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Should Entrepreneurs Seek MBA Degrees?

Young Entrepreneur Council

Some great entrepreneurs have a master's degree in business administration; others don't. But many aspiring business owners still trade in their pinstripe suits and briefcases for hooded sweatshirts and backpacks in pursuit of an MBA degree--including me.

As someone who started out in corporate America, pursued an MBA and is now an entrepreneur, here are a few things to consider before heading back to campus:

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What's Right for You?

Though many job-seekers hope for a position within a large company, few opportunities in this market environment offer the financial prospects, satisfaction, and exhilaration that working at a start-up can provide. So how do you weigh the entrepreneurial route against the other options available?

Let's use investing as an analogy for risk-taking: Taking a corporate job is like investing in fixed-income securities (e.g., bonds) that offer a steady and predictable return, while starting your own business is like investing in stocks--there is unlimited potential, but also a higher risk profile. Miss the mark and you're left with nothing. With this perspective, having an MBA in your back pocket doesn't sound so bad after all, right? Not so fast...

Opportunity Cost and the Cost of Opportunity

Having an MBA can put you at a significant disadvantage in becoming an entrepreneur. Why? Not because it doesn't help you achieve your goals efficiently, but because of what getting into an MBA program represents.

Here are a few limitations:

1. You are giving up a lot of your time. Every minute spent working on your personal venture represents salary you're forsaking. Your opportunity cost increases once you have an MBA because you can command a higher salary in the marketplace, so it's more expensive to take an entrepreneurial risk and start your own business afterward.

2. There's pressure. MBAs are notorious for groupthink mentality, and after graduating from the program, it's very hard to stay true to your own path while your friends are skyrocketing through their corporate careers, living comfortable lifestyles, and enjoying the status that comes with a prestigious firm. In the meantime, you are the CEO of a two-person company and eating instant noodles.

3. MBAs are taught to feed, not to hunt. Yes, you'll graduate with a repertoire of great tools, fancy communication skills, and a heck of a network. However, there aren't any classes that specialize in cold-calling customers, persuading skeptical investors, resourcefulness or bootstrapping--the skills start-up founders need to thrive.

[See Start-ups Offer Risks, Rewards for M.B.A. Interns.]

Consider a "Master's in Business Entrepreneurship"

On the other hand, earning an MBA can work to your advantage. It's a fantastic time to actually start your own business-- if done correctly. You'll find yourself pursuing a "Master's in Business Entrepreneurship."

Here are some advantages:

1. Rarely will you ever be surrounded by the resources you'll have while in school. Programs like Wharton, Harvard, and Stanford offer terrific resources for aspiring entrepreneurs; including cash, work space, exposure, and mentoring. You'll also find a huge expertise base and know-how in your classmates, whose experience could range from finance to engineering.

2. Most MBA programs offer two risk-free years. The worst possible outcome to launching a business during your school years is that you graduate and end up getting a great job. But if you succeed, you can hit the ground running once you turn your tassel.

3. An MBA offers a fantastic incubation environment. It is a microcosm of the market. You'll quickly find classmates willing to test your product and zealously support your company as it tries to scale.

[See M.B.A. Students Shift Focus Toward Entrepreneurship.]

In summary, an MBA can be incredibly powerful when leveraged properly. The degree is a solid hedge against the risky proposition of starting your own business, and will provide you with the network, confidence, and environment to succeed. But be warned: The siren calls of MBA groupthink are powerful-you'll need incredible focus and determination to turn that MBA into a "Master's in Business Entrepreneurship."

Tony Navarro is Founder and CEO of Streamcal, the "Twitter for calendars and upcoming events." He is originally from Colombia and strongly believes in the power of entrepreneurship to generate economic growth. He holds an MBA from Wharton and an MPA from Harvard, and currently lives in Boston with his wife. The Young Entrepreneur Council (YEC) is an invite-only nonprofit organization comprised of the world'' most promising young entrepreneurs. The YEC leads #FixYoungAmerica, a solutions-based movement that aims to end youth unemployment and put young Americans back to work.

Twitter: @hoostony

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