During a meet-and-greet after a speaking gig, a young man told me he wanted to start a business but felt he needed to go back to school first.

"I really think I should take two years off to get an MBA from a top school before I take the plunge," he said. 

"Why? I asked.

"I'm lacking some things," he said. "I don't know enough about accounting. Since I barely passed my stats classes in college, I could definitely use better data analysis skills. I don't know much about marketing, don't know the first thing about business law..."

"But why do you need an MBA from a top school?" I asked. "You can learn everything you just described on your own. And for free."

He looked at me oddly. "Yeah..." he said. "Maybe so. But I wouldn't have an MBA."

True.

But he also wouldn't have the tens of thousands of dollars it costs to get an MBA from a top school.

Nor would he have the money he would have made working for two years. He later told me his current salary was $57,000 per year, so the true cost of going back to school for two years would be $114,000 plus the cost of tuition. (Say hello to opportunity cost.)

So if he manages to get into a top school like Wharton, or Kellogg, or Booth, or Darden, or NYU... the average tuition is just over $70,000 per year. Tuition and opportunity cost combined adds up to over $250,000 for an MBA.

That means he'll need to generate $250,000 in profit -- not revenue, profit -- to break even on his education investment alone.

If You Can't Self-Start Your Education...

During a speech, Harvard Business School professor Clayton Christensen (author of the influential bestseller The Innovator's Dilemma), talked about the nearly $400,000 a HBS degree costs.

According to Christensen, "...that price point has made it such that the only people who can afford it are would-be McKinsey consultants, hedge-fund managers, and the like. Our customers need so much money in opening salary to pay off their debt that we have overshot the salaries."

Or, in simpler terms, the return on a B-school degree may not justify the investment unless the degree is a professional prerequisite, the ticket required for entrance to a chosen career.

Take doctors; if you want to be a physician, you need a medical degree. The piece of paper is the ticket.

But you don't need a ticket to start a business.

Although you need a lot of things, and knowledge is certainly one of them, customers don't whether you have an MBA; they only care whether your product or service solves a problem or meet their need. Suppliers don't care about an MBA; they only care whether you pay on time. Employees don't care about an MBA; they only care whether pay and benefits are fair and that their work provides a sense of meaning and fulfillment.

In career terms, the goal of an education is to provide graduates with the knowledge, skills, and at least some of the experience they need to begin the lifelong process of achieving success in their chosen field. 

But earning an MBA only proves you know how to earn an MBA; it doesn't mean you know how to start and run a successful business. What truly matters is applicable knowledge, applicable skills, and applicable experience.

What school you attended? Doesn't matter. Your GPA? Doesn't matter. The classes you took? To some extent, doesn't matter.

What matters is what you can do.

And what it cost you to gain that ability -- because when you're an entrepreneur, every investment needs to generate a sufficient return.

... You Probably Can't Start a Successful Business

The young man I spoke to lives just outside of Boston and hoped to get into MIT's Sloan School of Management.

Sloan is a top 5 B-school.

Sloan costs about $75,000 per year.

MIT also offers over 2,000 online courses on OpenCourseWare.

For free. 

Courses he could take while he keeps his full-time job and continues to gain skills, experience, and connections.

Granted, taking the DIY approach could be the slower way to go. 

But then again, since every program includes at least a few classes people only take because they have to take them, he could pick the courses he feels he needs most -- accounting, stats, marketing -- while skipping those he doesn't, like operations and management.

And since his goal isn't to receive a piece of paper but to gain applicable knowledge, he can focus on the material that matters to him.

He doesn't have to "finish" a class. He just needs to learn what he needs to learn -- and in the process, gain a better feel for what he doesn't know, and what he will need help from others to accomplish.

Granted, taking the DIY approach is definitely the harder way to go. He'll have to be a self-starter. Teachers won't keep him on track. Fellow students won't keep him on track. The program won't keep him on track.

He will be the program.

Which makes taking classes on his own the perfect test for whether he should start a business: The same discipline and focus required to achieve a self-directed education applies to starting a successful business.

If he can successfully bootstrap his education, he will be a lot more likely to successfully bootstrap his business. 

He will have gained more of the skills he needs... and just as importantly, he will have gained genuine confidence in his ability to stay the course when times get tough, as times inevitably do.

And possibly best of all, he won't be $250,000 in the hole. 

Before he even starts.

Published on: Oct 21, 2019
Like this column? Sign up to subscribe to email alerts and you'll never miss a post.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.