What is the secret to business success? This is one of the key questions many aspiring entrepreneurs ask themselves. Many will claim that an MBA isn’t essential; equally, many say it is necessary for startup success. What is certain is that more and more MBAs are founding SMEs each year.
Gone are the days when the world’s top business schools are regarded as factories for investment bankers and management consultants.
SMEs are in. They are trending. They are growing at a rapid rate in the UK.
StartUpBritian, a Government-backed organization, predicts that 523,410 new businesses will register in the UK in 2013, a 40,000 increase on last year. By January, 80,000 more new businesses will have been created in Britain than in 2011.
Yet SMEs are a risky venture. Failure rates are still stubbornly high, with one-in-three British startups failing within their first three years. An MBA, too, remains a considerable investment, costing tens of thousands to study in London, while taking a minimum of twelve months out of industry.
Graduates will want to see a return sooner rather than later. MBAs will be forgiven for taking on secure jobs in lucrative sectors – but with SMEs, opportunity for growth is boundless. Get in right, and your interest in entrepreneurship can hit fever pitch.
Many business schools offer entrepreneurship classes and UK-based MBA programs, such as Cass Business School at City University, have start-up centres and incubators to get the ball rolling.
But running a business can be a challenging experience. Our SME Profile section is littered with quotes citing funding, developing a team and marketing as key obstacles to entrepreneurial success.
Equally, many cite the same reasons for taking on these challenges. Passion for your product; a desire to work for yourself; using an MBA to develop a business plan: these are all some of the reasons MBA entrepreneurs create startups.
Many MBAs we interview say that they met their business partners at b-school. Many more tell us that they used the resources on offer to come up with pin-point plans to see their ventures grow after graduation.
But the question remains: is an MBA really necessary to achieve startup success?
We spoke to three London-based MBAs whom are hoping to expand their SMEs at a time when thousands more startups will be created in the UK over the coming months. Competition remains fierce, but they all see their products as unique.
Polly McMaster founded The Fold after meeting her business partner Cheryl Mainland at London Business School. The pair have been selling unique women’s-only work clothing for the past two years and 11 months. Before LBS, Polly worked as a consultant at LEK before moving into private equity.
Her business partner studied East Asian studies at Harvard, and although coming from diverse backgrounds, they were united by a passion for fashion.
“I would say studying an MBA definitely was necessary,” Polly said. “LBS has a lot of entrepreneurship programs as part of the MBA, so we used these classes to really test lots of different start-up ideas.”
Studying an MBA gave The Fold’s founders the mental space to think creatively and come up with their business plan. They also used the diverse cohort to bounce ideas off of those with relevant industry backgrounds.
“We gave ourselves the best chance of success by starting in that environment,” she added. “We used the business-plan course, finance course, market research and all of the strategy courses to test The Fold. Taking the chance to get off the treadmill at LBS was fundamental to our success.”
The business has gone from strength to strength over the past three years, and Polly raised angel financing to get the company off the ground. Using an MBA to plan, test and launch their SME, Polly and Cheryl now plan to make the brand international.
Mike Follett founded digital marketing and research company Lumen Research in June this year. After working in advertising for 12 years, he wanted a greater understanding of business and decided to study at Imperial College Business School. “Sometimes you want to have a well-rounded view of business, and that’s what an MBA gives you,” he said.
Like many aspiring entrepreneurs, Mike knew he wanted to start a business, but didn’t have an idea. He was inspired by the technology-mad students and faculty around him, and developed the idea for Lumen Research while working on an advertising project for supermarket chain Tesco. “Imperial has an amazing reputation for tech entrepreneurship. It helped me develop a way of thinking.”
Mike isn’t convinced an MBA is essential for startups in London. “You don’t need to do an MBA to do a startup. But it gave me a sense of confidence. You meet people who also are thinking of doing startups, and that makes your idea more of a possibility.
“There’s a whole series of compulsory entrepreneurship courses at Imperial, and they are very effective in helping you understand what’s possible, and mistakes to avoid. I wouldn’t have created a startup without an MBA.”
Connie Nam found that the biggest challenges in her entrepreneurial venture, astrid & miyu, were marketing their brand in London. She met her business partner while studying an MBA at LBS, and their jewellery design company has since swelled to ten times its size last year.
“The challenges were getting our first new customers,” she said. “Online marketing is difficult, and when we started we would sometimes shave just one order per week. Unknown startups also have difficulties getting good people in their teams.”
Connie’s MBA gave her the support needed to launch the company in 2011, and she used LBS’s incubator system for expert guidance. She also utilized the alumni network. “When I first started I reached out to alums in relevant industries and they were very responsive,” she added.
After meeting at LBS, Connie and her business partner tested the business as an MBA project in a safe environment before launching for real. She sees London as key to developing her brand before going international.
But was an MBA essential to launch her startup? “Yeah, I think so. It helped me to look at things at different perspectives. The MBA enabled me to have a holistic view, and it was made easier by working with people from different countries. LBS is ninety per cent international.”
These MBAs may have all come from different backgrounds, but they agree on one thing: an MBA has undoubtably helped them in making their SMEs a success. In some cases, an MBA was essential; especially for those hoping to switch career paths.
There are many challenges facing entrepreneurs, but SMEs are only growing stronger in the UK. There has been a 40,000-fold increase in new businesses created in Britain for the past two years, which coupled with greater economic prosperity, is an attractive prospect for MBAs.
With UK-based business schools ranked as some of the highest in the world, it is an attractive region for MBAs to get started. It can be an immensely difficult journey, but almost all MBA entrepreneurs will agree it is a mountain worth climbing.
Debate still swirls around the place of b-schools in the startup scene, and not everyone agrees an MBA is essential to SME success. But many entrepreneurs will agree that an MBA often makes that climb considerably easier.