A few years ago, I debated getting an MBA.
A lot of my friends were doing it, we have some world-class schools nearby (assuming they’d even let me in), and it seemed to be a solid investment in education.
I had this fear that without this extra credential or degree, I’d somehow be left behind.
For the most part, I’ve always been comfortable in school. I was a good student, and the structure of education made inherent sense: you show up, learn what you’re supposed to, and then pass a test.
If business is scary, school is safe.
But what would an MBA get me? Perhaps I’d look more attractive to potential employers, but I was already self-employed and had every ambition to stay that way.
Would the material I’d learn be so earth-shattering that it would skyrocket my business to new heights, moreso than investing those hours and dollars directly into the business itself?
Ultimately I decided not to pursue the MBA, but have become fascinated by the “is college worth it?” debate.
What’s an MBA Worth?
The Bureau of Labor Statistics paints a rosy picture of the value of education:
(And they may have good reason to. According to some Congressional Budget Office estimates, Uncle Sam could earn $100 billion or more in student loan interest over the next 10 years.)
But according to the government data, higher education graduates earn significantly more than their degree-less peers, and enjoy much lower unemployment rates.
Over a lifetime, those differences can add up to massive chunk of change, with college grads earning $1 million more than high school grads over the course of their careers.
And since no tuition (yet??) costs $1 million, a degree is still a purchase that makes sense, right?
There are a couple potential problems with that argument.
Costs vs. Benefits
The first combines the spiraling cost of education — roughly $37,000 for a 4-year degree at a public university and increasing at 8-9% per year — with the flat-lining value of that degree.
Perhaps the rising tuition costs are merely a reflection of a marketplace inefficiency; they’re just catching up to what value they provide. After all, colleges aren’t suffering any enrollment shortages, and by definition, people wouldn’t buy something they didn’t think was worth it.
But what the BLS chart above doesn’t show is that while tuition keeps increasing, wages are flat. At a certain point, it’s a trade that no longer makes sense.
Maybe we’ve crossed that point already. Maybe we have a few more years to go. Either way, the trend can’t go on forever.
How Relevant is an MBA?
The second problem is the rise of the freelance economy, which is expected to encompass 40% of the workforce in the next 5 years.
I call this the “who you trying to impress?” dilemma. If a degree is a golden ticket to a traditional 9-5 corporate job (hey I can’t fault it — that’s the path I took), but people will increasingly be working for themselves, who’s going to care about your diploma(s)?
Employers may still value the degree, but if you’re going to be your own boss (by choice or by necessity), do you really need it?
But after that little preamble, what I really wanted to do in this post is get some expert opinions on the merits of earning an MBA vs. starting a business.
Why Consider an MBA?
1. Increase Your Salary
Chris Deardorff | Revnt
I self-funded my MBA (and still am via student loans) as I went back full-time. It was a fantastic experience and something I absolutely do not regret doing! It did payoff quite a bit in terms of ROI as it doubled my corporate job salary right out of business school.
If I were to do it all over again, I think I would have maybe tried to start my own business first for a couple years right out of undergrad and even gone through an accelerator (though they didn’t really exist back in 2005). I’ve heard a lot of people deciding to do this instead of an MBA. Interesting enough, my most enjoyable and valuable part of my MBA program was going through the entrepreneurial track so take that for what it’s worth.
Ultimately, I would still recommend an MBA for people trying to start a business as I do think it adds value (provides business fundamentals, frameworks, and case studies to learn from) and also lends credibility to your professional reputation.
In terms of it helping my specific startup, it’s hard to say at this juncture. I think it does help in some cases (i.e. credibility and already having that business background) but I know a lot of people in the startup world (my target market), and even the corporate world in some cases, are put off by MBAs because they automatically label them as being theoretical vs. having real-world experience. Now, there’s absolutely some truth to this but I don’t think it’s fair to automatically place this label on all MBAs.
All that to be said, I think there’s both pluses and minuses in how beneficial an MBA is in the startup scene but at the end of the day, I think it having one helps someone more than hurts them.
2. Theory Plus Practice
Sean Higgins | VidGrid
I’m Sean, MBA from the University of St. Thomas and a founder at ilos, a Techstars company.
