Is an MBA worth it for the entrepreneur?
(Courtesy: Dinesh Moorjani)
April 24th, 2012
07:00 PM ET

Is an MBA worth it for the entrepreneur?

Editor’s Note: Dinesh Moorjani is the Founder and CEO of Hatch Labs, a mobile startup incubator creating new platforms and applications to improve mobility for the wireless generation.

By Dinesh Moorjani – Special to CNN

It’s often perceived in the business world that pursuing an MBA degree is analogous to buying career insurance, especially if you attend a top program.

What many aspiring entrepreneurs have found, however is that earning an MBA can actually momentarily slow down an upward career trajectory, considering the degree typically requires a two-year job hiatus at a full-time program.

The real benefit of this advanced degree may be the parachute it serves in times of economic distress.  But for those assessing the risk vs. reward opportunity, the need to consider the likelihood of that parachute opening properly remains paramount.  And perhaps the best indicator of that is how well the parachute is packed, or without the laborious analogy, how talented the individual is and how those talents are channeled toward meaningful professional endeavors.

To be clear, an MBA is not for everyone. While it can also serve as rocket fuel to accelerate career development, one overlooked fact is that this rocket fuel doesn’t typically ignite until a few years post-graduation. Furthermore, it requires some level of personal or professional accomplishments to combust.

To illustrate this point, let’s revisit the graph above. Why sketch an illustrative chart to make the point instead of comparing hard statistics? Because the decision is not purely a scientific one.

First, let’s understand the illustration.  When the post-MBA career fuel ignites and a new career path curves upward, it surpasses the expected outcome of the career path without the MBA.  Of course, we cannot actually compare both trajectories concurrently so we’re forecasting a critical eclipse point where the MBA begins to yield dividends.  But will the MBA lead to the expected outcome?

The most important inputs to answer this question are a self-assessment of your risk profile and an evaluation if that profile is in alignment with your professional goals.

The irony is despite the fact that MBA programs ask applicants to reveal these goals, the MBA degree may be most helpful for those whose professional goals remain unclear.

Career plans are rarely mapped with a straight line from points A to B.  Rather, success is built on our ability to identify the right trajectory and to track how every dotted line we trace is leading us in the right (or wrong) direction.  If you’re lucky, these dots will not only align, but they will build upon each other.

If you possess a clear understanding of your professional goal(s), you understand the dependencies to achieve them, and most importantly, you are willing to act on these dependencies, your path is no longer a straight line.  It would be like folding the paper to adjoin points A and B – you discover the shortest distance between two points is virtually zero, and is a result of "bending space."

This is precisely what entrepreneurs do.  They achieve their goals despite insufficient resources – in effect, they “bend space.”  Of course, we’re reminded that many successful entrepreneurs never finished school nor did they apply at all.  In these instances, an MBA would have likely impeded their progress, or hindered their ability to take calculated risks in order to accelerate their career.

On the other hand, an MBA from a top program provides a deep practical education and opens doors, allowing you to grow your personal and professional networks. This has the desirable effect of creating opportunity, either through coincidence or providence – or what I chalk up to the residue of hard work.  So, whether by choice or by circumstance, opening the right doors or exploring the right options statistically increases with the completion of an advanced degree.

According to a 2010 Graduate and Admission Council (GMAC) survey of 6,800 MBA graduates, even in a tight economy, 93% were employed and more than 70% felt that their salary met or exceeded their expectations.  It should be noted that the median salary of all those surveyed was $94,542, with their additional median bonus compensation averaging $17,565.

If you rely on stats and illustrative diagrams to guide your professional decisions, earning an MBA may be the right path.  But if you’re an entrepreneur whose appetite for risk is commensurate with the confidence in your capabilities, only you can decide whether idling in neutral for two years is worth the anticipated career acceleration.

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Topics: Business • Education • Innovation • Technology

soundoff (82 Responses)
  1. ✠ RZ ✠

    Education, knowledge, wisdom, intelligence and expertise can have significant value. And often more when actually applied.

    April 24, 2012 at 7:19 pm | Reply
    • mike

      If only today's MBA programs actually imparted intelligence and wisdom...

      April 25, 2012 at 3:22 pm | Reply
      • JUGGERNAUT

        Another genius.

        I bet you would score LOW on the GMAT.

        April 25, 2012 at 6:42 pm |
    • Senior Exe

      That MBA can be noticed real early in a company no doubt so you best perform, team up right and notice well. You will be 2 to 3 years behind the ones you will be peered with from a "perception" group or level in a large company or the ones who are fresh hires in others. Of course you are cream material for that small and mid cap stuff either as a practical career, venture or that dream stuff, accounting or consulting that's not the hire pot it once was. The curves they draw here are just not real. You have experience level, the type of degree, number of degrees, certifications, patents, credentials and then there is that deal about masters, doctors, phd, Jd, officer.....well there are a lot of things that go into educational credentials, certifications, expertise, ability, invention and things like that VS getting an MBA if really haven't ever worked in your life or have some big experience. An engineer with some big patents and a Series 7,8,66,3.....she might be worth some really big bucks and make Director pretty fast, possibly less than 3 years.

