Harvard Business Review recently published the article, “Why More MBAs Should Buy Small Businesses” by professors Richard S. Ruback and Royce Yudkoff. This article presented the argument that it makes sense for MBA graduates to buy small businesses as, in the long run, it benefits their independence and certainty (after the initial stress of the business search process, of course).
Browsing through the comments of HBR’s original Facebook link to this article, entrepreneurs with MBAs expectedly felt validated that experts from Harvard itself supported their path. This is understandable, as they have surely received mouthfuls before from friends, families and foes ridiculing how they are “wasting” their expensive MBA credentials.
On the other hand, some stated how unnecessary it is to have an MBA to create a small business, frequently citing tycoons who did not have MBAs, and how the funds used to pay for business school could have been used as start-up capital, instead. Owning a small business may not be for everybody due to the risk and investment required, but it is a path to consider.
So, what then does an entrepreneur gain from an MBA?
1) A Strategic View
Learning about the rise and fall of industries, companies and products, as well as the market forces that drive them, will help you gain a big-picture look of business and allow you to better determine the feasibility of your ideas. It will also equip you with a general range of probabilities for your success, while also keeping you conscious of both the upside and downside of your venture. Having some awareness of broad industry and economic trends – while keeping an eye out for disruptive technologies or events – could help you spot opportunities and risks.
Key concepts on managing finances and operations, such as the trade-off between debt and equity or between stock-outs and spoilage (or obsolescence), are important takeaways from an MBA that will help save you money in the long run, or even be the difference between the life and death of your enterprise.
2) Recognition of Human Factors
During the first month of my MBA program, I was filled with stories of how giant companies – reputable ones filled with the smartest people – made errors that a rational person would not have committed. The reason? Organizational politics, silo mentalities, misalignment of incentives, or just plain misplaced egos!
Being aware of these human factors can help an entrepreneur build a strong organizational culture that is able to implement strategies and processes sustainably, while also creating a healthy work environment that encourages accountability and growth throughout.
Learning about these human factors will also help you deal with outside organizations – including clients, suppliers and service providers – in the future. Being able to negotiate and effectively manage your relationships with these key stakeholders will be as critical to your success as any business activity.
3) A Rise in Self-Awareness
Decisions, decisions and more decisions! You have craved to have more independence and to be able to do things your way; the hierarchy, multiple levels of approval and authority limits that frustrated you before is no longer there. What you have now as an entrepreneur is the responsibility to make decisions (both large and small) that directly affect your business, your employees and your family.
The classes and group exercises at business school will allow you to become more aware of your biases, strengths and limitations, both intellectually and emotionally. Being aware of these should better inform you when it comes time to consult with others, delegate projects, and pull the trigger on tough decisions. Having an idea of the potential impact of your choices should also be able to guide you as to the time and energy you should allocate for these.
To conclude, getting an MBA is not a necessary condition for entrepreneurs or a guarantee for business success, but it does improve your probabilities of getting it right! At the very least, it should also help provide you with a safety net and an option to go back to the corporate life if you later choose to do so.
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Written by Edison Cu, a Veritas Prep Head Consultant for INSEAD.