The biggest point I can strive here is that these aren’t mutually exclusive paths.
My MBA taught me more about communication than 30 investor pitch meetings (I’ve had them too). You also learn the essentials of being a business (5 forces, sustainable competitive advantage), and your way around a term sheet.
Startups teach you how to do things. Every day on the job you’re faced with undefined problems and need to create your own solutions. They are the ultimate testing ground for ideas and where you learn very quickly what you know and what you need help with.
Theory and Practice make a winning combination.
I went to get my MBA after about a year out on the job in corporate. I had a 90th percentile GMAT score and got a good scholarship to go back. My classmates went on to get 6 figure jobs at corporate, which would pay for their degree pretty quickly.
As for my ROI? Hard to put a value on waking up every morning excited about going into work, but I can tell you it’s pretty darn high.
3. Personal and Professional Growth
In early 2008 I was in a corporate fashion role but was frustrated by the lack of growth opportunities and salary the company was able to offer.
And given the recession, opportunities for a new job elsewhere seemed grim so I decided to get an MBA at the University of Michigan and started in Fall 2009.
I was fortunate to ave my tuition fully covered by a grant, though I had to cover living expenses which I mitigated by completing my MBA in 1.5 semesters instead of 2. During my third semester I was offered a position with a salary that was over twice what I made prior to getting an MBA. This provided a strong baseline for negotiating future salaries and within 5 years have been able to make 3 times what I made in my pre-MBA role.
Money aside, the skills learned from the MBA program has helped me grow professionally and personally. For those considering starting their own businesses, I still encourage getting an MBA, not only for the skills but for the network you gain. Also, many programs offer startup incubation
programs with funding and mentorship.
4. Education Helps with Startups
Adam Kirsch | Yorango
In addition to studying full-time at Cornell University, I am CEO of Yorango, a developer of software for property management and leasing. Before Yorango, I cofounded Daily Beat
In my opinion, the MBA was definitely worth it and highly complementary to my startup. A formal business training gave me hard skills bolstering my self-teaching, and many of the things I learn in class I can try immediately in my business. Johnson, Cornell’s MBA program, was also highly beneficial in and of itself. I had access to dozens of subject matter experts in my professors, and the school’s accelerator program gave me credit, capital, and top-notch coaching from experienced entrepreneurs and investors to launch my business.
Tuition at Cornell is around $60,000 per year, and I did not have the benefit of a company sponsoring my education. I had only a small amount of debt from my undergraduate education and virtually no other debt, so I felt comfortable taking on the MBA’s financial burden.
5. Land New Clients
Yvette Best | Best Services Unlimited
I had started my business before I received my MBA and my business did well. However, I went back to school and finished my MBA this year at Belhaven University, and my business is better. The education I received helped me work smarter at my company and I received better tax clients.
My tuition was $20K which included my textbooks. My full-time job paid $12K, and I paid the rest.
I believe a young entrepreneur should start their business and pursue their MBA part-time. The ROI is greater with this combination. They are pursuing their dream as well as investing in lifetime learning that will help sustain business longevity.
6. Break Into a New Field
Tyler Brooks | Analytive
I’m actually an MBA and an entrepreneur. I went back for an MBA after being finished with my undergrad for just one year. For me, it was an opportunity to help break into a new field (digital analytics).
The ROI long term is going to be fairly large, although it’s hard to quantify that exactly. However, working in a highly technical and quantitative field, I rely on the MBA a lot. It’s not been so much the skills that I learned, but mainly the credibility it adds during sales pitches and meetings.
I paid for the MBA on my own. If you can get an employer to pay for the degree, you should absolutely do it! As an entrepreneur, it’s hard to determine if I received a “pay raise”, but it has certainly helped me grow my business.
7. Expand Your Network
Scott Gabrielson | Oliver Cabell
I am the founder and CEO of a new fashion label focused on end-to-end transparency and challenging the way the industry prices its products.
I also just graduated from the full time MBA program at the University of Oxford. The decision to get an MBA before starting a company was a deliberate one. It allowed me to:
- Expand my skill set
- Expand my network
- Provide a nice Plan B if the startup does not work out as hoped!
