Is an MBA Needed for an Entrepreneur?

Through the years, I've done a fairly good job of growing my income. A key part of this success was getting my MBA. It cost me $5,000 but has returned much, much more than that. As you can imagine, I'm a big fan of MBAs in many cases.

But one in which I'm not sure it's worthwhile is when a person is an entrepreneur. The Wall Street Journal agrees, stating the following:

In addition to tuition, consider the cost of not working while attending grad school. Students who quit their day jobs to attend full-time two-year MBA programs stand to lose about $107,922 in wages, according to a 2005 report from the Graduate Management Admission Council in McLean, Va.

For entrepreneurs, an even bigger concern than wages might be the loss of time and energy that could be spent developing their businesses. Take, for instance, Jeff Takle, who co-founded RentingYourHome.com, a web-based rental property management service, shortly before starting Babson College's one-year MBA program last May. While his business acumen has soared, his actual business has suffered. "I am not able to spend the hours and energy I need to spend on it," he says. "I can't go to all the conferences and the trade shows because, well, I'm trying to graduate." As a result, revenues have suffered, at least in the short term. "If I had spent the whole time last year selling, we'd have maybe doubled the customers that we have now," he says.

Here's my take on the issue:

1. An MBA is great if you have a more traditional career path because it 1) opens doors for you that could take years to open otherwise (if they could be opened at all and 2) earns you a higher starting salary early in your career. That's why many MBAs pay for themselves fairly quickly.

2. An MBA also works well if you have a non-business degree and want to enter the business world -- as an entrepreneur or anything else. It can give you the basic knowledge you need to best manage your career/business.

3. For someone who already has a business background/degree and is going to become an entrepreneur, I don't see a whole lot of value to getting an MBA. It won't teach you any more than you'll learn in the "real world" and it will cost you in time and money. Yeah, it could open a few doors for you (maybe with alumni from your school), but that's probably it. 

What's your take? Is an MBA needed for an entrepreneur?

Comments

[The Happy Rock]

I am two weeks from finishing my MBA at Drexel U. It has been a great journey, and I definitely fall into category number 2. Computer Programmer with no business background that wants to be an entrepreneur.

The actually details of the specific MBA classes weren't that great IMO, but the overall usefulness of the degree and the personal growth will be a huge benefit. Plus my company paid for it all.

[Jonty Chickweed]

I have toyed with doing an MBA for some time now...my career path has been: IT consultancy, technical pre-sales, and now global technical marketing. I have always looked for career moves that are linked to what I have done in the past, but where I can stretch to new experiences (eg marketing).

In the large org that I work in, I see many senior execs with MBAs...but likewise there are many without. I have spoken to some of them about me doing an MBA, and some say that this is just a requirement for entry level positions, and as long as you continue to do well in role, you will always get ahead regardless of educational background. But then I have also spoken with some who (snobbishly I believe) will only look at job applicants (internal and external) that have MBAs...which I believe is short sighted on their part, but given that they may sometimes have a couple of hundred applicants for some popular roles, I guess it eases their selection burden.

I should also say that even though I now live and work in the US, I am from Europe, where MBAs are not as big a thing...probably because a bachelors degree there carries a lot more weight there...but an MBA certification is increasingly becoming a req on job specs.

I think my advice would be to do an MBA if:
-you are young - just graduated from a bachelors degree
-your employer pays
-you want to make a complete career change and are unable to make the switches that I have been able to

[moneyandpf]

Having a Masters of Accounting I always ponder if it would be wise to go back and get my MBA. I do think judging from what I've heard from others that I wouldn't really learn that much more since I did my undergrad and graduate school taking primarly business classes.

But MBA's do usually get very nice paydays coming out and seem to fit into management easier. Still though I doubt I'll go back and obtain my MBA unless my work will pay for it. For now my focus is on getting my CPA done.

[Foobarista]

It depends greatly on what you're doing as an entrepreneur. If you're a self-employed business consultant, it's probably required. If you're bootstrapping a web startup, it probably is a waste of time; you'll learn far more by doing than you'd learn in school.

[chica with issues]

I don't think it is necessary, but helpful. However, I think the stuff that would be helpful could all be learned from a book from the library :)

For the record, I do have an MBA. I learned a lot. But I wish I had saved the cash and just used my library card.

