In the next few weeks, business schools around the world will be starting the application process for the MBA class that will start in the fall of 2016. Most MBA programs do admissions in rounds, with the first round applications due by October, and second and third rounds coming later. Only 30% of applications are filed for the first round, and it is often thought to be easier to get admitted in the first round rather than in the later rounds.
Top MBA programs take two years and cost upwards of $100,000 in tuition alone. Add in missing two years of salary and promotions and young CPAs need to think twice about whether getting an MBA makes sense. I think there are two good reasons to get an MBA.
The main reason to get an MBA is to make a career change. An MBA from a top school can open up new career paths for you. So, if you no longer want to pursue a career in tax or financial reporting, getting an MBA might be the best way to head in a new direction.
Getting an MBA can also cleanse your resume of a less than stellar undergraduate degree. Get an MBA from Harvard or Stanford and no one is going to ask you again about where you did your undergrad. The ranks of top executives are heavily populated with people who went to top schools – that is not a coincidence. The biggest benefit of an MBA is usually the networking with classmates and alumni from great schools who disproportionately go on to do great things.
I don’t think it makes a lot of sense to abandon a successful public accounting career to get an MBA unless you go to one of the top programs. I’d suggest the 25 top ranked programs in the Financial Times (FT) rankings. I would not be too rigid in the cutoff –- in my view there is no meaningful difference between #25 UCLA and #32 University of Virginia. But the top five, #1 Harvard, #2 London, #3 Wharton, #4 Stanford, and #5 Insead are in a different class from those ranked near #25. I am not dissing #5 Columbia, #8 MIT, #9 Chicago, or #10 Berkeley –- all are fine programs. But #4 is a long ways ahead of #14.
CPAs are in good shape to get into a top MBA program. Three years of public accounting experience appeals to admissions officers. You also need a good undergraduate GPA and high GMAT scores if you want to get into a top program, and you will need to write a compelling essay. The top 25 programs are looking for GMAT scores over 700, which is the top 10% of people who take the test. Top schools do admit a few students with lower scores who have amazing stories, but those stories are probably not tales of toil on the audit trail.
Think about doing your MBA in a foreign country. The FT top 25 includes schools in the UK, Spain, France, Singapore, China, and Switzerland. An international MBA can lead to an interesting career overseas. The international perspective will be of increasing value even if you pursue a career at home.
Does it make sense financially to get an MBA? FT says that graduates of the top 25 MBA programs earn an average of $152,000 three years after graduation. If you are a first year senior currently making $65,000 should you take two years off and pay $100,000 to get an MBA? You may get that average salary of $152,000 three years after graduation, but you paid $135,000 or so in two years of missed salary and $100,000 in tuition for a total of $235,000.
Had you stayed at a Big Four firm you would probably be a 3rd year manager making $100,000 at that three year point after MBA graduation. So, you might pay for your MBA investment in less than five years with the higher salary and your career earnings might be significantly higher if you can hold that premium. If you are good enough to get into a top 25 MBA program, life is going to be good for you either way. You likely have the right stuff to make partner if you stay in public accounting. Get an MBA and you likely make as much or more, but on a different path. It really comes down to what you want to do with your career. If you want to be a partner, stay in public accounting. If you want to be a CFO or a CEO someday, invest in an MBA.
There are other MBA options. Online programs are gaining in popularity. I think you can learn as much in an online program, but you miss developing the close interpersonal relationships that are the most valuable feature of an MBA. I don’t recommend the top 25 programs because the teaching is better (it often is worse); I recommend top 25 programs because your classmates will be better. They will help you learn more, and help build you a network that will serve your career well. If you decide against getting an MBA, I highly recommend taking some courses online – some of the content is very good and many of the courses are free.
Another option is the executive MBA (EMBA) that is targeted at mid career professionals. I think an EMBA is an excellent program for new partners. I will explain that in a later column.