring entrepreneurs including cash, work space, exposure and mentoring. You’ll also find a huge base of expertise and know-how in your classmates, who will have experience ranging from finance to engineering.
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  3. Most MBA program offer two risk-free years. When launching a business during your school years, the worst possible outcome is that you graduate and end up getting a great job. But if you succeed, you can hit the ground running once you turn your tassel.
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  5. MBAs offer a fantastic incubation environment: it is a microcosm of the market. You’ll quickly find classmates willing to test your product and zealously support your company as it tries to scale.

In summary, an MBA can be incredibly powerful when leveraged properly. The degree is a solid hedge against the risky proposition of starting your own business, and will provide you with the network, confidence, and environment to succeed. But be warned: the siren calls of MBA groupthink are powerful — you’ll need incredible focus and determination to turn that MBA into a “Master’s in Business Entrepreneurship.”

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