8. Gain Clout in Your Workplace
Jesse Till | Chatter Buzz Media
I actually have an interesting story regarding getting my MBA. I first studied audio engineering and music production. Once I got my bachelor’s, I decided to take on a Master’s degree in Business because I wanted to know everything behind the music industry (writing contracts, copyright law, etc.).
It was there though that I began fine tuning my marketing and general business skills. Though I got my MBA on a full scholarship, it not only helped become a fundamentally sound entrepreneur, helping me in my musical career, it actually landed me my current job.
Though the pay raise isn’t there (yet), my intangibles with an MBA gave me clout in the office and having the MBA made me look like a cut above the rest of the resumes sent daily to the agency I work for.
In a nutshell, my MBA gave me working knowledge of how businesses work and landed me a sweet gig at a company I like to work for.
Reasons to Just Start a Business Instead
1. Avoid Debt
Tasha Mayberry | Social Media 22
I have great respect for education and think it’s important, but because of the high cost of education in our country I truly believe that starting a business is better than pursuing your MBA.
I am a perfect example…
I have a BA in Legal Studies – left school with $40k debt. For a few years before I started my business I could not pay the nearly $1000 a month payment so I foolishly deferred. Now I owe $70k for my loans! ($30k more in accrued interest.)
I started my own web design, marketing and PR firm after I was laid off from working as a Paralegal. I planned on going to law school but after over a year of getting not one decent offer, I had to think about my transferable skills and a new career path.
I love to write and am very creative and about 8 years ago social media was really getting big so I decided on marketing and PR…and I am so happy I did! I am completely self-taught and use self-discovered strategies that I would have never learned in an MBA program or any college.
Related: How to Make Money in College
The best way I learned was through following the blogs of marketing pros. Even their books and paid training courses added up to be a much smaller investment compared to another degree, and the material was much more actionable.
We are on our way to making $1M a year in revenue and have a team of 6 employees. In just a few short years we broke $500k in sales.
So again, I respect education and IF it was more affordable then my answer may differ but getting out there and starting a business with the amazing tools these days we all have at our fingertips, this is the best way.
2. Don’t Get Yourself into Golden Handcuffs
Scott Trench | Bigger Pockets
So we’ve all seen those studies about how much more money those with graduate degrees (like MBAs) make over the course of a 40 year career.
But the MBA *only* makes sense if you are planning on having a 40 year career working to make someone else rich.
Investors and those considering becoming an entrepreneur are, in my opinion, sacrificing nearly a decade of opportunity in pursuing the MBA. In most cases, the education will result in a significant financial delay in the form of lost earnings or mounting debt, and will result in opportunity cost, as the only reasonable option for the vast majority of MBA graduates is to take a high paying job with long hours at a corporation.
It’s this mentality of setting yourself up for 10 years at a corporate gig that scares many of us who desire to be entrepreneurs or to truly succeed while we’re still relatively young. Think about this – if you get a $100,000 – $200,000 degree from an elite school, the best case scenario for most of those looking to pursue an MBA, you are backed into a mental corner.
Every single option you had prior to getting the MBA now makes less sense except one: work a high paying job with long hours at a large corporation.
3. Learn More By Doing
Julie Ann Wood | E-seedling
I started my first company, Check + Balances, an accounting system consulting business, when I was 27, and sold it 3 years later. I learned more about business in those 3 years than any other time in my life.
Learning how to run a business has so many complex situations and problems that can’t really be learned in school or during an MBA project.
Here are a 3 reasons why I believe that running a business is more valuable than a MBA.
- You are ultimately responsible for everything related to the business and in order to be successful you learn ways to exceed expectations of not only yourself but also your stakeholders, customers and employees.
- You learn how important cash flow is to keeping the business alive and in doing so learn ways to improve your cash flow turn such as invoicing faster and working with customers to find out when and who is responsible for payment.
- Every day as an entrepreneur is a learning experience, you never know what problems will arise that you will have to deal with so you learn to be flexible and how to solve problems creatively.
4. Free and Low Cost Education is Available
Shaun Walker | HEROfarm
I’m the 31-year-old creative director/partner at an ad agency here in amazing New Orleans. We understand the dire straits college loan debt can put students in. I, for one, would have twice as much debt if I had not received a simple out-of-state waiver.
