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The numbers are also very biased like for some programs they say the average salary after is like $200k but they exclude the fact that the average grad had already 5-7 YOE upon admission and was already 32-35 😂 so they would have been making that money either way but the school says it in a way to get credit for it.
The point is that the TFA people make consulting money because they used an MBA to land a consulting job. They would not have been making 200k if they kept teaching low income youth in Mobile Alabama.
I think you were spot on with the "every situation is unique"- if you didn't go to a big name undergrad, HBS is a rebrand of your resume. There are also tangible benefits and your MBA opens doors 20 years in the future when you are raising capital for a fund, getting funding for your start up, or selling a client on a project. Overall if really just comes down to what is important to you, and what your goals are
It depends a lot on background. If you come from consulting… and to stay in consulting it’s completely useless to take an MBA and math will be difficult to add on. Best use cases for MBA are 2: 1) people who want to pivot from low to high pay job, 2) people who want to move international into higher paid countries
I feel like you could also factor in the value of the network that you will make.
What’s the terminal value of life long friendships and the network?
Do you need it if you’re in consulting - no. Do the vast majority who attend find value in the experience and relationships they develop - absolutely.
Also, if you're getting into these types of places im going to say there is a strong chance you die with a lot of money
The opportunity to have that life experience is something you will never get back. The financial cost is something that you may not view as much down the road
Rising Star
But what about the destination weddings?
I didn’t go to a top undergrad but I still don’t plan on getting an MBA. I can’t fathom the cost of the MBA and also the opportunity cost of postponing salary for two years and not sure how I would pay my mortgage if I did one
Thanks for everyone’s insights - network and potential business opportunities are valid reasons that I didn’t really focus on.
Here’s the back of napkin calc btw, using an average consulting comp after a few years in. Pretty crude, but essentially only comparing tuition investment vs incremental comp coming out of school for the next 20 years.
I definitely did a similar IRR calc, as cost was the biggest mental hurdle for me to get my MBA. Few thoughts on how my experience differed from your model:
- my comp trajectory was much steeper post-MBA than you’re modeling. Year 2 I was at 250k,year 3 300k, etc
- I got half my tuition paid for with an award / scholarship
- my pre-MBA salary was around 100k, so post-MBA my comp basically doubled
Add to that the 2 year break, the friends, the career pivot, the opportunity to go back in a classroom, etc etc. I’m really glad I made the decision I did
Really depends on what you want to do, if you ever want to leave consulting. I’d say go do it. Controversial opinion here but I would have paid double the tuition based on the value I got out of it. 3 years post-MBA from H/S.
Coming from non-traditional background it opens doors not available otherwise. And now doing recruiting for my investment firm, H/S opens so many more doors and we spend so much time and focus there. As a source of capital, we often see start up funds or other strategies in their fundraising stage. It’s not the sole determinant but it matters.
This is also only 3 years post-MBA. The true payoff will be in 5-30 years when that one obscure friend you made at yacht week opens up a once in a lifetime door. Can’t walk through that door if you were never there…
For me it wasn’t even close, I did part time and my income has more than tripled (more like 5x if you include equity that hopefully come through) in 5 years…
Similar experience but less exaggerated numbers
I was an engineer in industry, went to a part time program (company paid upfront cost each semester), knocked it out in 2 years, left after graduating (company didn’t have a clawback period) to do consulting. Then left for small SaaS firm.
Doubled in about 3 yrs. No opportunity cost and no out of pocket cost for the program, so payback was nonexistent
5x is prob hyperbolic unless you were both super underpaid beforehand and landed the best paying job possible afterwards
Rising Star
Am 27 and have run similar calculations. It doesn’t really make a ton of financial sense looking forward 10-15 years. I guess there’s an argument to be made that it will open doors later in life to grow into roles behind senior middle management.
Personally I’m saving it as a career pivot move if I get sick of what I’m doing now. But obviously the clock is ticking on that.
I think it works out to a wash when you extend it over a lifetime. It might not have added anything, you might get a bit of a bump or help from a network, but it’s also just a really fun, memorable two years lol. That’s my logic—but I also came in already burned out and saw this as a break
Or you do it to meet someone cute. Add a line for dual income oppy 💁🏻♀️
Here’s my situation and why it made sense. Pre-MBA: Non-target UG, industry job making $70K. Pursued a part-time MBA program at a semi-target school. By graduation, same job promoted me 2x (once in the program, once at graduation) and comp was $95K (36% comp increase in two years). 6 months after graduation manager leaves and they promote me again - new comp $105K. Another 6 months passes and I leave the company for a new position where an advanced degree was a requirement - new comp $120K plus a 15% bonus target. I spent three years here and then moved into consulting. TC is now about $200K. So, +186% in five years. No way it would have been possible with my shitty UG, so it made sense for me (but certainly have b-school classmates that didn’t have anywhere near the ROI). Hope this story helps.
Depends where you want to work. Stalked some MBB associates on LI the other day and every single one had Wharton or Fuqua in their header.
Agree. It's not for everyone. If not trying to go director and above, maybe don't do an MBA. Also I'd probably throw out there most people who are taking MBAs aren't even making 100k, so it definitely makes sense to them.
Depends on where you want to recruit to post MBA. IB and top consulting firms pay well above that 200k average for TC and many places provide tuition reimbursement. For example first year out of MBA at LEK can make ~$307k
You are missing the intangibles in your calculation. Examples:
1) I was a liberal arts major at an Ivy for undergrad. Despite getting into consulting pre-MBA, I was still rejected for so many jobs because I didn’t have a major listed on the job application for the AI review. Post-MBA, I have no problem applying blind to job applications (unless I’m asking for too much money) or getting hit up by recruiters. It’s meant faster promotions and salary progression.
2) I’ve left consulting, but my MBA classmates who are working at consulting firms are really hoping that I get promoted to a role where I get to hire consultants — so that they can sell to me and boost their sales numbers as partner / almost partner. While you can make those relationships independently, an MBA helps create those relationships (and it’s why consulting firms sponsor MBAs!).
3) I met my spouse as an MBA student. The ROI of that is priceless to me. But for your calculations, that has doubled my household income and opened more financial growth doors.
I was a Sr ASC at PwC with clear path to manager and doing very well. It was still super worth it for me. I was targeting McK and was lucky to get it and doubled my TC immediately after graduating. I’m really not sure if McK would have given me a second look if I’d applied any other way.
I also have a ton of ex-B4 classmates who ended up in great spots, many of whom are doing way better than me now with better WLB.
Money aside, travel, fun, friendships can’t be beat. Truly one of the best experiences of my life.
HOWEVER! Economy was doing well and there were plenty of jobs when I went. I also chose INSEAD specifically for the better ROI. I think it’s insane to pay $250k in loans for a 2-year US MBA. I took just $70k in loans (scholarship + cashed out retirement savings tax-free) and it was totally worth it.
Don't forget to account for scholarships. I got $90k discount for my MBA and had offers of $80 elsewhere. Saved on some costs during the MBA and so only ended up $60k in debt. I didn't even like b school very much but am still glad I did it because of the incredible friends I made. Just went to a bschool wedding last weekend and it was incredible -- not to mention full of people who would help me in my career any time I needed. The network is not to be underestimated