I have got my MBA fresh out of undergraduate college. I never conducted business before that. But some knowledge that I obtained in MBA helped me throughout my life and career and is still helping now. Therefore, I want to share my thoughts on this topic with you.
MBA is not necessary for entrepreneurs to start and run a business. But MBA can provide essential basic foundational business knowledge, which can be very helpful when an entrepreneur makes business decisions.
The MBA program is also a potential pool of helpful business contacts which can be exploited in establishing and growing business in the future.
I obtained my MBA primarily for knowledge, and I do not regret it. It helps me to make decisions in personal finances and at work. MBA also instilled a limited amount of entrepreneurship spirit in me.
On the other hand, I have seen many successful entrepreneurs without degrees or degrees in other areas. They still had to learn business concepts on their own. In my opinion, MBA can be helpful for a businessperson in several ways.
Is MBA needed to start a business? Can I create a company without MBA?
In most instances, you can start a business without an MBA. Especially such statement is true in our modern digital world, which allows to market business to masses without specialized knowledge of finance or economics.
Starting a small business with limited capital by exploiting merely personal skills does not necessarily require an MBA. But it instead helps to have MBA knowledge down the line when you grow your business.
You need to know how to present your service or product and sell in the market environment. That you usually learn on your own, or through working as a salesperson.
At the same time, I would also argue that starting a business in areas where you need to raise capital or acquire investors may pose a particular need for an MBA.
But my pet peeve about MBA was that MBA did not specifically teach primary business skills. MBA does not teach you to be a shrewd businessman or businesswoman.
Instead, it teaches you to be more of an analyst or manager with a wide range of foundational business knowledge.
MBA was designed and introduced in the 1980s as an experimental program for creating middle-managers.
Still, things learned in Strategy class, like that there are only two ways to enter the market – by differentiating or low costing can be a pretty helpful grain of knowledge in business.
Or supply and demand curve is the foundationally essential knowledge for an entrepreneur who wants to scale a business.
On the other hand, having an MBA from a top-ranking MBA program may help open many doors and hearts of investors who will see you as a more legitimate candidate for a recipient of investment capital.
Having an MBA from a top MBA program may also help you raise debt capital, if necessary. Banks may also view you as someone who understands the consequences of raising money and the responsibility to repay it.
Finally, MBA from a top business school may give you solid, valuable business contacts among other business students. Because in top MBA programs, you may find many well-connected students who accomplished something in business themselves.
They may also have good solid relatives influential in the business world. You may take them as partners in your business and benefit from their expertise or connections.
Is MBA necessary to be successful in business?
I worked for law firms founded by successful lawyers. A couple of them were millionaires or multimillionaires. However, I noticed one common thread among them.
They did have a good understanding of finance (revenue, profit, and expenses), marketing, and sales.
They were and are very successful without getting an MBA. But all of them had to learn at least basic business knowledge to be successful entrepreneurs.
Their knowledge was similar to what I have learned in MBA, although their aspects were geared toward finance and marketing their specific services.
Some of them were not good managers, though. That comes naturally or does not come at all unless developed through learning.
On the other hand, MBA gave me some additional knowledge about economics (one of my favorite classes), which they did not have because it was too specialized. And it helped me in my work and helped me in my small business projects.
MBA also helped me with learning how to build and work in teams. I have a natural ability to train people.
So I exploited that skill for one of my significant projects where over 3-4 years, I built a team of reliable, independent professionals who worked like a clock when I needed them.
Some of them have PhDs, so you can imagine that I had to find a different approach for each of them.
However, despite my natural ability, I believe MBA helped me to learn quite a few valuable tips and tricks when working with a team of professionally diverse individuals.
The conclusion is that while MBA is not necessary to be successful in business, MBA knowledge can help run a business.
Is MBA needed for an entrepreneur?
In the previous section, we concluded that MBA knowledge is not necessarily needed, but MBA knowledge can be helpful for entrepreneurs. So, let me explain specifically which MBA class how can help the entrepreneur.
Specific MBA classes which benefit entrepreneur
Finance and accounting classes.
These classes are pretty important, and they provide entrepreneurs with an understanding of basic financial concepts.
Concepts ranging from financial ratios, financial concepts to financial statements like income statements, balance sheets, and cash flow statements are helpful.
The last three financial statements will be necessary to understand for the entrepreneur. One cannot run and grow a successful business without understanding financials not intuitively but on a practical level.
