The Un-MBA: I teach the aspiring self-employed the opposite of what is taught in business school

Many of my clients aspire to self-employment, entrepreneurship. Much of what I teach them is the opposite of what's commonly taught in business school--and that's not surprising. I am most critical of universities' attempts to prepare people for a career.

For example, knowing that law schools, especially the prestigious ones, focus on theory not practice, good law firms have felt forced to create a comprehensive training program for their new lawyers.

Indeed, most law professors don't know how to practice law. Anthony Kronman, when he was the Dean of Yale Law School, received a frantic call from a friend who had just been jailed: "Please, Tony, get me bailed out of here!" Kronman was forced to admit, "I don't know how."

Same is true of education. I have a Ph.D. from U.C. Berkeley in the evaluation of education and, along the way, had to take courses from professors who taught in Berkeley's K-12 teacher-education program. They may have been assiduous researchers of arcana but as teachers, most were mediocre or worse. Certainly, none were the master K-12 teachers who should be preparing our future teachers.

My physician says he learned most of how to be a good doctor after he finished medical school.

But it is in the field of business where I most personally see how badly universities prepare people for their career. I have helped many of my clients to become successfully self-employed, and also have clients, colleagues, and friends with MBAs. I see such a discordance between the principles of starting and running a business taught in business school and what I've seen work in the real world:

Biz schools say "Innovate." That is very risky advice. Sure, a large corporation can take risks. Its deep pockets allow it to stay in business even if many attempts at innovations fail. But individuals or small businesses are likely to run out of money. Indeed, there are so many reasons why an innovation might fail: development costs are high and subject to overruns, the product doesn't work, the public doesn't like it, the public too-quickly stops liking it, and/or a competitor comes up with a better or better-marketed product. That's why they say, "The leading edge often turns out to be the bleeding edge."

Sure it's fun to innovate and, sure, the world benefits from innovation, but if you don't have the deep pockets to afford the multiple failures that precede even most successful entrepreneurs' success, it's wiser to replicate a successful type of business than to innovate.

It's easiest to find a successful business to replicate in the small (therefore affordable) retail space: If a reasonable percentage of small retailers in a certain category are busy, it's a sign they're successful. So, for example, at lunchtime, there are lines in front of many food trucks. I'd simply watch the busy ones, incorporating their best practices plus consumer-tested recipes. I'd hire the owner of one of those food trucks as a consultant to help me prepare to open-up shop. (I'd agree to not locate mine near his.) In sum, my mantra: Don't innovate; replicate.

If I did want to innovate, I can reduce my risk by asking deep-pocketed business owners and executives, "What in your business is annoying you?" If my queries yield a simple, doable business idea, I'd ask similar businesses if they have the same problem. If so, I could create that innovative business with relatively little risk.

Biz schools urge you to quickly get big. "Scalable" is one of biz schools' favorite words. Alas, that too is dangerous advice for small businesses and especially for individuals wanting to be self-employed. True, even if the aforementioned food truck were successful, it probably wouldn't yield enough profit to earn me a sufficient living, so I would need to clone it in another good location. But I'd stop after just a few trucks--as soon I netted $200,000 a year. The more locations, the less control you have over quality and cost control, and the difficulty of operating it well tends to mushroom. So I teach my clients, "Don't be greedy. Get just big enough." (And live modestly so you'll always have enough money.)

Biz schools focus on high-status businesses: high tech, biotech, medical devices, environmental technology, multinational corporations, etc. I teach my clients the opposite: start a low-status business, the grungier the better. That way you're competing with less capable business owners. Few Stanford or Harvard graduates aspire to owning diesel repair shops, mobile home park cleaning services, installing and removing home-for-sale signs from lawns, shoeshine stands, cleaning out and installing cabinets in basements and garages, gourmet food trucks, rehabbing tenant-damaged apartment buildings, carts selling soup, scarves, knockoff designer purses, French soap, or coffee, or placing and maintaining laundry machines in apartment buildings. It's far easier to compete successfully in such low-status businesses. I teach my clients, "Status is the enemy of success."

