Three reasons why you should do your MBA before you start your own business:

I get it – the force is strong with you.

You are young, perhaps 2 – 3 years out of college, full of energy, and brimming with ideas.  As far as the element of risk is concerned, you are completely unconcerned.  You have enough confidence in yourself, and believe that you have it in you to overcome any challenges that you are likely to face in your way.

Lastly, you are impatient.

So impatient, in fact, that you sometimes wonder why it’s taken you so long to start your business.  After all, Richard Branson was on his way when he was sixteen.  Why can’t you?

Under these circumstances, pursuing formal business education will appear to be a significant speed breaker.  Given that you’ve waited so long already, is it worth waiting for another two years as you get through business school?

An MBA is worth every penny and every second you invest in it.  Let’s look at three reasons why.

 

1) An MBA will teach you good financial management

Businesses make money.  But before your business starts doing that – you need to spend money.  You cannot escape this regardless of whether you are a one-person company or a global conglomerate.

Think about it – before you reach out to customers, you need to be formally registered as an entity.  You should have a product or a service that you can sell.  You should do your due diligence to understand who is likely to buy your product or service.  You should reach out to target customers, and interest them enough to buy from you.

All of these stages require money.  And money is the scarcest resource available to you when you start up. In a world where capital is abundant, you are free to invest as much as you like in all the ancillary areas.  But in our resource-constrained world, you need to make the right decisions about where to best invest your money.  If you have five hundred dollars to spend – how much should you invest in product development vs. advertising?

An MBA teaches you frameworks to make such decisions easily.  And such decisions accumulate and eventually make the difference between going big or going bust.

 

2) An MBA will teach you how to scale up your business

We live in a world where size matters.  To survive, you need to compete, and to compete, you need scale.  This is why Dominos pizza dominates a market that also has several chefs who make superior quality products at tiny mom-and-pop restaurants.

Bigger firms face lower costs of business – they get better terms on credit.  They can get better terms from their suppliers by way of lower prices for input materials and services.  To top it all off, they are also able to command higher prices for their products from their customers – this is because of the brand equity that they’ve built up.

But scaling up a business is a methodical, and systematic process that requires you to hit the right milestones at the right points. An MBA teaches you what these are, and how to get there.

 

3) An MBA gives you credibility

Going by points (1) and (2) above, you will see that for you to start and scale your business, you need to interact with several stakeholders along the way – your investors, creditors, suppliers, and customers.

These interactions are much smoother when you already have the backing of a large company. But you don’t, at this point.

The success or failure of several of these interactions depends on the level of credibility that you bring to the table.  All else being equal, a loan officer is more likely to extend you that life-saving line of credit if you present them with the right credentials.  The fact that you have an MBA will give them the faith that you are likely to use the funds wisely and turn a profit shortly.  Your success is important to them because that determines your repayment capability.  And if you don’t pay back, it’s their career on the line as well.

An MBA will make it easier for them to believe in you.

 

These are lessons that I’ve learned from my short stint as an entrepreneur.  If you have any questions, feel free to reach out to me at karthik@augustacademy.in

Leave a Comment