December 2004

Why should entrepreneurs get an MBA?

If you're an entrepreneur who thinks pluck and luck is far more important to success than learning business essentials by getting your MBA degree, you might want to hear what people like Emily Cieri think about it.

"Most of our students coming to our program have technical experience or life sciences or educational backgrounds. But they usually lack the hard-core business skills to develop a business," says Cieri, managing director, Wharton Enterprise Programs, University of Pennsylvania.

In fact, she goes on:

"Students already in business sometimes already have the technology to do it but they need to be rounded in areas of marketing, financing their business, legal aspects and many others. They often don’t have that foundation."

As a representative of one of the oldest and best-known MBA programs, Cieri may have some bias. But as MBA programs everywhere have in recent times stressed entrepreneurial skills, students involved in the programs have also given testimonials to their success.

"I had entrepreneurial vision, but needed the business skills to make that vision successful," says John M. Arnold, who earned an MBA at the Smeal College of Business, Penn State.

He owns several businesses that have grown 2,200 percent and now generate more than $750 million in income. "My Smeal College MBA degree gave me what I have needed to meet and exceed my personal goals," he says.

Another entrepreneur, David Henry, had no thoughts of school while building a successful $1.5 million day-care business with his wife. But then he hit a cash crunch.

The 28-year-old Pittsburgh native with an undergraduate degree in French told The Wall Street Journal: "We had no idea what we were doing."

So he enrolled at Carnegie Mellon University's MBA program, which typically emphasizes entrepreneurship.

A year after graduation, he was on a second round of venture-capital financing. His business was heading towards $18 million in revenues.

His experience is a textbook example of how even the most skilled entrepreneurs can learn necessary skills through MBA programs.

Henry discovered in his classes, for example, how much economies of scale meant to his business -- it doesn't cost much more to insure 500 kids than 100. That applied to food preparation and administrative fees as well.

And the right niche? How important is that? Another entrepreneurial class taught Henry to stop locating in suburban centers, where all his competition could be found. His niche would be the inner-city families that are ignored by the big child-care chains.

Still another critical class was on entrepreneurial venture capital. It shed light on what investors were looking for.

As the Journal wrote:

"Once the province of ambitious corporate climbers, MBA programs now are being filled with the ranks of entrepreneurs who want to hone their analytical and financial skills for their own businesses."

Nearly every top-rated business school has a specific program or a core of classes that emphasizes entrepreneurship. In fact, entrepreneur classes are the fastest-growing courses in today's business schools, academics say.

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