An MBA can make your business idea a reality

But the course may not be the best option for budding entrepreneurs in comparison to the school of life

DURING 2012, the total number of new businesses created in the UK increased by almost 10 per cent. Small businesses accounted for 47 per cent of employment and 24.4 per cent of turnover in the country’s private sector, according to figures from the Department for Business, Innovation and Skills.

As a result, more people who may have traditionally taken a Master of Business Administration (MBA) programme to enter into the corporate world are now looking to join the fast-paced world of start-ups instead. A third of respondents to the 2012 QS Top MBA Applicant Survey said that entrepreneurship was one of their preferred areas of specialisation, and three in ten see themselves running their own business within the next decade.

Business schools have certainly not remained oblivious to this trend. Many top schools now offer elective options in entrepreneurial subjects, as well as additional financial and administrative support for people hoping to start their own businesses – a notion that would have been unheard of 20 years ago.

London Business School, for example, runs courses with titles like financing the entrepreneurial business, entrepreneurship in emerging markets, and new venture development. Saïd Business School, meanwhile, has a seed fund that invests £15,000 to £25,000 in start-ups led by Oxford students and alumni.

The problem is that the MBA, by definition, is a generalist programme whose primary graduate destination continues to be large, established companies. The kind of skills these employers need are often far removed from the requirements of a start-up, and much of the course content may be irrelevant or misleading for potential entrepreneurs. This mismatch of skills is deeply ingrained into the way business schools operate – the widely respected MBA rankings in the Financial Times have a career progress grade that ranks programmes by the “changes in level and size of company alumni are working in now, versus before their MBA”.

But despite this, filling a skills gap is what drives many successful entrepreneurs towards the programme in the first place. Cathal Brady, founder of software solutions start-up Ultan Technologies and winner of last year’s Association of MBAs’s Entrepreneurial Venture Award, took his MBA at UCD Smurfit in Dublin to gain the accounts and marketing skills he needed to leave his job in software development and start his own technology business. “If you’ve got basic skills in a sound area, an MBA can be good for brushing up on those areas where you don’t have expertise,” he says. But he adds: “I have a technical background though, so it may be different for others.”

Matt Robinson, co-founder of online payments system GoCardless, says he is “totally reliant on my tech team” and that “the ability to read and write code is immensely more valuable to me than an MBA”. Robinson has never hired an MBA graduate, as the people he has interviewed from the programme have all been unsuitable. He thinks that the qualification in its current format does not accurately target the needs of the modern start-up – particularly tech start-ups.

“That’s not to say I never will hire one, it’s just the system is not set up right at the moment,” says Robinson. “The skill I am looking for is the proven ability to get stuff done, but most MBAs seem to be more preoccupied with the ideas stage than the execution.”

To address the market for entrepreneurs who think that too much of the traditional MBA course is irrelevant for them, start-up recruitment site Escape the City has set up an alternative programme it calls the “Start-up MBA”. This course claims to teach “all of the relevant and practical knowledge you need [to start your own business] in five days and at a fraction of the price [of an MBA]”. Co-founder of Escape the City Rob Symington says the MBA, for some, is just “glorified procrastination” – a method of deferring the harder and more important task of working out what you’re going to do.

“MBAs of course have their place, and there are numerous benefits to having one – including a brand on your CV, a business network, and the chance to interact with academics,” he adds. “But it’s my opinion that the only way to really know if an idea will work is to put it out there.” Given the ease and cheapness of testing an idea and starting up a business in the UK – especially an online one – this is certainly an option worth considering.

Symington’s criticism of the programme is a familiar one. But he goes a step further to say the MBA could actually count against you if you’re applying to work at an existing start-up. “There’s a commonly-held stigma in the start-up world that people coming from MBA programmes will expect unrealistic salaries and perhaps think themselves overqualified for the role.”

Robinson agrees, saying that many of the MBA graduates applying for roles at his company have been “sold a false dream” about what working at a start-up is really like. He says people with aspirations of working at a growing business need to realise they will be starting at the bottom doing a lot of grunt work, and must be prepared to make an initial financial sacrifice. “I asked one graduate what his salary expectations were and he replied with £60,000 plus. I don’t even pay myself that much, so why would I give that to a graduate straight out of business school?”

Julian Birkinshaw, professor of strategy and entrepreneurship at London Business School, explains where this misunderstanding might come from. “Students with plans to start their own business rarely have misconceptions about what life will be like – they know they’ll be doing everything from cold calling to fetching the coffee. The problem arises when you get students applying for a start-up that has got through its first round of funding and is in rapid- growth mode. Some of them think that because the business has got its feet, they won’t have to do the grunt work and will be paid a competitive salary.” He adds that most good business schools ensure their students are fully aware of the realities.

For some, however, the value of the MBA derives from the chance to develop their business concept and join a network of support. Veronica Favoroso, an Italian native with a legal and general management background, spent several years working in Shanghai before moving to London to take her MBA at Cass Business School.

“I had an idea, and I used my time and the resources at Cass to research and mould it into something workable,” she says. “The school has good elective options and a good network of alumni that really opened my mind and helped me explore my options.” This notion is echoed by Brady, who says he learned just as much from his fellow students as he did from the professors.

But the real advantage for Favrosa came after the course, as the school supported her and helped advertise her business to the right people. She has since founded MVBespoke, which provides advice and training on how to deal with Chinese and Middle Eastern customers in the luxury consumer market.

It’s important to consider alternatives to the MBA. Escape the City’s Start-up MBA is just one of a number of training courses aimed specifically at entrepreneurs. At the higher end of the cost scale are courses like the EMLYON Business School’s Global Entrepreneur-ship Programme, priced at €32,000 (£27,500). At the lower end, numerous lectures by well-known start-up gurus like Steve Blank and Peter Thiel are available for free online.

If you’re still not sure, work out what you would gain from an MBA, and whether the programme is the most cost and time effective way of attaining it. If you’ve already got start-up experience, think about what stage of the company’s lifestyle you most enjoyed. If it’s the chaos of the early stages, the school of life may well be the best teacher of all.