Should MBAs Start Their Own Businesses?

There's an ongoing debate about whether going to business school prepares you to start a business. After all, business schools teach things like corporate case studies, financial modeling and regression analysis while building a company takes guts, passion, luck and endless pleas to your friends and relatives for money.

But one question that rarely gets asked--or answered--is whether business school graduates (aka MBAs) should start their own companies in the first place. According to the Graduate Management Admission Council, the average starting salary recruiters plan to offer new MBAs this year is $80,508, nearly twice what newly minted college grads will be taking home. First-year MBA graduates can expect salaries of $100,000 or more if they opt for careers in health care, finance or consulting. By contrast, startup CEOs typically take no salary, investing huge amounts of time and money before their companies can afford to give them even a modest paycheck.

Last week, I spoke to a group of Wharton grads (Wharton is the University of Pennsylvania's business school) who had invited me to come and speak to them about "unleashing your inner entrepreneur." Some of them were business owners already. Others were working for corporate America, debating whether to take the plunge.

"Why should I leave a six-figure job to start my own company?" one of the MBAs wanted to know. While he had run a couple of small businesses in the past, now that he had his MBA he was making six figures crunching numbers for a big insurance company.

You probably shouldn't, I told him. Not only will you take a huge pay cut, but it's unlikely that your company will become the next Google, Facebook or Twitter or even still be around five years from now. People don't start businesses because they want to, I explained. They start businesses because they have to--either for economic reasons or because they just can't bear to work for anybody else.

But that wasn't the answer he wanted to hear. His current job made him feel dead inside, he told me, and he longed for the chance to be his own boss and call his own shots. All he needed was an idea--an idea that he could build into the next big thing.

Now, don't get me wrong. I'm not saying that MBAs shouldn't start their own businesses. In fact, several of the MBAs sitting around the table already had. There was a real estate developer, a guy with an import/export business and a grad who'd sold his food-delivery company and was now onto his next venture. What I'm saying is that entrepreneurship is a marathon, not a sprint, and there's no guarantee that you'll cross the finish line no matter what kind of fancy degree you get. But MBA or no MBA, you'll never win the race unless you're prepared to take the first step.

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