Becoming an entrepreneur requires more than a good idea. This career path requires a solid business plan, market research, and funding. MBA students often possess an advantage over other prospective entrepreneurs. According to Small Business Trends, 80% of small business owners hold a bachelor's degree or lower, with just 16% of small business owners holding a master's degree. MBA students benefit from advanced business training -- particularly those who pursue an entrepreneurship concentration or choose electives in entrepreneurship.
Entrepreneurs innovate, dreaming up new products and services that can transform the world. Successful entrepreneurs know how to avoid the pitfalls of starting a business and set themselves up for success. Our entrepreneur guide targets MBA students and provides step-by-step instructions for how to become an entrepreneur. Keep reading to learn how to transform your big idea into a successful business and be your own boss.
Ten Steps to Becoming an Entrepreneur
MBA students wondering how to become an entrepreneur can follow our 10-step entrepreneur guide to jump start their entrepreneurial journey. While the specifics vary depending on the industry and the product or service, our entrepreneur guide provides a general roadmap for MBA students who want to start a business.
Solidify and Assess Your Big Idea
Before starting a new business, entrepreneurs need a big idea. That big idea could be a new product that fills a niche in the market or a new service to meet industry needs. Either way, every new business starts with an idea. MBA students pursuing entrepreneurship should formulate an idea that fits their skills and serves a market need. After coming up with an idea, entrepreneurs must solidify and assess that idea before starting a business. Considering several factors, including market demographics, competition, and industry demand, can help entrepreneurs transform a broad idea into a specific business plan.
Many new businesses fail within the first five years. Small Business Trends reports that 20% of small businesses started in 2014 failed within the first year, and only 56% of new businesses survived for at least five years. MBA students can increase their chances of founding a successful business by investing time and energy into creating a solid idea and business plan.
MBA students with an idea can start by asking themselves if their product or service fills a void in the market and who it will help. These questions help prospective entrepreneurs determine whether an idea can sustain a business. In particular, conducting research on market demand plays a central role in transforming a big idea into a business plan. In fact, research from CB Insights shows that a lack of market need represents the number one reason startups fail, accounting for 42% of startup failures.
Map Out a Realistic Business Plan
Successful businesses start with a realistic business plan. This plan should provide a roadmap for an entrepreneur's startup, including a description of their big idea and how they are going to launch their business. While coming up with new business ideas requires creativity, a business plan should rely on a solid, realistic understanding of business. Fortunately, MBA students bring strong business skills to their entrepreneurial enterprises.
A business plan gives entrepreneurs direction, laying out the strategy for launching their business. The plan should include a marketing strategy; research on the target audience; and financial projections on capital requirements, budgets, and expected revenue. The plan should also set milestones the entrepreneur can use to measure progress toward their goals. Business plans can vary in length from a single page to a chapter-long document intended for external investors. In fact, smart entrepreneurs create multiple versions of their business plan for different audiences.
Prospective entrepreneurs should devote significant time and energy to their business plan. A business plan helps entrepreneurs stay on track and achieve their goals. However, after mapping out a business plan, entrepreneurs should not laminate it. Rather than adhering to a rigid schedule, the business plan must act as a flexible document.
Entrepreneurs should also regularly review, modify, and update their business plan. For instance, if new research shows the entrepreneur's first marketing strategy does not connect with consumers, the business plan may need an update. A solid business plan does not just give entrepreneurs a roadmap -- it also helps secure financing and provides a transition from the idea stage to launch.
Identify Your Target Audience
A new product or service without a target audience can quickly flounder. If consumers show no interest in an entrepreneur's idea, the business will likely fail. Furthermore, identifying the target audience helps entrepreneurs position their idea within a competitive marketplace.
A product's branding, price point, and marketing strategy will look completely different depending on the target audience. Entrepreneurs can identify their target audience by conducting market research analysis, competitor analysis, and analyzing the product or service itself. Narrowing the target market requires data, which entrepreneurs can gather from surveys, focus groups, and existing sources.
When identifying the big idea's target audience, entrepreneurs should also consider how to promote their idea to a specific audience. Will a digital marketing strategy work best or does the idea require targeted marketing? Answering these questions early can help entrepreneurs position their product and secure funding.
Test Out Your Big Idea
Launching a product without testing it can spell disaster for an entrepreneur. Instead, any new product or service should go through several rounds of testing, both to identify problems that could derail the business and to improve the final product. Entrepreneurs rely on several methods to test their big idea, depending on their industry and product.
