One important question that well settled professionals have to be think about before their MBA apps is the economics of the whole thing. Cos, barring those ludicrous few who would want to join the peace corps in Africa at minimum wage, most MBA applicants are looking for a substantial pay-hike, post MBA. So lets get some numbers going.
I will stick to the oil and gas space cos thats what I have been doing in grad school and then at work (for a combined total of 6 grand years). For this simple exercise I'll use MK as an example. MK is one of my closest buddies, we went to undergrad together, we were room-mates in the first year at undergrad, we applied to US grad schools together, and to top it all like me MK works in Houston in the oil and gas space for the past 3 years, with one of the 5 biggies. MK was contemplating an MBA last year after 2 of his office-mates got their Havard tickets. But after some fairly large amount of thinking he decided against it, from a simple economics stand point. Heres his arguement against the MBA:
(1) Cost of MBA in a top school : 120k
(2) Loss in salary for 2 years : 250k
Loss : 370k
Expected mean/median/mode salary package post MBA: 120k
Salary package at current job in 2 years if no MBA: 135k
Salary loss at end of 2 years: 15k
Loss in 2 years: 385k
Loss in Matching 401K @7% of salary/annum: 17k
Loss in 2 years: 400k
Actual Loss (amount he would have saved in those 2 years): 190k
(20% savings+120k mba cost+401k contributions)
Assuming he continues to save post MBA, and he can save on avg 30k/annum, he will break even only after 6 years. This is a bit of an unknown part of the equation as salary projections post MBA in terms of growth rate is not something I am too familiar with, so I have just assigned 150k as an avg for the first 7 years post MBA. But for those 7 years that ~200k which he lost in his MBA would have grow to about 400k on a 10% compunded basis. If you tweak the numbers even further and put in the fact that for each of those 7 years he would be contributing an additional 25k per annum, the number stands at 660k.
Yes you read it right thats -660k USD.
No wonder he isnt planning on doing an MBA.
PS: If you are wondering about the accuracy of the math, assign 40k in savings per annum post MBA for the first 7 years, and use a compounding rate of 10%.
Next post: Do MBAs make good analysts in the stock market in other words do they have the expertise to be a good analyst or is it more jargon bombarding and fancy verbosity of the obvious is what they do??