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  • Writer's pictureGermán Villalobos

Do Entrepreneurs Really Need to Hire an MBA?

Updated: Oct 27, 2022

By: Germán Villalobos

Arriving five minutes before an important meeting with a potential client, as I usually do, his assistant gave me a coffee without having asked for it, while he told me that the CEO would receive me in 15 minutes. Those 15 minutes were indeed almost 30 minutes, finally when I entered his office and after receiving me with a splendid smile he commented -I am sorry I made you wait, but I had more important business to attend to, to which he added -I also regret that he has made you come, but I do not think we need your services, I do not believe in MBAs. This is how it started one of the most interesting conversations I have had with a client, because indeed and unexpectedly of how that meeting started, he has become one of my best clients. I share part of that conversation with you in my following notes.

After listening to his reception, I was surprised, I did not expect it and much less I was prepared to respond, for a second, I felt confused, but because of his kind treatment, the first thing that came to my mind was just to ask why? His answer was very convincing -I have built this company with a lot of work, effort, talent, astuteness, decision, sacrifice and a lot of desire to succeed, and those qualities are what it takes to be an entrepreneur, without the will and resilience, resistance to frustration and above all a true desire to serve, as best as possible, the customers who trust me and my company, it would be impossible to start a company like this, and that are not taught in business schools. After listen to him carefully, he was surprised by my answer (I surprised myself too) – Yes, you are right, all these qualities are necessary and indeed they are not taught in business schools. I am also regret that he had invited me to come, but I am grateful you have shared with me your point of view.

Many entrepreneurs of the stature of Elon Musk and Steve Jobs, as well as famous business influencers, have rightly expressed that an MBA is not required to start a business and be a successful entrepreneur.

Before you leave, he told me, please thank our common contact (who is one of his most important business partners, who arranged this meeting), and give him my regards - Yes sure. Please also thank him for my part, I am leaving with a new perspective, in fact, it reminds me a story I once heard about a hot dog vendor. I know that story, he said, it has inspired me for years and without realizing it we began to remember that good story together.

The Story

A good man faced with the need to support his family, wife and a newborn baby, he began with a lot of sacrifice to sell hot dogs with a small old cart that had been loaned to him, pushing it from very early to get to a street corner where he offered them to everyone who passed by, after a few days he thought he had to improve his products because there was a poor sales, so he decided to get up earlier to be the first to choose the best ingredients in the market, but that doesn’t improved his sales.

One day, a client after finishing eating commented to him, -Very delicious, but you should go to the next corner, few people can see you here and I’m sure you could do more sales there. The problem is the location, he thought, so in the following days he made the necessary arrangements to move his business, which was also close to a major office center. His sales grew as expected to the point that customers began to queue waiting for his hot dogs, extremely interested in pleasing his customers, he decided to put a box with the price to receive payments and not waste time handling money and only focus on serving its customers, for whom he was adding more variety of options, ingredients, and sides for different tastes. He even got a permission to set up tables and umbrellas, that way his business prospered to the point that he could support his family and pay his little son a good education.

Until then, my client and I agreed on the story, but it was the final version that we had different.

Two endings of the same story

The ending he knew was not a good ending. The son, who had studied business, one day approached his father, and said, “I recommend you save everything you need in your business; we are starting a severe economic crisis and many people may lose their jobs and would buy you fewer hot dogs”. Loving his son very much and trusting him, he stopped buying the best ingredients, substituting them for the cheapest ones and reduced the number of tables with which the quality of his products and services decrease, and even stopped going to work some days per week due to the drop in sales and finally had to close, thinking: my son was right, after more than 20 years in business this crisis came and make me close my business.

The comment of my client when he finished telling his ending version was – Not even with all the business knowledge he got at school could help his father, who surely went through several crises without realizing it, and facing those crises he for sure worked more, innovated, and served better his customers to survive. Bad business advice bankrupted him.

My end of the story was quite different, the son gave him the same advice in the face of the impending crisis, but also helped him cut expenses more intelligently, asking suppliers to deliver him with raw materials at his place and only what he needed for one or two days, reducing logistics costs and energy consumption (of the refrigerators), they invested in better grills that cooked faster and also with less energy consumption and included a salad bar. Together, father and son developed better processes to reduce costs, improve prices, and preserve sales and profit margins. Due to the crisis, for many of the office workers a good hot-dog with salad was an economical and more healthy option. Finally, after the crisis ends and in better times, they extended the business to a second location with plans to continue growing.

It is not surprising that the largest and most iconic companies today, which started as small start-ups with great potential, have hired MBAs as they grow.

At the end of my version, he asked me Where do you hear that ending? To which I replied, in the business school and we both laughed.

Entrepreneur VS and MBAs

Many entrepreneurs of the stature of Elon Musk and Steve Jobs, as well as famous business influencers, have expressed and, as we have commented, with good reason that an MBA is not required to create a company and be a successful entrepreneur, the skills required are unique and special like those numbered at the beginning of this note.

An MBA is required to help the entrepreneurs to improve and grow their company. It is well known that around 90% of companies close before the first 5 years, but what few know is that many were successful start-ups the first 3 or 4 years, but due to their growth, the lack of best practices and the lack of successful business strategies succumb.

For some entrepreneurs, the big problem is not entrepreneurship, the big problem is the management of corporate finances, market strategies, continuous improvement of operational efficiency, productive investments in capital assets and technologies and even in commercial legal advice, which their company needs to become and remain as a corporation.

It is not surprising that the largest and most iconic companies today, which started as small start-ups with great potential, as they grew up have hired MBAs, who even currently run them, such as Tim Cook - Apple CEO, Sheryl Sandberg - COO Facebook, Niels Christiansen - CEO Lego and Satya Nadella - CEO Microsoft, among many others.

Joint efforts, qualities, and experiences

In a recent conversation with another client, I commented that the qualities needed to be an entrepreneur and a successful MBA are remarkably similar at the end, to succeed in business schools also requires a lot of effort, dedication, persistence, resilience, and talent for business. Those mutual qualities converge and are strengthened collaborating, both entrepreneurs and MBAs, to grow successful companies.

I hope this note could be useful for your business, just a final comment, some MBA like me, we have started-up our own firms accumulating bast entrepreneurship experience too. As always, I wish you the best in business.

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20210715 Realmente necesitan los emprendedores contratar a un MBA
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20210715 Do Entrepreneurs Really Need to Hire an MBA
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