Conducting focus groups, for instance, helps entrepreneurs collect feedback on consumer demand, user experience, and a product's branding. Many tech companies rely on beta testers to find bugs in software or identify problems with service. Entrepreneurs can also turn to their network to test out a big idea, requesting feedback from their professional associates. Once a product or service goes through testing, entrepreneurs can refine it based on the feedback.
Collecting and analyzing feedback can improve a product or service significantly; therefore, testing remains a critical step in launching a new business.
Refine Your Idea
Entrepreneurs rarely develop and test a new product or service that requires no additional refining. In fact, most new businesses refine their product multiple times, testing out changes to respond to customer demand and increase user satisfaction.
Consider, for example, an entrepreneur who designs a new software product that lets businesses track their sales. After testing out the product and checking for bugs, the entrepreneur receives feedback from testers that adding an additional tracking capability to the software would improve the user experience. Using feedback from focus groups, beta testers, and soft launches helps entrepreneurs refine their idea and improve the final product or service.
Prospective entrepreneurs should think about testing and refining as a continual process, rather than a single step they should take before launching a business. The most successful entrepreneurs continue to test and refine their ideas throughout their careers.
In any field, networking can help professionals advance in their careers. This is especially true for entrepreneurs, who gain more from networking than many other professionals. When building a professional network, entrepreneurs should foster connections with other entrepreneurs, professionals in their target industry, and experts in their area. Entrepreneurs can call on their network to review a business plan, find opportunities, and receive feedback on their big idea.
A network can serve as a professional resource and a sounding board to test out and refine ideas. Joining professional organizations and taking advantage of an alumni network can help entrepreneurs network.
Consider a Partnership
Some entrepreneurs work best solo, while others prefer a partnership. A partnership can help new businesses divide and conquer, as partners bring additional strengths to different tasks, like designing a product, bringing in financing, and promoting the business. Certain business ventures -- including larger startups or ambitious business plans -- may require multiple partners to head the company.
The type of business matters, too. Depending on the business type, going solo might make the most sense. Partnership can bring stability and diverse talents to a business. However, a successful partnership requires clear communication about responsibilities and the terms of the partnership.
Funding can make or break an entrepreneur's business plan. Securing funding for a product or service launch -- particularly for a current MBA student or recent grad -- can feel daunting. The list below describes some tools that can be used to secure funding for a new business.
- Crowdfunding: Crowdfunding helps entrepreneurs raise funds from individual investors who pool their resources. Instead of pursuing a single investor, crowdfunding relies on collective investing from multiple people, including potential customers, friends, and family members. Crowdfunding platforms let entrepreneurs pitch their product or service, market their funding campaign, and drive traffic to their website. Successful crowdfunding campaigns often take place online through a crowdfunding platform, social media, or both. Entrepreneurs can treat crowdfunding investments as donations or offer rewards or equity to investors. In addition to raising capital, crowdfunding can raise a business's profile.
- Loans: Many entrepreneurs rely on loans to fund their new business. To receive a loan, entrepreneurs typically apply for a certain amount from a lender -- often with repayment deadlines and an interest rate. The U.S. Small Business Administration (SBA) offers SBA loans, which are issued by banks and backed by the SBA. SBA loans offer low interest rates and long repayment terms. However, entrepreneurs must meet the lender's requirements and complete an extended application process. The SBA and other organizations also offer microloans -- small loans that typically come with a short repayment schedule.
- Bootstrapping: Bootstrapping appeals to entrepreneurs with very limited resources. In essence, it means cutting costs and stretching resources to avoid heavy borrowing and high interest expenses. In practice, this may mean choosing to lease space or equipment rather than renting or negotiating with vendors to keep your costs low. Bartering, buying used, or waiting for promotions can also limit expenses. Several advanced practices, such as factoring or relying on trade credit for startup expenses, can help entrepreneurs keep expenses low and limit spending. This method may not work for entrepreneurs in certain industries that require high startup costs.
- Angel Investors or Venture Capitalists: More common for tech startups, angel investors and venture capitalists provide financing to entrepreneurs. Angel investors invest their personal money in businesses, with the expectation that they will receive business equity. Venture capitalists also invest in startups and new businesses; however, instead of using their own funds, their investment comes from corporations and investment companies. Like angel investors, venture capitalists expect an equity share in the company. These lucrative financing opportunities can take a significant amount of time as entrepreneurs build relationships and make pitches to investors.
