BEING AN ENTREPRENEUR requires a marketable idea, a lot of passion and perhaps an almost zealot-like commitment. But what’s not necessary — and in some entrepreneurial circles, even scoffed at — is a master’s degree in business administration.
That’s the situation Kenny Lao, co-founder of Rickshaw Dumpling Bar, a chain of dumpling eateries in New York, found himself in after receiving his MBA from New York University’s Stern School of Business in 2004. When conversing with fellow entrepreneurs and others of the restaurant-industry ilk, he rarely (if ever) mentions his prestigious schooling. “There can be a backlash against MBAs,” he says.
While a business degree is good for boosting credibility with investors, “it’s also something you downplay in certain company,” Lao says. If the topic comes up, satirical ribbing and jeers usually follow. “People in nonconsulting industries tend to think MBAs don’t want to get their hands dirty,” he says. And being an entrepreneur, he adds, is definitely a grit-infused vocation.
However, the degree is also costly. Tuition alone ranges from about $4,000 to over $40,000 a year, according to Peterson’s, an online education-services company. Many students take on hefty loans and wind up in serious debt upon graduation. While MBA candidates planning corporate careers can count on higher salaries to pay it back (some skip the cost entirely when current employers foot the bill), entrepreneurs who are technically “self-employed” don’t typically enjoy such luxuries.
New York University B-school grad, Kenny Lao, at his 23rd Street Rickshaw Dumpling Bar location.
Joe Lassiter, a professor of management at Harvard Business School’s entrepreneurship program, says the decision of whether to get a degree or not boils down to common sense. “If you are a young entrepreneur who’s got a hot company that’s growing, you should not get an MBA,” he says. “You’re investing time preparing for tomorrow rather than spend time doing what you need today.”
While an MBA is not for every would-be entrepreneur, it usually doesn’t hurt either — especially if you have the business bug but lack direction, says Lassiter. An MBA can provide the skills needed to build and grow a company, and connect a budding entrepreneur with mentors and future management team members. Plus, a degree can give you the confidence to move seamlessly from an elevator pitch to a corporate boardroom, he says.
Before you send out those applications, here are some considerations:
Think About What You’ll Miss
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.