“Why do you want to do an MBA?”
“I want to be an entrepreneur.”
“Do you need an MBA to become an entrepreneur?”
Even though I answered “Yes” with out any logical thinking, this question of my Professor Anirban Ghatak kept me thinking for the entire two years in MBA. Do you need an MBA to become an entrepreneur?
MBA – Masters in Business Administration – is different from entrepreneurship. To be specific, MBA is a subset of entrepreneurship. Entrepreneurship is more than that of MBA. The roles of a manager and an entrepreneur are not comparable. The approaches to the same problem by an MBA graduate and an entrepreneur are also different. The way they think(intuitive/ systematic), the decisions they make, idea generation methodologies, their dealing or presentation with other people, the risk taking abilities, and even their appearances and mannerisms are different.
An MBA graduate, usually, focus on one particular specialisation and even into micro specialisations. But an entrepreneur is a jack of all, and sometimes may be a master in one subject. There is no need of an MBA to start a business, but to proceed further, may be after a year, one needs some knowledge about managing the business. An entrepreneur can avoid this step by appointing a manager in the firm to take care of business. But would you prefer another person to run the business to you? Three things matter here.
Effectiveness: The entrepreneur has better information and knowledge regarding the business because he/she is the one who conceives the idea. And hence he/she can manage the business effectively and efficiently.
Trustworthiness: Since the entrepreneur knows the business inside out, it is better to take the position as a manager than appointing another person.
Money: You need to pay the manager a hefty amount if one is appointed.
An MBA is good when you need to understand more financial/marketing/HR concepts, otherwise there may be a chance that your own employees fool you and take advantage of your ignorance.
The critical factor: Idea
The critical factor that decides whether you need to do an MBA to become an entrepreneur or not is “idea”. If you have a very good ‘innovative idea’, do not waste your time in doing a two year MBA course. Start it right away. Get the help from a professional to make a business plan and present your idea before venture capitalists. They will take care of the funding part. But be cautious that the professional who is helping you to prepare the business plan should not steal your idea. (It is better to prepare a business plan by yourself or patent your idea).
But what if you do not have an innovative idea? An existing business or a successful idea copied from another country is prone to more competition. You need to know how to develop your business and here comes the importance of MBA. It depends on a number of external factors like economy, politics, technology etc. If you do not want to waste your time and have good financial backing, go ahead and hire a manager.
Decisions and risk-taking ability
An entrepreneur thinks both intuitively and logically more or less the same. But intuition plays a less role in the decision taking ability of a manager. Business schools will teach you to think in a systematic way just like solving a case study. But no one in business schools will teach you how to think intuitively. It is qualitative and is difficult to convey. One need to practice it. Keep in mind that intuition plays a major role in decision taking.
Entrepreneurs are more risk taking than managers. An entrepreneur identifies an opportunity and grabs it. He/she takes the risk and acts accordingly. But a manager is more into traditional way of thinking and hesitates to take the risk. Even if a manager do not take a risk and the business goes smoothly, he is not in a dangerous position. But if he takes risk and the business flops out of the risk, his may get a pink slip. This thought hesitates the managers to take risk. Always keep in mind that the risk should be a calculated one.
Learning: an on-going process
Whether you have an MBA or not, whether you plan to take an MBA or not, whether you are a manager or an entrepreneur, to run a busiess, it is essential that you need to learn continously. It is an on-going process.
Keep on updating your knowledge. Identify the opportunities, anaylse them – its advantages and drawbacks. If it is viable, take the risk and invest in it. Reap the benefit as soon as possible.
Hi,
Very good blog. I am in the exact same situation, have been in a dead end job for almost 9 years, now I have secured admission in a full-time mba program from a top 20 school and I really want to get into entrepreneurship stream and that is the exact question that I am asking myself, do I really need to spend all this money and effort to get an MBA degree and start on my own.
As you said in your blog, idea is really important, full-time mba programs do work with other departments in the univ. to come up with new ideas that can be made into business plans.
