An MBA is different from other advanced degrees. Unlike a JD or an MD, no one needs an MBA to practice business. Yet MBAs are still very expensive. For a person earning $75,000 per year, the fully loaded economic cost of going to business school is something like:
Two lost years of earning $75,000 = $150,000
Two years of direct costs of tuition, books, etc. at $50,000 per year = $100,000
$250,000, or a quarter of a million dollars
If an MBA costs $250,000 over the course of just two years, you need to be very sure that the present value of your increased earnings over the course of your life justifies that $250,000 investment. If you choose to do something you would have or could have done without an MBA, you may have just lost $250,000. That’s a lot of money to lose.
In my opinion, there are five situations in which you should strongly consider an MBA:
1: Pure learning – your current job function is too narrow and your undergraduate degree was not in business. In this situation, you just don’t feel like you know enough about business to make an impact at work, switch companies, or switch careers. Perhaps you are an HR analyst, but really know nothing about anything else. Your current company shows no signs of being willing or able to rotate you into different functions so you broaden your knowledge base. An MBA can obviously provide that new knowledge base.
Note – in this situation, attending a top 10 or 20 MBA program (as measured by any of the popular rankings) might be less important than in the scenarios that follow.
2: Signaling – you attended an “OK” undergraduate institution, but you want your current and future employers to know that you’re among the “best and the brightest.” In this situation, your job may be pretty good, and you may already know a lot about different aspects of business. Perhaps you went to a good Big Ten school and you work at a large consulting firm. However, you want to differentiate yourself further from the crowd. An MBA from a top program can help here.
Note – in this situation, attending a top 10 MBA program is critical. It’s not difficult to get into most MBA programs outside the top 25, so the “signaling” effect is drastically reduced if you don’t go to a top school. In fact, an MBA from a really small or unknown school can be a negative signal.
3: Consulting or Investment Banking or Private Equity or Venture Capital or Brand Marketing, etc. – you are not currently in one of these industries – but you want to be. Certain jobs, like those in consulting, banking, or PE, can be very difficult to get on the “open market.” If you don’t know someone at any given firm, (or if you are not a member of Doostang), you simply can’t get an interview, because interviews only occur on campus, with MBA or undergraduate students. For the most part, filling out an online application at a well-known consulting firm or bank is useless – nobody gets interviews from doing that. However, these same firms will, without a doubt, be on campus at all the top MBA programs for interviews year after year.
4: Networking – you plan on building or running a business someday, and you want to create a powerful network. Motivated individuals who seek to be senior vice presidents, CEOs, etc. need to have mentors, friends, and in general, a network to call upon to help them solve problems, raise money, get key market insights, switch roles, etc. An MBA from a top school provides an instant network you can leverage for the rest of your life.
5: Entrepreneur– you plan on becoming an entrepreneur, and you want to test the idea first. Since anyone can be an entrepreneur (i.e., no college degree required), it may seem odd for this to be on a list of reasons to consider business school. However, business school provides you with the opportunity to test ideas, and take specific classes that will help you run a new business. You can even take classes that allow you to effectively build your business while in school. From start-up legal formation decisions to accounting to marketing to HR, running a business requires a very broad knowledge base. And, perhaps most importantly, if the business doesn’t work out, your MBA provides a nice safety net, in the form of a “ticket” to a well-paying corporate job (or at least an interview for a well-paying corporate job).
Do you agree or disagree? What situations have I mischaracterized or missed altogether?
About the Author: Mark Skoskiewicz is a former strategy consultant with Marakon and current entrepreneur. He owns and operates MyGuru, a provider of in-person and online GMAT tutoring and many other types of tutoring and test prep. He also received an MBA from Northwestern University’s Kellogg School of Management. He founded MyGuru while at Kellogg in 2009.