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To B School Or Not To B School


Special Report (Enterprise) EDUCATION -- OFF-THE-JOB-TRAINING

TO B-SCHOOL OR NOT TO B-SCHOOL

Entrepreneurs find contacts, but little real-world help

One evening in 1994, Stanford University MBA candidate Ariel Poler and a few classmates were brainstorming for an Internet marketing project. As they pondered the burgeoning World Wide Web, Poler's idea was born: a company that would help businesses determine who's visiting their Internet home pages and what features they're using. By graduation time, Poler was president of Internet Profiles Corp.

If he hadn't attended Stanford's business school, Poler might never have come up with the idea. He certainly wouldn't have made the myriad contacts that helped him build a business that attracted Dun & Bradstreet Corp. as an investor. But what he didn't get at the prestigious B-school is at least as significant: a course on how to manage the daily challenges of a startup, from setting up payroll systems to hiring temps. Those things he learned by the seat of his pants. "The company would be in similar shape had I not attended a single class," says Poler, who expects his San Francisco company to break even by yearend.

Many would-be entrepreneurs are flocking to business school in the hopes of flattening the learning curve. But the stories told by budding entrepreneurs who earned their MBAs provide mixed evidence of success. To go or not to go? The answer depends on your personal expectations. B-school is a great place to build a network, gain some valuable tools, and fine-tune a business plan. But no program is going to teach you how to build a business from scratch or juggle tasks such as hiring and firing people and weathering cash crunches.

BLOOD AND GUTS. What's more, the cost of B-school can burden the entrepreneur and the new enterprise with enormous debt. Bottom line: If you have the time and can afford the average $40,000 tuition bill, B-school can make you a savvier entrepreneur. But if your parents aren't footing the bill and debt is a concern, entrepreneurs are probably better off learning on their own.

For those who decide to give B-school a try, there are plenty of choices. Schools are responding to growing demand and rolling out more entrepreneurship courses: The number of schools offering at least one such course has doubled since the early 1980s, to about 400. But business schools aren't encouraging MBAs to launch companies upon graduation. Instead, they suggest MBAs rack up some experience in a desired industry first. "We teach that it is not wise to come immediately out of school and start a business," says Thomas J. O'Malia, director of the entrepreneurship program at the University of Southern California's B-school. "A small percentage do [start their own businesses], but the success rate is much lower."

Those who venture into business after B-school are often surprised at how ill-prepared they are for the harsh realities. Professors teach how to manage an existing company, not how to build a new one. It's the nitty-gritty tasks such as putting together health plans and writing employment contracts that ultimately throw newly minted MBAs. "The actual process of operating a company is not something for me, at least, that could be duplicated through any classroom experience," says Robert J. Jordan, president of Chicago-based publisher Red Flash Internet and a graduate of Northwestern University's J.L. Kellogg Graduate School of Management. Most entrepreneurs concur: B-school did not prepare them for the blood and guts of starting a business.

Gregg Latterman says B-school might have even extinguished the fire that got his business going in the first place. He knows, because he's now juggling a full-time course load at Kellogg while running AWARE Records, a small company that produces CDs featuring unsigned regional rock bands. He decided to go back to school for the credentials after he got his company off the ground. "If I took the business-school approach, there is no way in hell I would have done it," says Latterman. "They can teach you some useful tools, but in most cases you have to throw the rules out." Latterman started his business without any sort of financial plan or in-depth market research. He just jumped on his idea quickly and figured out the rest as he chugged along. That's hardly the B-school way.

Even Latterman, though, would concede that B-school is a gold mine of networking opportunities. MBAs meet potential business partners, employees, clients, and investors through school. Many MBAs still call former professors for advice, and some profs sit on their boards. It's also a place to meet entrepreneurs, brought in by teachers, and hear war stories. "So many of these entrepreneurs were just ordinary people, and it kind of demystified the process," says Jay Check, a University of California at Los Angeles grad and co-founder of Santa Monica (Calif.)-based Cape Enterprises, which makes a device that removes unwanted hair.

Some schools also help raise capital (though the most common way is still through friends and family). Some host business-plan competitions, judged by local entrepreneurs and venture capitalists, that award small sums. Babson College graduate Michael A. Healey, for example, was two weeks late paying the first month's rent on his new office for PC-Build Upgrade Centers, a computer-hardware service company in Needham, Mass. The school's $3,000 Douglass prize saved his lease. Chicago-based Jordan received $5,000 from Kellogg's venture fund. But that was nothing compared with the $150,000 he got from an "angel" who sat on the judging panel.

FREE CRITIQUES. An enterprising duo at the Wharton School raised about $150,000 from classmates for their invention. Brian E. Le Gette and Ronald L. Wilson II met at the University of Pennsylvania and designed a sleeker version of earmuffs. By the start of their second year, they had a prototype for their fleece-lined product. They polled fellow students for market research and generated so much enthusiasm that other students approached them to invest. The money helped them start Gorgonz Group Inc., a Chicago-based company that markets EarGear. They hope to be selling $1.5 million worth by April, 1997.

It's rare that classmates make out checks to support a new business, but plenty are willing to critique a business plan for free. In many cases, questions and criticisms from fellow students and professors are among the most valuable lessons a future entrepreneur learns from school. Healey says it's easy to find critics at B-school. "There are lots of people who shoot holes in your idea, and you need that," he says. "To shoot a hole in a piece of paper doesn't hurt you."

Sure, you can make B-school pay off for your new business. It's just a question of whether it's worth shelling out the thousands of dollars over two years--and putting your burning idea on hold.BY LORI BONGIORNO IN NEW YORKReturn to top


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