Startup lessons you won’t learn in your MBA

While an MBA degree certainly elevates your skill set, it doesn’t prep you for the challenges in your entrepreneurial journey.

Don’t get me wrong - a business degree can be useful.

Business schools teach you frameworks that help you approach problems around marketing, sales or product management in a structured, thorough manner. These frameworks can be extremely useful in the context of large, stable businesses. That’s because these frameworks require abundant reliable data to base your decisions on, and some existing structures to be in place that can help you execute what you decide to do.

Entrepreneurship, however, is a different ball game. A startup is not the best environment for using a lot of what you would learn in business school, as there is a severe lack of data, time, money, and people. One such example is the famous price discovery framework called Van Westendorp’s pricing framework. This requires you to ask dozens of customers four questions to zero in on the right price range for your product.

The trouble with applying something like that to your startup is that you’d not have enough customers at the start to ask all of these questions. Even if you manage to have those, it will take a lot of time to run this exercise, and it is very likely that it will just give you a price range that you might already know from common sense and from looking at other products in the market.

A very different set of learnings and insights are useful in most entrepreneurial journeys. I have seen that these learnings are unlike frameworks you would learn in business schools. These are more like truths that can work as guiding principles that help you plan better and be better prepared to handle what is coming next.

Here are three lessons that I have learnt in my entrepreneurial journey that can help you plan and execute better as a founder.

You Will Spend Faster Than You Plan to Spend

Planning for an entire year is really difficult when you are doing a startup. Things move too fast, and since you’re learning fast, it is important to adapt and tweak your plan as you go. But when it comes to your money, you need to plan for a year. That is because money is not available on the tap. If you run out of money, it can be catastrophic for your business.

Most annual plans would take into account cash at hand, factor in all expenses and initiatives, estimate earnings and any financing, and would chalk out a path for running the business for the next one year. What throws a spanner in the works of most annual plans is new initiatives failing, or taking longer time and larger investments to start showing expected results.

At large organizations, initiatives are grounded in much more data and research than they would be at a startup, and hence, have a higher likelihood of succeeding in the planned time-frame. At your startup, a lot of your initiatives might be experiments grounded in little data. As you’re working on them, there is a good likelihood that you’ll realize you didn’t plan them deeply enough.

The effect of initiatives not succeeding in time at startups get further exacerbated because startups have much more riding on a new initiative than a large business has. Hence, a new initiative failing or taking too long impacts a startup much more gravely than it would impact a large company.

The result of failure or delay in getting results from new initiatives and experiments is that startups burn through their cash faster than they expect to.

You’ll Never Be Rid of Self-Doubt

Founder self doubt comes in many colors and forms. Here are some questions you’ll very frequently find asking yourself:

• Am I building the right product?
• Did I hire the right person for that role?
• Was I right in building this feature this way and not the other way?
• Am I doing the right thing by going big on paid marketing now, or should I hold back?
• Was my decision to raise money correct, or should I have continued bootstrapping?

See the pattern there? Each of these questions is a perfectly legitimate question about your business, but you add I/me to them and make them about yourself. And that is a perfectly natural line of thought - as a founder, you have the independence to make key decisions about your company, and how those key decisions turn out reflect on you as a founder.

The problem is the constant, frequent oscillation between “I’m awesome” and “I suck” based on whether a customer was won, an investor turned you down, or the latest marketing experiment was a booming success. With time, you will become more centered and objective, but self doubt will never leave you.

You’re an Incurable Optimist. Use It to Your Advantage

I’ve never met a founder who is not an incurable optimist. Radical optimism probably is a necessary requirement for someone to leave a comfortable job and start a company. How else would you bank on the minuscule chances of your startup being a success against the certainty of a good job and a regular salary?

20% of all startups fail by the end of the first year, while 50% of them go out of business by the end of the fifth year. Your belief that your startup would not be one of those is based not just on your belief in your product idea and confidence in your domain expertise. Your belief in yourself and confidence would amount to very little if it was not multiplied by your infinite optimism.

Once you get your startup off the ground, your optimism comes into play in everything you touch. You expect every prospect to close, every investor conversation to lead to a term sheet, and every hire to do very well.

That of course is not practical. Not everything translates into a success, and when they fail, it is natural for you to respond with self doubt (go back to (2) above). At times, you might also feel cheated and wronged.

When I discuss scenarios like this with my friends and advisors who are not founders themselves, I’m frequently advised to tone down my optimism and be realistic. But through multiple such instances, I have realized that founders can take on hard, unsolvable problems with confidence because of their boundless optimism. Toning down my optimism will certainly make me realistic, but it will also make me less likely to take on difficult challenges with the enthusiasm that I currently do.

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To sum up, there is indeed value in what you would learn in business school, but when it comes to startups, an entirely different set of lessons and insights are more useful in a lot of scenarios. Read your business books and case studies, but remember that a startup is like running a Formula One car on broken roads. Your track driving lessons might not be very useful.