2007 Small Business Outlook
Forbes Magazine
It’s one thing to learn how to crunch numbers for an investment bank, quite another to start the next Microsoft, Google or even a decent restaurant.
Small businesses account for a little over half the output of the U.S. economy. If trade and productivity are an economy’s twin engines of growth, entrepreneurship is the rocket fuel. The big question: Where will the next generation of entrepreneurs come from?
For keepers of the Ivory Tower, the answer is Karan Goel. Just 23 years old, Goel is the CEO of PrepMe.com, an online test preparation company he founded with two friends after bagging an M.B.A. in entrepreneurship and finance from the University of Chicago. Goel says he could have started his company without the business degree, but he’s glad he plunked down the $80,000. Now, just 18 months later, PrepMe.com boasts 13,000 customers at $300 to $1,000 per individual course.
In the last 10 to 15 years, business schools have massaged their curricula to attract and then train the next generation of Bill Gateses, Sergey Brins and Karan Goels. Along with core classes in accounting and marketing, students now tackle interdisciplinary exercises with macro themes like globalization and environmental sustainability. They even team with engineering schools to learn how to start and run companies, not just maneuver spreadsheets.
So-called entrepreneurship programs are hot too. The number of U.S. business-school faculty teaching entrepreneurship classes has exploded, to 349 in 2006 from 12 in 1997, according to the Association to Advance Collegiate Schools of Business. At the University of Pennsylvania’s Wharton School, for example, the number of courses on entrepreneurship has grown threefold, to 30, in the last decade.
Whether the makeover will actually pump out more–or more successful–entrepreneurs, though, is unclear at best.
Academic directors from top-ranked business schools crow that their changes better equip students to develop ideas, evaluate risks and even shake off mistakes. More importantly, perhaps, they offer encouragement: Of last year’s graduates from MIT’s Sloan School of Management, 4.1% said they planned to start a business upon graduation, up from 1.4% in 2001.
Still, it’s difficult to know what kind of effect business schools are having on U.S. entrepreneurship. For starters, many schools have trouble tracking the numbers of alumni who go on to start their own businesses–if they track them at all. Most students (even those who study “entrepreneurship”) work at larger companies for years before branching out on their own. The other problem: Graduates may stumble a handful of times before establishing a viable business, muddling the numbers further.
When it comes to starting companies, the stumbling–not the studying–is what counts, argues Henry Mintzberg, author of Managers Not MBAs: A Hard Look at the Soft Practice of Managing and Management Development. Bona fide entrepreneurs such as Bill Gates and Apple’s Steve Jobs typically shun M.B.A. programs because they’re too anxious to work on their own ideas, says Mintzberg. (Both Gates and Jobs dropped out of college to start their companies.)
Mintzberg may have a point, if the super-rich are any indication. Of the members of Forbes’ 400 Wealthiest Americans, approximately two-thirds each year are self-made. How many of those carry M.B.A.s? In 2006, just 15%, down from 17% five years earlier.
nunya
Interesting post. I started my own businesses while I was in undergraduate school and then continued one for a couple years after graduation. My plan had been to attend law school for several years and not necessarily to be an entrepreneur, so it wasn’t as if I was quitting due to failure. Now that I’m back in school and do interact with the business school at my university, what I gather is:
1) Our top-ranked business school is overrated and doesn’t really teach students the skills they’d need to be as successful as an employer would want, let alone to start their own businesses. This was the same sentiment floating around the business school of my undergraduate university. Basically, students are on vacation, and it’s easy to earn good grades. I was disappointed to learn about this, since one of the reasons I considered Penn for law school is because I could simultaneously earn a business certificate and because at my current law school many of us apply to receive a joint JD/MBA degree. Since I didn’t choose Penn, I considered doing the latter with my current law school, until I found out it would have been a waste of money and that the experience I gained running my businesses would be far more valuable than anything our business school would teach me.
2) The school feeds students right to employers, i.e. no, they are not becoming entrepreneurs. Employers come to campus, students do on-campus interviews, they get hired, and that seems to be that. Students want the “easy cash”…they want to know they will make lots of money every year, especially if they got into debt to attend their school, so they take the “easy” path by working for someone. The same is true with law school and entering law firms rather than striking out on your own to start a law firm.
March 31, 2007 at 1:21 pm
David McQueen
Can you really teach entrepreneurship?
Seriously. How does an MBA teach about innovation and taking risk. I have yet to meet a lecturer on such courses who has actually taken risks to be an entrepreneur. Why? Because most entrepreneurs are out their doing not teaching.
You can teach enterprise and business but not entrepreneurship. I would say to those who want to spend such money, if you got it go for it, but all the real entrepreneurs I know and have met grafted with their ideas, surrounded themselves with other skilled people but just did it.
Sorry, but I poohpooh the idea of an MBA making someone a better entrepreneur.
March 31, 2007 at 1:49 pm
Kimberly Michelle
I agree with both of you 100%, especially about the parallel with law school. Nothing in law school teaches you how to “go it alone” and I imagine the same is true for business school. As for being an entrepreneur, either you have it or you don’t.