Biz schools focus on intellectually meaty, complex businesses like the aforementioned high-tech, biotech, etc.. Alas, the more complex the business, the more that can go wrong. I teach my clients to choose a simple business, such as those I list in the previous paragraph. Each business location may yield insufficient profit to support a family but, once you've refined the concept, as I said, just clone your simple business in another location(s.) Yes, keep it simple, stupid.

Biz schools urge, "Choose a business with high barriers to entry;" that way it's tough for competitors to enter the market. That's valid advice if you're a deep-pocketed corporation but it's usually dead wrong if you're the typical cash-strapped entrepreneur. I recommend that most aspiring entrepreneurs start a business that requires little capital and then, as mentioned, use its profits to clone it.

Biz schools proceed on the principle, "It takes money to make money." I teach the opposite: You must constantly look for ways to get what you need for little or no money. For example, I urge that, where possible, you run your business out of your home, car, a Starbucks, a condo development's community room, or friend's apartment that's vacant during the day. When buying something, I urge such cost-effectiveness techniques as to ask yourself, "What must this cost to manufacture?" That enabled, for example, one of my clients to buy silk scarves wholesale for $1 a piece than from another "wholesaler" who wanted $10. Of course, I also encourage my clients to consider buying last year's model, used or cosmetically flawed items, and using the Internet for price shopping. In short, I teach my clients, "Start with 'How can I, without undue hassle, get this for free or very cheaply?'"

Biz schools urge entrepreneurs to delegate: "You can't do everything," they urge. In contrast, I encourage my clients to, when starting their business, to do as much as possible themselves. Of course, that conserves cash--the life blood you must preserve lest you go out of business before you become profitable. Also, spending time immersed in the business's weeds tends to build your psychological ownership in and enthusiasm for the business. Most important, being hands-on allows you to gain deep understanding of how to make the business work.

For example, if my goal were to make $200,000 a year from a chain of shoeshine stands, I'd run the first one myself, taking full shifts doing the shoeshines. That would enable me to truly understand the customers, the art of shoeshining, identify upsell opportunities, how to optimize the experience for the shoeshiner and the customer, theft and vandalism problems, disgruntled customer issues, everything. Only when I really knew the business and it was clearly becoming successful would I clone it and then delegate by hiring someone to run the two shoeshine stands. I would take all the time needed to find great employees and would treat them well, for ethical reasons and because I want them loyal to me. Even then, I would remain actively involved in the business: visiting, training, inspiring, and, where needed, setting limits. My rule: Don't delegate prematurely or too much.

As a way of summarizing, here's how I'd start the aforementioned shoeshine business to maximize my chance of ethically and relatively quickly, netting $200,000 a year:

1. I'd search Google and Amazon to find the best articles and books on running a shoeshine business.

2. Using service review sites such as Yelp, I'd identify a half-dozen shoeshine stands that had excellent reviews and many reviews. The latter would indicate that a business has many customers.

3. I'd visit each of those shoeshine stands and note everything: the characteristics of the location, signage, menu and prices, equipment, products used, procedure used, ergonomics, the shiner/customer interactions, how people who needed to wait were dealt with, amenities, everything. I'd buy a shoeshine at each stand and while getting the shine, ask such questions as, "What should I know about running a shoeshine business that might surprise me?"

4. I'd amalgamate into my shoeshine stand the best practices of the articles and books I've read and the half-dozen shoeshine stands I visited.

5. I would take the time to find an excellent location that I could get for free. (Remember, my rule: "Start with free.") For example, I'd ask the owner or manager of a large office building to let me run my stand for free in the lobby. My pitch: "That enables you to provide a useful service for your tenants without it costing you a dime."

6. I'd run the shoeshine stand myself for a week, a month, whatever it took for me to fully understood the business.

7. Then, because I don't want to make a career of shining people's shoes, I'd take all the time needed to find an excellent person to replace me.

8. Next, I'd turn my attention to finding another excellent location and an excellent person to staff it. I'd keep expanding only until I netted $200,000 a year, always staying actively involved to ensure the quality remained high, my shoeshiners happy, and my profit adequate.

9. Finally, I'd sell the business or keep it as a cash cow while I turned to my next project: entreprenurial, social entrepreneurial, or volunteer--like writing this blog.

As always, dear readers, comments are welcome.