Just want to share this since I am currently in an MMBA program. From my experience, it brought a lot of business information in the marketplace to my attention that give me better “big picture” of how businesses are suceeding these days. Concepts such – capability or core business, the global economy etc….Although execution of the bplan is still the key factor.
You are right Manas. Not knowing the business very well may take years of experience to learn them. But you can learn it all with in a year or two.(I admit that there are some things that cannot be learned in B schools, but only through experience).
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I agree that a genius is born, but every genius necessarily won’t be a good responsible manager. Management is a talent which you may have but it needs to get polished and refined for using it to its full potential.
MBA helps you to learn skills of team work, leadership, innovative thinking, which you may have otherwise, but, owning a skill is really not that important as its application. An MBA teaches you that.
[…] Do you need an MBA to become an entrepreneur?: This post considers the real ROI of an MBA. […]
Hi,
I would like to comment on the article above:
a) From my own experience, entrepreneurs do not require an MBA, but certainly some kind of knowledge of the functional areas of the business, so as to lay the right foundation for a healthy future growth. An entrepreneur eventually WILL hire an expert (like an MBA holder) to run and manage his business, seperating ownership and control. This doesn’t mean that the entrepreneur goes on a long vacation, switches of his handphone and laptop and doens’t care about his business anymore… Rather he hires a captain to run the ship, but remains owner of the ship and makes sure the captain maintains the right direction. If you open a business, you sure won’t end up having the business depending on your presence to run. Your goal is to make money, and your business is your tool to do just that. Get a great team (MBA holders?) together and have them run the show for you. As an entrepreneur, you don’t want to be the smartest guy in the room, but what you want is to be in control…
b) Personally, I don’t have an MBA. I’m currently doing a 3 year BSc in Business at University of London, because I find that in 3 years I learn the craft more in depth than in a crammed 18month program. Sure, I won’t have “the Master” title, but since my goal is to continue building start-ups and NOT working in big MNCs, I won’t need that MBA on my resumee anyway.
Everyone has different objectives: If you want to join the MNCs I guess an MBA is the best choice to keep all options to climb that corporate ladder. However, other people like to be the ones who actually BUILD the corporate ladder by creating their own corporation. Those people should, in my humble opinion, focus their efforts and funds in building their own businesses.
Whether one needs an MBA or not is probably a very subjective question. From your post it is clear that in some cases it does make sense. But there is another important aspect here. Every start up struggles to hire right people and raise money. With an MBA from a reputed institute it becomes easier to attract both these resources.
Further, MBA is teaches more logical analysis. You are given a problem, make use of the tools and come up with a solution. It is painfully lacking on execution part. While planning part is required in any start up the issues in execution make it difficult to reach the desired results. An entrepreneur tries to not only identify the risk but also mitigate it. This is in stark contrast to what an MBA might do – avoid the risk altogether.
Anyway nice discussion there. I am going to write an article on this on my website.
Excellent article. It should really inspire some young up-and-comers…I will definitely be checking out the wining idea.
Thanks and Regards/-
Jason Webb
Views expressed here are enriching. Entrepreneuring is something unpredictible. The success of a start-up depend on a number of factors and maybe sometimes even upon luck. While the success stories of entrepreneurs making it big are known by all, many’ve also failed. Mba or no mba, it just doesn’t matter!
I am sitting here getting ready to look for a job in which I have 3 more classes before the specialty in Entrepreneurship. Got to know how to spell and say it. Yes, I believe this MBA will help me. I remember what is was like before taking all of these courses. Second guessing what one should do it case of this or that. MBA helps with critical thinking. Thanks for the topic.
This question also reminds me when I took my first accounting course, the instructor asked me why I was taking it. I told him because I am a tax preparer. His reply was that tax and accounting are totally different. Which is true, but you need to take it in order to know it, was my reply.
Get EDUCATED IN ALL FIELDS….the mind is open to knowledge.
good article
it is really helpful