I recommend jumping into the business world by starting a business, no matter how small, to get that incredibly valuable real-world experience that school can’t teach and you won’t learn any other way.
Of course, I’m not advocating the entire abandonment of college, as some are clearly still worth it. In addition, trade, specialty schools, and other 2-year programs are becoming more valuable, economical, and logical.
5. Results Not Guaranteed
Jessica Oman | Renegade Planner
I’m an MBA (2009) entrepreneur and I’ve been running my own business plan writing firm, RenegadePlanner.com, since 2010.
First of all, I believe that if someone is truly looking to have a good, secure job in a business field, an MBA is a safe choice. MBAs are marketed as leadership degrees, but they’re actually best for followers, who want to apply their skills towards the greater vision of a larger company. Nothing
wrong with that.
I don’t think an MBA is well-suited for entrepreneurial folk. Real-world experience is more valuable – plus, the skills required for entrepreneurship can mostly be learned for free or very cheap – through platforms like Udemy, through workshops, conferences, etc.
Tuition for my full-time program was $27,000. I received about $6,000 in scholarships and I paid the rest out of pocket.
Pay raise? Ha.
We graduated during the economic downturn, and our own career center staff were telling us we should take unpaid internships “just to get some experience.”
We were encouraged to work for $15 an hour or less to “get a foot in the door.”
We were told to “wait for opportunities.” As if.
Turns out entrepreneurship was the only choice for me.
6. Invest Your Tuition Elsewhere
Jason Savedoff | RVA Advisors
I faced this decision and started a business, then several others. Never looked back… the reasons:
1. Value. I would have sought out a well-regarded (read: expensive) program and taken on something in the realm of $200k in debt. Sure, I probably would have increased my salary upon graduation, but instead I used the $200k to buy my first rental property. Now, 15 or so years later, it’s almost paid off and equates to a $20k salary increase without having to do much work at all.
2. Lifestyle. After stints in Investment Banking, Wealth Advisory, REIT’s, etc. I was through with miserable managers. Most folks get an MBA because it’s increasingly helpful in corporate America, which, to some degree, ties them to that path, and thus, quite possibly, to many more miserable
I enjoyed working in/with small businesses so much I founded a small business consulting and brokerage company!
7. Determine Your Own Future
Maimah Karmo | Tigerlily Foundation
I previously held the assumption that I had to have an MBA in order to climb the ladder and be successful; so, I began pursuing an MBA.
After being diagnosed with aggressive breast cancer, I had to focus on my treatment. Everything else became secondary. While in chemotherapy, I found that there were several gaps in young adult oncology – education, diagnostics, treatment and survivorship, and I started my non-profit, which
is now nationwide and going global.
I realized through my experiences that I didn’t need to have an MBA. A lot of very successful entrepreneurs haven’t even finished undergraduate college. I believe that while there is a lot of
value in pursuing a college degree or an MBA, the success factor is driven by one’s passion and commitment to the vision, not school name or level of education. I have also written a book (Fearless: Awakening to My Life’s Purpose Through Breast Cancer), publish a digital magazine, run a successful consulting business, and travel the country, speaking and empowering women.
No MBA needed.
8. Market Saturation
Christopher Charles | Molding Money for Your Family
Unless there is a high probability of tangible benefits, use your time and money to start something on the side instead of getting a MBA.
At this point in time I regret getting mine. There’s no real opportunity for advancement with my company, and, to date, all of the interest I’ve gotten from other companies is for the same title I have now (at less pay).
It wasn’t terribly expensive since I went to a smaller state school — only about $13k and my employer did pay half of it. But I’m still not sure it was worth it. My bosses haven’t even acknowledged verbally that I graduated and I’m not the type to bring it up. I went back part-time since I have all of the usual adult responsibilities including two kids in high school.
In spite of the time and expense, the market is getting over-saturated with MBAs.
Side Hustle Nation Weighs In
Finally, I posed the question in the Side Hustle Nation Facebook group to get some insight as well. Here’s what came back…
Robert Farrington | The College Investor
MBA here – I recommend starting a business.