[Jonathan]

I would agree it matters what you want to do by being an "entrepreneur". Do you want to start you own restaurant or clothing shop in town? I don't think you need an MBA for that. Do you want to start a publicly traded company? It might help. Most of my MBA friends all work for big corporate companies, not for themselves.

[Chip]

In my experience, the biggest return of graduate school is the practical experience gained through an internship (I have a masters in sport management). The book learnin' was fine for understanding theory, but the real world is a whole different matter. The connections and opportunities I gained through that internship years ago are still paying dividends.

[Know The Ledge]

I'm about halfway through my MBA program and when I started it was to get ahead in the corporate world, my security blanket for myself and my family to guarantee that I could always get a decent job in a pinch. Know that I'm starting my businesses I don't see much value in it, so I'd definitely agree that it's not needed. It's nice to have on your resume, or to show that you're somewhat competent to potential investors, but experience in your field is more important to the ultimate success of your business.

[aa]

MBA is just a name that gets people into the management tier of the corporate world.

Name a few famous entrepreneurs with MBA!?

[No Debt Plan]

I am 30% through a 2 year night MBA program. It's been excellent and I think will truly help me down the road. In the near term, I'm not as convinced because I have a business management degree. I'm now wishing I had pursued a finance degree. Ah, if we could only change the past.

[Finance Monk]

"-you are young - just graduated from a bachelors degree"

That'd be nice, but if you're gunning for top 7 MBA programs (and eventually Wall Street) they tend to want work experience before you're accepted. I've been ready to go to an MBA program for quite some time, but I'm waiting for my work experience to make me a viable candidate to get in. Not that I'm sitting idly (I'm taking the CFA exams, trying out some entrepreneurial ventures), but few programs allow you go to an MBA right after a bachelor's program:

Avg. student's work experience upon application-

Wharton (UPenn): 5-6 yrs.
Kellogg (Northwestern): 5 yrs.
Sloan (MIT): 4.9 yrs.
U Chicago: 5 yrs.
Harvard: 4.5 yrs.

Granted, U-Chicago and Harvard have early applicant programs for only 1 year experience, but that seems to be an exception rather than a rule.

Just frustrating... I graduated at 23... 5 years out I'll just be entering a two-year MBA program (and $100,000+ debt), and that's if I'm lucky... and yet everyone I've spoken to recommends this?

[Frustated entrepreneur]

I had this dilema 3 years ago when I was 27.
After working for Corporate America in my native country ( Mexico) I had $50K in savings and family grants and didnt know whether to invest in a franchise or to make an MBA.

I went to Babson one year MBA. It was a great experinece and exposure to a lot of high worth individuals. The MBA gave me a lot of confidence and the skills needed to take a small business to the next level, but at the key learning from the MBA were common sense business concepts that any sucess entreprenour would tell you for free: you have to have a good idea with a niche Market, get around people that know what you dont know, and reduce cost.

Today at 30 yrs working for a company that is not in the industry I like, Corporate America style only to pay my enourmous debt i acquire to complete the MBA. Of couse, I had to put on hold my business idea.

In retrospective, I would recommend to do a MBA only if you get accepted at Ivy League school and want to high executive job for next 10 years. On the other hand, if you want to start a business, get yourself 1-2 years experience in that industry and use the MBA tuition money to pay an executive program (4 months at the most)or seminars focus on your industry.

[Jeff Takle]

As one of the guys mentioned in the WSJ article above, I thought I'd chime in, now about one year after that article hit the street.

Without question, the MBA at Babson has helped me tremendously. Lacking the knowledge of how to buy and sell companies, negotiate term sheets, raise smart capital, and "talk the talk" with big league biz people, my company wouldn't be where it is today. I'm now balancing two potential buyers and a third on the fringes. I've raised bridge financing and we're getting top notch press consistently. And [drum roll please] we're profitable.

Some of it's lingo. Some is connections. Some is financial literacy for biz. And a huge part was picking an MBA program that: 1) was one year long, and 2) was entirely focused on what I wanted to do, which was start, finance, and sell a business.

Guess it depends what you want to do in life. To swim with the big fishes, though, I think you need the kind of strategic foundation that an MBA provides. Just my $0.02.

Jeff Takle