Promote Your Business
Entrepreneurs spend a significant amount of time promoting their new business, especially in the early stages. For example, before even launching a business, entrepreneurs may promote their venture to look for financial investors or to qualify for business loans. Businesses that market a particular good or service must promote their product to potential customers to demonstrate demand and build sales. Entrepreneurs with businesses that market services to other businesses also need to promote themselves.
But what are the best ways to gain exposure for a new business? Promotion starts with a solid marketing and public relations strategy. Online marketing helps businesses draw traffic and potential customers through tools like search engine optimization, which can push an entrepreneur's business to the top of search results. Other tools, like social media, can help spread the word about a new business. In some cases, promoting your business means developing an advertising strategy, which might include digital, broadcast, or print ads.
Will getting an MBA make you a better entrepreneur? Almost certainly. An MBA provides advanced training in business, strategic decision-making, leadership, and management. Earning an MBA can also highlight an individual's entrepreneurial skills, which may impress potential investors. However, entrepreneurs should not stop learning once they earn their degree. Working as an entrepreneur requires a lifelong commitment to learning. Entrepreneurs can pursue formal education after earning their MBA, including certificates or credentials related to their speciality.
Outside of formal education, entrepreneurs can always learn from other professionals in their field. Maintaining a professional network and enrolling in graduate school helps entrepreneurs keep learning and expand their professional skills. Staying up to date by reading journals, magazines, and business research can benefit entrepreneurs at all stages and contribute to their success. Entrepreneurs with no interest in learning typically do not last long in the field.
Questions to Ask Yourself Before You Begin
Before becoming an entrepreneur, it is a good idea to ask yourself a few fundamental questions. Self-reflection can help prospective entrepreneurs decide if the path fits their personality and meets their career goals. For example, will you enjoy starting your own business? And can you financially afford to become an entrepreneur?
Characteristics of Successful Entrepreneurs
What makes a successful entrepreneur? Many of the most successful entrepreneurs share a few common traits and characteristics, including curiosity, creativity, perseverance, and persistence. Many entrepreneurs also know when to take chances, how to turn a setback into a learning opportunity, and when to listen rather than speak.
Resources for Emerging Entrepreneurs
Small Business Administration: The SBA provides business plans, funding, and support for entrepreneurs starting their own businesses. The SBA also offers resources for management and growth.
Bplans: Bplans delivers free business plan templates, business plan guides, and planning tools for entrepreneurs at every stage of the startup process. The site also offers tips and advice on business funding.
FindLaw - Small Business Center: This resource provides legal advice for entrepreneurs, including information related to laws and regulations on financing, the hiring process, insurance requirements, and filing taxes.
edX: This site offers free courses from professors, entrepreneurs, and business professionals. Entrepreneurs can brush up on finance, marketing, and other key areas for entrepreneurs.
Strategyzer: Strategyzer offers free resources for business professionals, including the Business Model Canvas -- a tool that can be used to better understand customers and grow a new business.
Forbes: A business magazine with an international presence, Forbes publishes articles on finance, startups, investing, and marketing. Forbes also offers a section for entrepreneurs.
Entrepreneur: A magazine dedicated to entrepreneurs and small business owners, Entrepreneur publishes news for entrepreneurs, offers resources such as webinars, and provides support related to starting a business.
VentureBeat: VentureBeat offers news and events for business leaders, with articles on business trends; analysis and research on venture capital; and news that covers small businesses, entrepreneurs, and the tech industry.
Wall Street Journal's Business Section: While the entire Wall Street Journal may interest entrepreneurs, the business section delivers focused news and analysis relevant to prospective entrepreneurs. Readers can sign up for a newsletter and alerts.
Fast Company: With its profiles of entrepreneurs and innovators, Fast Company offers news, business advice, and inspiration for entrepreneurs.
Entrepreneurs' Organization: An organization with international reach, EO connects entrepreneurs, offers resources and news, and runs an online forum that promotes professional growth.
Young Entrepreneur Council: An invitation-only organization for entrepreneurs under the age of 40, YEC boasts professional development resources, articles, and tools that can be used to help build a business.
United States Association for Small Business and Entrepreneurship: USASBE offers entrepreneurship education and research for members. Members can also access journals on entrepreneurship theory and management.
Startup Grind: Startup Grind hosts conferences with networking opportunities, runs startup programs, and promotes a community to connect entrepreneurs.
Vistage: Vistage offers programs for small business owners and chief executives. The organization's services include coaching sessions, workshops, and a peer advisory group to support entrepreneurs.