Yes, you will hire an accountant to do numbers, but those statements reveal the state and health of your business. As an entrepreneur and future millionaire, you will need to understand those.
Basic knowledge of accounting is necessary. Entrepreneurs starting a small business often do their accounting.
While you can learn to account on your own, even online, managerial accounting may give you a perspective in the future when your business starts growing.
Although my accounting professor was an expert, she could not teach. So, your ability to understand accounting will depend on your ability to learn to account independently. Like anything else, it is your responsibility to run your business well.
One of my favorite classes was finance. I got my A+ in it. Entrepreneurs will need to understand finance to grow a business.
If you need to raise capital or involve investors in your business as an entrepreneur, then you will need to speak to them in their financial language. Finance classes help in this respect and a lot.
At least you learn concepts and terminology to present yourself as a more knowledgeable and legitimate entrepreneur.
Investors WILL feel more comfortable working with someone who knows and understands business numbers. Banks are more willing to lend money to such entrepreneurs.
If you have watched Shark Tank, then you should have noticed how those prominent investors sitting there reviewing projects are pleased when guest entrepreneurs know financial numbers for their business – sales revenue, expenses, and so on.
In short, finance class is helpful because it makes entrepreneurs think more seriously about finances and how to manage finances when running a business.
Note. For me, finance class created a problem when I thought of myself too much and began trading stocks, options and forex. As a result, I lost a noticeable amount of money in 2008-2009 cash as I was still young and too cocky.
My MBA finance classes sparked that interest in trading. But I shifted to the side of financial gambling in my trading and took too many risks.
And I did not listen to myself but heard to the media. But, on the other hand, large companies also lost billions of dollars in that crash).
If you learn in MBA, it will be this: never gamble with money unless you are ready to lose that amount. And always manage your expenses, just like in regular life.
Marketing
Understanding marketing and advertising are very useful in promoting a business. Still, sales skills are the most essential and can be learned without MBA.
But general concepts of how marketing works may provide foundational based for your future creative marketing strategies for your business.
In my opinion, the most beneficial was my specialized marketing elective, where we had to break into teams and develop marketing plans and strategies for actual real-life projects.
That was very creative work and very practical. So if I learned anything about marketing in my MBA, it was from those activities.
Because common marketing knowledge in counting audience retention is not too practical for entrepreneurs in the early stages of running a business, I frankly do not remember much about that.
But promoting my project creatively more correctly and creatively – I learned that from my marketing classes. On the other hand, the entrepreneur may learn marketing from successes and failures in performing their marketing activities.
Economics
I just loved economics class. It was not easy, but it provided a few essential concepts, like the supply and demand curve. Or show to scale a business by employing economies of scale.
This class is beneficial because it teaches us to see the global picture and global macroeconomic trends.
For example, simple supply and demand curve analysis can predict bubbles and significant market crashes and which product or service may have more potential in your business.
Management
Management is an interesting and valuable class for entrepreneurs who intend to hire and manage larger groups of people.
Solving real-life management problems, brainstorming problem solutions in a team was a beneficial experience in my MBA management class.
So, the MBA knowledge can be quite helpful when making business decisions with a more global growth perspective.
What are the cons of an MBA for an entrepreneur?
Opportunity cost
Opportunity cost means the time, money, and other potential opportunities one forgoes by choosing a specific activity. For example, pursuing MBA takes away plenty of time that an entrepreneur could have spent on growing and promoting a business.
That is why many busy people choose part-time evening MBA or other educational programs because they do not want to abandon their job or business while in business school.
Note that MBA also requires time and energy for reading textbooks and doing homework at home. Other activities that will take time include meeting with your class tams to prepare for class team projects. Take that into account.
Student debt
If you are an entrepreneur starting or pursuing your business, you should know that getting in debt is usually not the best option. Instead, the entrepreneur must evaluate the pros and cons of incurring a student loan for pursuing an MBA program.
I tend to think that the top 5-15 MBA programs are worth practically any cost. Anything beyond the top 15-25 MBA programs requires thorough thinking and analysis on a potential MBA student who is currently pursuing entrepreneurial projects.
I recommend preparing well for GMAT and going for as top-ranking MBA program as possible. If not, then try to choose one that is cheaper and more flexible with scheduling classes.
