Learning from Student Businesses

For some undergraduates, the first taste of running a business happens right on campus

In 2001, MBAs at the University of Maryland's Robert H. Smith School of Business opened up the Smith Store, a shop that sold university paraphernalia, such as logo T-shirts, and bulk orders for special events at the university. The goal was to provide business students with a safe environment for taking risks and experimentation.

Three years later, the school's Dingman Center for Entrepreneurship took over the project and hired two MBA students to manage the store. The MBAs did fine, but the following year the school gave undergraduates a shot at running the show—and the results were surprising.

"The MBAs did well, but undergrads have a lot of fire in the belly," says Melissa Carrier, director of Venture Investments & Social Entrepreneurship at the Dingman Center. The undergraduates doubled the revenue in six months, and now the jobs remain in the hands of undergrads exclusively. A profitable business, the revenue pays the working students, and the rest goes to the Entrepreneurship Club and to scholarships. Plus, Carrier says, students learn three key lessons: leadership, team skills, and customer service.

A Different Sort of Classroom

The Smith Store is one of a number of student-run, on-campus businesses designed to give business majors and other students a hands-on experience. While each may have a unique history, all have a common purpose: teaching young people about how to manage a small company.

Learning comes quickly. John-Paul Kwasie says he was a typical undergraduate student at the University of Massachusetts, Amherst—meaning he used to sleep in and lacked a real direction. Then the communications major signed up to work for Campus Design & Copy, a student-run business that provides photocopies and graphic design work for students and faculty.

Kwasie's college life changed with the new job. "I had structure," says Kwasie, who is co-manager of the business. "All that energy I wasn't using, I put it toward something." A senior who will graduate this December, he dreams of opening his own design or visual arts firm.

Students Only

Whereas some schools take an active role in setting up and running businesses, others are run strictly by the students. At Georgetown University in Washington, the Alumni & Student Federal Credit Union (GUASFCU) operates without any faculty or administrators as supervisors. In 1982 four undergraduates wanted to help students with their banking needs, and by the fall of 1983, the credit union was chartered. In 1994 services were extended to alumni. Now, the 147 credit-union employees come from the university's four schools, but 80% are from the Robert Emmett McDonough School of Business. For B-school undergrads, the best part of the gig is getting exposure to their chosen industries. "[The job] lets me apply everything I've learned in class," says Lorena Ferrara, chief marketing officer of GUASFCU, which has more than 6,000 accounts and over $10 million in assets.

Students at the University of Colorado who had an interest in entrepreneurship sought a loan of about $42,000 from the Leeds School of Business and Deming Center for Entrepreneurship to open a coffee cart. The business was launched in 2005 but closed for a year while the business school building was being renovated. In 2007 the Trep Café—"Trep" being short for entrepreneur—reopened, this time as a full-service café inside the renovated building.

Mike Isham, accounting manager of the café, says one of the most important lessons he learned was to be prepared for anything. When the snack bar first reopened, he and his three fellow managers were new to the game and found themselves having to tackle problems such as running out of milk in the middle of the day. He says they got organized and started putting procedures in place that should make it easier for the next batch of undergrads to take over.

Without involvement from faculty or administrators, student managers must create smooth transitions as they pass the torch from one year to the next because there's lots of turnover as students graduate. Many programs choose leaders for the next academic year months in advance so they can start mentoring and training them before the school year ends.

Spreading "Entrepreneurial Wings"

Even a university without a formal business school can use on-campus businesses to teach students management. Princeton University created the Student Agency System in the early 1900s to help undergraduates earn money for school. Currently, 19 student agencies offer everything from dorm furnishings to tuxedo rentals. More than 200 student managers and workers share earnings from agency operations and report to an administrator who advises them.

The agencies, which are for-profit, do not receive funding from the university and are no longer part of the financial aid office. They recorded over $1 million in revenues annually, says Sean Weaver, director of Student Agencies & Special Projects in the Office of the Dean of Undergraduate Students. "The most valuable thing the agencies do is provide a venue for students to stretch their entrepreneurial wings in a safe place," he says. The school won't ask students or their parents to pay for financial losses that happen as a result of their decision-making, he adds.

UMass Amherst also has a long experience with student-run businesses. The Center for Student Business advises eight student-run operations, which originated three decades ago when students were fighting for their rights and wanted to take charge of their campus, says Rosemary Schmidt, the center's director. Only 20% to 25% of the student participants are business majors, a rate Schmidt hopes to improve. Businesses include Campus Design & Copy, where Kwasie works; Tix Unlimited, which oversees the use of the campus concourse and handles the cash for campus event ticket sales; and the Bike Co-Op, which repairs bikes and refurbishes abandoned bikes for resale. The school would like to create more student-run businesses. Two ideas on the drawing board: security for events and automobile mechanic services, such as oil changes, provided by the Motor Sports Club.

Schools that host student-run businesses describe them as a win-win situation. Students get the chance to earn money and gain valuable business skills and experience while the university can benefit from the services at a minimal cost. "It's a great way to learn about life," says Schmidt. Indeed, the educational lessons appear to be the biggest payoff.

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