March 31, 2007 at 2:18 pm
Tambra
Though a MBA doesn’t equip you to address the 100% realities of being an entrepreneur, it does provide you a network, a level of confidence, knowledge of resources and real life projects/cases to analyze for you to lessen the potential of falling in similar scenarios. I truly valued the entrepreneurial management course at Boston University. I had a great faculty member who was an entrepreneur–actually a venture capitalist in IT. We worked directly with his clients–CEOs of well established IT companies and presented our solutions to their business challenges.
I was the only African American in that class of 45-plus students. I definitely felt I had a unique learning opportunity. From that experience it added value in my graduate education along with giving me the confidence and leverage to pursue business-related positions though I am trained in health communications with prevention campaign focus. Now I am starting a social venture and lessons learned from my faculty member lies within me to this day such as with any venture you must think exit strategy in mind: sell or scale and many other lessons.
April 1, 2007 at 1:08 am
YBP Guide — weekly roundup: 3/31
[...] ← Do M.B.A.s Make Better Entrepreneurs? [...]
April 1, 2007 at 9:14 am
N. Thomas
I disagree with David 100%. An entrepreneur can always benefit from learning how to better market, finance and reduce the risk of starting a business with an MBA. Thanks to Enron, we now have to sign our names on the bottom line for our business’ accounting/finances. Would you want to do that without a thorough understanding of the numbers? MBAs also gain a priceless network of people to call on in the future (v-capitalists and angels). During my stint in b-school, my adjunct professors (e-preneurs and professors) taught me HOW to evaluate risk such that I don’t lose my shirt in the process of starting/maintaining my business. I also learned a great deal about innovation and how to evaluate my ideas to determine if there was a market for it.
Kimberly, going it alone is neither the goal nor the smart way to start a business. B-school teaches you not to “go it alone,” but how to choose the right people to get on board.
I was an entrepreneur coming into b-school and I am one now. I also know people who learned what was needed to BECOME successful entrepreneurs that started businesses straight out of b-school. I agree that “stumbling” is important as well to learn how much sweat equity is needed to get a business up and running. Just not at the expense of learning deeply your craft and how to sustain it without eventually giving all control to someone…
with an MBA.
April 1, 2007 at 5:13 pm
Bigrayvin
I think M.B.A.’s can only improve how a Entrepreneur succeeds. Can it help predict miss opportunities, misfortune, and misstakes. No! It can help you better prepare yourself to succeed out of that 95% failure rate. Overall a M.B.A. should be looked at as a tool in the entrepreneurship box of resources that they can pull from. I mean imagine going into a business and not knowing where to start. Without a M.B.A. this can set you back a year or two possibly. Think about the team: The saying goes there are tons of good ideas ,but there are not tons of good teams. A M.B.A. can teach the entrepreneur to create a great team first before going live with the business.
Also, the resources, networks, and connections that are made when getting a M.B.A. are priceless .
April 6, 2007 at 10:25 am
YBP Guide — YBPs: The Advanced Degree Chasers
[...] advanced degree can increase your income by $20K. We’ve recently posted on whether having an M.B.A. makes you a better entrepreneur and the arguments were poignant on both sides of the discussion. The truth is, whether you think [...]
April 12, 2007 at 7:31 am
African American (Black) Opinion Blog » Young Black Professionals: The Advanced Degree Chasers
[...] an advanced degree can increase your income by $20K. We’ve recently posted on whether having an M.B.A. makes you a better entrepreneur and the arguments were poignant on both sides of the discussion. The truth is, whether you think [...]
April 12, 2007 at 7:32 am
David McQueen
N. Thomas
I supppose we will have to agree to disagree but I have met a number of the most successful entrepreneurs in the UK including Duncan Ballantyne, Peter Jones, Richard Branson, Alexander Amosu and Alan Sugar. all of them successfull millionaries and execs and none of them employing MBAs. Then I think of Warren Buffett, Steven Jobs, Bill Gates and then there are Brin and Page of Google. Only the latter actually finished university.
Not to mention Earl Graves, Robert Johnson, Oprah Winfrey and George Fraser. All entrepreneurs who I model and look up to and didnt have to spend £80k on a course designed more for corporations.
On my road to a million I know where my focus will be. Bless you on your journey also.
April 12, 2007 at 8:41 am
O.O.
The entrepreneurial spirit can’t be taught, but the skills resouces and networks gained in an MBA program create a slight buffer against many pitfals that may arise. I think of my brother and I. My brother, a entrepreneur – http://www.s4tconsulting.com – does not have an advanced degree and actually was not the greatest undergraduate student either. BUT he is one of the most savvy business people I’ve ever worked with. As for myself, I believe I have the spirit also, but I just received an MBA degree. I felt that it would make more credible in certain circles of international development which is the industry I would eventually like to start a business in.
That said, the Entrepreneurial Spirit you cannot recreate, but the skills and networks of an MBA are definitely priceless. So whether you have an MBA or not trial by fire is the only true teacher. The idea is that an MBA will help you bypass some of those fires.
May 12, 2007 at 10:41 am
Anwar Hussain Bangsh
Hello Dear
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i wish i can have contat with you soon my email address and contact numbers are below.
cityof_knowledge@yaho.com
Mobile No: 92-301-8026331
January 14, 2009 at 2:06 am