Use of MBA knowledge in life and career
This point is simple. Entrepreneurs growing their businesses will benefit from at least some knowledge from an MBA.
Also, an entrepreneur with an excellent idea needs to learn a specific topic for the business. Say, if you run a pizza store, you need to know about making pizza and operating a kitchen.
If you design a clothing line, you may need to learn how to model, design, sew and find contacts in the fashion industry, boutique stores, or promote clothing online. That knowledge is precise, and MBA programs usually do not have such a narrow focus.
MBA program usually gives general knowledge of business topics. However, many MBA programs started introducing specific specializations which may not be necessary for an entrepreneur.
For example, focus on management and marketing can be a good choice for clothing designer who started own clothing business.
But MBA focusing on heavy financial analysis and valuation for hedge funds may not be as beneficial. On the other hand, such a program may lead to contacts that may help designers find investors in their business. That is a rare occasion, though.
Still, getting an MBA gives a global perspective on business to those entrepreneurs who have entrepreneurial spirit and plan for massive future growth of their business.
On the other hand, Google founders did not have MBA’s, as far as I remember. Neither did Elon Musk. Oh, wait! Elon Musk has an MBA from Wharton – one of the top MBA programs in the world.
Phil Knight (Nike corp.) also has MBA from Stanford. But Bill Gates and Mark Zuckerberg do not have MBAs. But they employ MBAs in their companies.
But if a business fails and an entrepreneur gets back into the workforce as an employee, then MBA knowledge may not be as beneficial, depending on the type of job.
MBA may still be an excellent addition to a resume for an experienced professional who wants to advance their career in managing the company.
Note that every entrepreneur is usually a good businessman or businesswoman, but not every MBA is a good business person and entrepreneur. MBA does not teach intangible natural skills required to start and run a business. But MBA does teach a framework in which entrepreneurs operate.
Analysis of MBA pros and cons for entrepreneur
The entrepreneur needs common sense. But, even without a degree, you can start and run a successful business with common sense.
The other thing you need to know is how to keep profits high and costs low. But, again, that is common sense knowledge, no necessarily requiring MBA.
MBA is just a tool that you can use to leverage your business activities by exploiting the knowledge you have learned in MBA. As an entrepreneur, you will discover many topics covered in an MBA program.
If you started a business and gained traction, I would focus more on running and growing a business rather than pursuing an MBA because you do not want to lose the momentum you had built in your business.
The basic knowledge that entrepreneurs need is marketing, promotion, sales, understanding financials, leading, and managing people. Managing people is probably an essential skill after sales and marketing.
I have met strong entrepreneurs who could manage people but could not lead them. Because people are different, and there is a thin line between being bossy and being a leader.
MBA experience helped me in some way to understand that. So MBA and practical work experience combined were beneficial.
If anything you learn in MBA is that business is a separate entity, you need to treat it as such. Even a personal brand is often an entity separate from the focus person.
Conclusion
MBA allows for that personal development in the areas of theoretical business that many starting entrepreneurs lack. Said that many entrepreneurs do not have MBA or other business degrees.
Entrepreneurship is an efficient activity, and MBA lays the theoretical foundational knowledge base. MBA assembles that critical theoretical and practical foundational business and entrepreneurship knowledge in a condensed form.
At the same time, MBA pushed me into thinking more like an entrepreneur and pursuing certain business activities, for good or foul. MBA can add beneficial skills and knowledge plus contacts for entrepreneurs. MBA is an excellent overview of the business world.
Yet, Steve Jobs did not have an MBA. But, such types were born entrepreneurs. Yet many MBA graduates form successful companies after obtaining MBA.
The founder of Sun Microsystems is an example (Stanford MBA). The co-founder of BlaBlaCar (over 1 billion in valuation) is another example (Instead MBA). Founder of Grubhub (4 billion dollars’ worth food delivery company) is yet another example.
I am sure that top MBA school contacts help their graduates in the funding process.
For example, shark Tank’s Mister Wonderful Kevin O’Leary is an MBA, Ivey Business School, Western University. And he credits his MBA not for making him an entrepreneur but for contacts to help him launch, grow and sell his first significant company.
Therefore, we can conclude that a top MBA is worth it for the entrepreneur. On the other hand, low-ranking MBA – it is up to you.
MBA itself does not make a person entrepreneur. But MBA does provide a platform that promising entrepreneurs can exploit to start and grow business faster and more successfully.
