The Benefits of an MBA for Entrepreneurs

Entrepreneurship has always been vital to our nation’s spirit and success. America’s history is filled with aspiring business owners who, armed with innovative ideas, began small businesses and grew them into multimillion-dollar corporations — companies like JPMorgan Chase, DuPont, and Colgate. These success stories originated from humble beginnings and grew to achieve at the upper echelons of the corporate world.

Starting your own company can be exhilarating and can fill you with a sense of pride. However, this type of challenge requires more than just offering the world a great product or service. You need business savvy to make it as a long-term entrepreneur.

Data the U.S. Bureau of Labor Statistics (BLS) has been collecting since the 1990s indicates that 20% of businesses fail within the first two years, 45% fail within the first five years, and 65% fail within the first 10 years. Only 25% of new businesses make it past the 15-year benchmark.

Even with these odds, the idea of owning a business is a dream shared by many. In addition, small businesses are vital to the economy because they are one of the largest sources of job creation.

Any business veteran will tell you that being an entrepreneur is a risky lifestyle. The number of failed businesses drastically exceeds the success stories. The reasons for failure are numerous, but a common thread among them is lack of preparation. Many people underestimate how much knowledge and hard work goes into creating a business and believe a simple guidebook is enough to help them succeed.

If you dream of starting your own company, a Master of Business Administration can become your greatest asset. An MBA for entrepreneurs provides the background to brainstorm, draft, organize and finance a business in the industry of your choice.

Benefits of an MBA

There are several benefits of an MBA for those interested in a career in business. At established corporations, an MBA can lead to positions of higher responsibility. There are also considerable monetary benefits. The median salary for MBA graduates was approximately $115,000 last year — 77% more than those with a bachelor’s degree ($65,000), according to the Graduate Management Admission Council’s 2021 Corporate Recruiters Survey.

For those interested in heading their own companies, MBA programs offer unique advantages. The roadmap to gain the benefits of an MBA for entrepreneurs can be broken down into four major categories.

1. Develop Financial Literacy

Part of the reason that new businesses have such a high failure rate is a lack of financial literacy among entrepreneurs. These individuals might have a great idea, but they lack the skills to market their product or service and don’t know how to maintain a budget for their new company. In addition, many fall into the trap of over-investing; taking too intensely to the notion that they have to spend money to make money. Others force themselves to grow too fast, adding equipment and payroll at the first sign of progress without making sure they can sustain their momentum.

Taking MBA courses gives you the foundation to make solid financial decisions during the critical first few years of operation. Classes in entrepreneurship, financial management, and accounting teach you how to analyze risks and rewards, create value for shareholders, finance a newly established company, and price your service to maintain your bottom line.

You can also learn to read financial reports as part of your education. Financial accounting courses in particular prepare you to create and read income statements, cash flow statements, and balance sheets, giving you an overview of your business’s financial health.

You’ll also review famous case studies, allowing you to obtain important insights into successful business strategies. You’ll learn what works, what doesn’t work, and what warning signs to look for if you suspect your company is starting to fail.

Although a general master’s degree is an investment, an MBA could save you millions in rookie mistakes. Furthermore, the school provides a safe place to test ideas, giving you the opportunity to experiment with different business concepts and research startup costs as you attend MBA classes. You’re also free to solicit feedback from teachers and peers, which you can then use to improve your company ideas. Access to those resources is one of the biggest benefits of an MBA program.

2. Gain Interpersonal and Negotiation Skills

Some businesses are technically profitable but still, fail for financial reasons. Their issues don’t stem from a lack of payments — rather, these entrepreneurs don’t push their clients to pay them before expenses are due. In their efforts to be amicable business partners, they accept payment conditions based on their customers’ terms, and not on terms that serve the company’s financial needs. Thus, even though the business may price its offerings to make a profit at the end of the year, it can’t pay its suppliers in July and is forced to close.

Part of the reason inexperienced entrepreneurs are willing to accept such long payment collection periods is they feel they have no other options. The first few years are arguably the most important for a new business, and entrepreneurs don’t want to risk alienating customers by setting strict payment terms. Without accepting payments in a timely manner, however, a new venture can’t sustain funding.

Your experience in graduate school will stress the importance of monitoring your cash flow so you’re consistently able to manage your expenses. You’ll learn how to conduct meetings with clients and assert your business terms fairly but firmly. Contrary to popular belief, an MBA education gives you a combination of hard and soft skills, making you a better leader, negotiator, and all-around businessperson.

3. Learn Operations

Forbes magazine weighed the pros and cons of MBA programs for aspiring entrepreneurs in a 2019 article. While some argue that business schools overemphasize theory over practice, Love Hudson, co-founder of the digital marketing and business data company Mar-Dat, disagrees: “Entrepreneurs should get MBAs because it can give them the foundation for understanding how business works,” she says.

One of the major benefits of an MBA for entrepreneurs is that students learn how to run different elements of a business. With courses in such areas as operations management, supply chain management, and data analytics, you can graduate with the knowledge and ability to operate your business efficiently from the day you first open your doors. This can potentially impress future business partners and investors and give them an incentive to work with you over your competitors.

With the knowledge you obtain from graduate school, you can create an efficient business from the outset.

4. Establish a Network

One of the most valuable advantages of attending graduate school is the professional connections you’re able to make. Even if you pursue your MBA online, you’ll obtain a valuable network of peers, teachers, alumni and guest speakers. These people can become valuable allies upon graduation — they might join your company or put you in touch with clients or investors.

The value of networking in business cannot be overstated. While business leaders aren’t necessarily averse to risk, they do prefer making educated guesses and relying on credible information before agreeing to a deal. That’s why the saying “It’s who you know” rings true in business circles — people in your network are more likely to partner with you because they already know your work ethic.

Additionally, a business might be more willing to work with your company if you went to school with one of its employees, and the connections you make during graduate school could catch the eye of wealthy investors.

On the other hand, some of your graduate school peers could become lifelong business partners. Think of all the major companies that started from college friendships. Hewlett Packard, the self-proclaimed “original Silicon Valley startup,” stemmed from two college friends who began their business in a garage. Starbucks was the brainchild of two coffee-roasting classmates inspired by Herman Melville’s Moby Dick. If you approach your education with a desire to make these types of connections, you’ll most likely graduate with either a business partner or an address book filled with potential collaborators and clients — perhaps both.

Is an MBA Worth It for Entrepreneurs?

An MBA for entrepreneurs is perhaps the best way for future business owners to learn how to launch a company, run it effectively and grow it to profitability. The benefits of an MBA include the skills learned, the knowledge acquired and the connections made during your education. These can last for the duration of your post-graduate career.

Is an MBA worth it for entrepreneurs? The answer is a resounding “yes,” especially if you have the dedication and resolve to stick with a business once you’ve started it. No company is without its challenges and financial setbacks. There will always be hardships to overcome. However, with an MBA, you will have the tools and the talent to solve problems and persevere.

If you are ready to take a step toward becoming an entrepreneur, find out more about the online Master of Business Administration from the University of Maryland’s Robert H. Smith School of Business. The curriculum covers everything a successful future business owner will need in the areas of finance, leadership, marketing, and operations. The online learning format makes it more convenient than ever for you to obtain an MBA at your own pace.