I got my MBA but my employer paid for it. Is it worth it? If I had to pay for it out of pocket, no. But since it was free – sure, it was worth it.
But I learned a hell of a lot more starting and running my side business than anything taught to me in MBA. And, for reference, my MBA was focused on entrepreneurship, lol.
The most valuable part was the network.
I tend to agree w/ Gary Vaynerchuk when he says that MBAs and degrees in entrepreneurship are the biggest wastes of money. It’s ridiculous to spend $60k + to get an MBA for a $3000 a year pay raise.
And we shouldn’t fool ourselves into thinking it’s about the connections either. You and I met at a conference almost 2 years ago and spent the cost of a single college class (or less).
I’ve got an MBA and an MS in Software Dev. It helps me get jobs and promotions, but I really didn’t learn that much. I basically got my MBA while I was trying to figure out what I wanted to do… it is helpful for teaching as a side hustle at the local colleges and universities, I guess I’ll get my ROI from that.
I paid for the MBA myself, but I overloaded and did it in 1 year full-time so it wasn’t too bad. The MS was paid for by my employer, so it was free. I will always recommend free school, if for nothing more than the networking.
Candice Marie | Young Yet Wise
I had been invited to one of my dad’s friend’s dinner parties. Mid-way though stuffing stuffed shells into my mouth, a man to my right asked, “So… Candice, when are you getting your Master’s degree?”
“I don’t plan on getting my master’s degree,” I responded.
He was a little surprised by my response. A sense of shock, or disbelief as if I were a five-year-old telling him that I didn’t believe in Santa Clause.
The only time I thought about getting my master’s was when I graduated and I didn’t know what I would do next. It would of cost me $38,000. I didn’t do it.
I believe that you can learn more by doing. It’s even said that people only remember 5% of what they learn when they’ve learned from lecture.
I completed my MBA in management and strategy in 2012. I was self-employed at the time( I still am) and was in a transitional period in my life. I took out 40 K in student loans to complete the program. I chose a 100% online program as that allowed me to continue to work full time while I completed my degree.
The pros: I thoroughly enjoyed the program and I will say that getting my MBA changed everything about how I look at business. I can’t walk into a retail store, restaurant, or any other business without thinking about the supply chain, marketing etc.
The cons: It was only after I completed my degree that I discovered many of the online teachers in the area of information products, digital marketing and passive income. Knowing what I know now, I could’ve spent about $5K on education in very specific areas to accomplish the goals I have now set for myself.
So, in my opinion, is it worth it? If your employer is paying for it? Absolutely yes. If you have to go into further debt to receive the degree? Absolutely not.
In the corporate arena I think the piece of paper of a degree is still valuable, however if you are an entrepreneur like myself, I would strongly consider the specific knowledge that you wish to acquire that you think he will acquire with your MBA and investigate other educational resources that will save you a lot of money. I would be debt free now if not for that additional student loan debt!
My employer paid for my MBA. After 5 years, I don’t think it was worth it.
Have an MBA. Paid for it myself, slogged it out for two years to do it while working full time. Got me a promotion and a substantial raise but not sure it would help me start a business.
We always hear about highly successful entrepreneurs that say the MBA was a waste of time. But, in the corporate world, I wonder if it isn’t required to climb the corporate ladder.
Shawna Newman | SkipBlast
Mine was a waste of time and money. Sure, it got me a raise when I was working a cubicle job, but I make more now working from home.
My main hustle is making authority niche websites, which is basically just loads of content creation + making the actual sites.
I also have an MBA. Paid for it myself but I did the ASU online program so not as expensive as full-time. I enjoyed the program and don’t regret getting my MBA one bit.
But I can’t say it’s helped all that much in either my corporate or solopreneur careers beyond giving a little bit of extra credibility!
I am planning to get an MBA. This is primarily because I see myself moving into larger business in hopes to take my family overseas in the future. It’s much easier to emigrate with the backing of a larger company, particularly to the developing world. Not to mention the fact that I want to work within larger companies to reform what I often see as a ‘Toxic Culture.’
At the end of the day, the question is about where you want to arrive.
Do you have an MBA? Is it worth it?
Please feel free to share your thoughts below on whether young professionals should get an MBA or start a business — or both!