Assessing the Value of an MBA for Future Entrepreneurs: A Cost-Benefit Analysis
You might not need an MBA to successfully start your own business — but it certainly helps. Still, is it really worth the cost? Let's find out.
Entrepreneurship has never been more accessible than it is today. There are so many low-overhead online businesses that entrepreneurs can start, plus more options than ever for connecting with people who want to invest in growing startups.
With that said, being a successful entrepreneur is far from easy. In the beginning, most new business owners really have to get their hands dirty and handle every part of the process, from providing a product or service to understanding tax withholding.
So, what kinds of skills and education are needed to build and sustain a successful startup? Do new entrepreneurs need an MBA (Master of Business Administration) degree to have the best chance of success? Let’s take a look at the cost-benefit analysis.
Understanding the MBA degree
Each MBA program is slightly different, but the main goal of these programs is to give students a comprehensive understanding of how businesses run and the tools they need to be successful as strategic administrators or entrepreneurs. Generally, students will learn about the following topics in an MBA program:
- Operations management — business processes required to keep a business running
- Marketing — market research, customer behavior and communications
- Strategy — long-term planning for larger business goals
- Finance and accounting — money management
- Product management — product development and the role of demand
- Business ethics — understanding what is and isn’t ethical within domestic and international business
- Behavior management — team dynamics and behavior for managing people
Some schools also offer courses in topics like innovation and entrepreneurship. Some classes are required for all MBA students, while others are elective courses based on the student’s goals and interests.
The benefits of an MBA for entrepreneurs
Getting an MBA can make a lot of sense for future entrepreneurs. The most significant benefit is that it provides a solid foundation of knowledge and a suite of skills that can make running a business easier. Instead of learning everything on the fly, entrepreneurs will already undersstand the basics and can progress more quickly than their self-taught peers.
Another major benefit of pursuing a master’s degree in business before becoming an entrepreneur is networking opportunities. MBA programs are full of ambitious and intelligent people who want to make connections. Those connections forged during a master’s program can lead to lots of opportunities later on.
MBA students will get lots of real-world business examples they can learn from, which can help when they face challenges and opportunities in their own businesses down the line. Mentorship and guidance are also available, which can be another resource even after graduation. Some students also get internship opportunities for real-world experience.
Evaluating the logistics and costs of pursuing an MBA
There’s a lot of potential value for entrepreneurs in earning an MBA. However, if it was easy or inexpensive to earn an MBA, almost every entrepreneur would do it. The costs and logistics involved can be a major roadblock that ends up reducing the overall value of getting a degree.
First, the actual cost of an MBA: Tuition, fees and other expenses are an upfront investment that may or may not pay off. If someone gets an MBA and goes on to start a business but then ultimately decides that entrepreneurship isn’t for them, they might not recoup their investment and have lots of debt to pay off.
There’s also the opportunity cost of getting an MBA. The hours dedicated to schoolwork and classes can’t be spent on other activities, such as work, personal enrichment or relaxation. Those hours invested might be worth it in the long run, but they do require sacrifices in the short term.
Analyzing potential career advancements with an MBA
So, what’s the cost-benefit of an MBA for entrepreneurs? Does it make sense for those who want to run their own businesses to get an advanced degree? It depends.
An MBA can be helpful for career growth and opportunities for those looking for traditional employment. However, entrepreneurs don’t really need someone else’s stamp of approval to start their own businesses.
With that said, having the foundational skills and professional network that an MBA provides can be extremely valuable for entrepreneurs. Sometimes, it can also help to have a business degree in terms of attracting investors and understanding growth strategies.
To MBA or not: a personal choice
The cost-benefit analysis of an MBA looks a bit different for each person. Those who have dipped their toes into entrepreneurship might choose to go back to school after they’ve already started their businesses. Some have their education sponsored by an employer. Others decide to use free online resources and go it alone.
There are lots of options for business education. An MBA can be a great way for entrepreneurs to set themselves up for success. For others, learning along the way makes the most sense.
Andrew Deen has been a consultant for startups in a number of industries from retail to medical devices and everything in between. He implements lean methodology and is currently writing a book about scaling up business.