      April 25, 2012 at 3:51 pm | Reply
      • Senior Exe?

        Maybe by your name you meant Senior Exec, but I in no way believe that based on your ability to form sentences

        April 25, 2012 at 4:22 pm |
  2. deniz boro

    With the state of unemployment there are a lot of people to tell you what the books have told so far- including all kinds of engineers and managers and statistic analyst...not to forget the globally independent auditing corps 🙂 Being an entrepreneur takes more than an A-Grade. You must have the inspiration, dogmatic belief in your aim, a kind of courage to smile down all oppositions and a kind of state that I will explain as going against what the society tells you to be right. You know, you should get in a good job, get a good man/women and settle down etc..
    Only un-inspired people go to masters degree to make a living. The youngesters who already know what to do do not wait it out.

    April 24, 2012 at 8:23 pm | Reply
    • Billy

      Many of those who think they "have the inspiration, dogmatic belief in your aim, a kind of courage to smile down all oppositions and a kind of state that I will explain as going against what the society tells you to be right" are still living alone in their parents basement ten years later.

      April 25, 2012 at 10:28 am | Reply
      • dylan

        says the life long middle management suit who hates his job.
        as jay z said..."far from a harvard student, just had the ball$ to do it..."

        April 25, 2012 at 1:54 pm |
      • pam

        Totally agree. While an MBA may get attention on a blindly submitted resume it is not a measure of someone's ability to succeed. There are far too many young people going back for advanced degrees (at least an MBA actually applies to making money and is not totally 'abstract') because they 'can't find a job'. I tend to think that if one falls in the top, narrow margin of people earning over 100K then they also must have internal, personal resources that got them to that place that doesn't include having an MBA. Experience and knowledge earned on the job would seem to be a much better bet for any employer wanting to get the biggest bang for their buck. Proven success. It could be argued that going back to school in lieu of working in this economy might be seen as a bad decision, sticking your head in the sand and defraying the inevitable.

        April 25, 2012 at 2:14 pm |
      • DK

        @PAM, that personal network of people you know to get ahead is forged best in business school where other talented students are (assuming you go to a good b-school)

        Would you rather network with entry level people or people who already have management experience?

        April 25, 2012 at 9:51 pm |
      • DK

        @Pam again. If you aren't on a career track that will pay you $100K w/o going to grad school you should switch careers in the first place. It's easy to go from $90-$140 after an MBA but going from $60-$100 is much harder

        April 25, 2012 at 9:52 pm |
  3. theglobalroundhouse

    Over the entire career of entrepreneurs, does the income level out? In other words, the income for those w/MBAs rises at a point but over time, what's the difference for the earnings for both groups over a span of say 20, 30, 40 years? I am wondering the extent to which time in the work force sans an MBA achieves comparable results over the life time of a career.

    April 25, 2012 at 8:12 am | Reply
    • Dave Mishem

      Anecdotally speaking, there is a backlash in many tech companies right now against the "MBA mentality". This is the idea that you can learn general business principles and then apply it to any environment, treating the output as just widget X rather than widget Y. For example, take control of a motorcycle company and run it without knowing how to ride a motorcycle. Carly Fiorina was the poster child for this. Add that in to the glut of MBAs being churned out right now, I think you're better off coming in strictly from the technical side.

      April 25, 2012 at 5:49 pm | Reply
      • theglobalroundhouse

        I can see this. I was actually at a B-school event tonight and referenced the graph in this article. The sentiment was that in the case of a Bill Gates, the MBA is not necessary but for most others and MBA has advantages that can't be gotten in the workplace alone. Also, that since MBA students come in after a few years in the market, they come out well prepared to assume advanced roles and earn higher income than those who do not . So, basically, what the graph indicates.

        MBAs are a confident group. I can see how they'd have the idea to apply business models to everything, turning the world into widgets. Your motorcycle example is a good one. I don't know if I'd turn to technology as the alternate though. I'm thinking coming from a more humanistic perspective is preferable because you retain a focus on human beings in the process of designing models. To the point of technology, engineers do this when designing buildings, cars, prostheses, etc. Hmmm... at its core, technology is artistic, inherently creative. Is this what you mean?

        April 25, 2012 at 10:42 pm |
  4. Luther

    It is stupid to talk about a "MBA" as one thing, just as it is stupid to talk about a "JD."

    The fact of the matter is over a thousand schools grant MBA's. Do you think going to University of Phoenix of your crappy local college for a MBA is any comparison to going to Harvard, Duke, Darden, or Stanford?

    Of course it doesn't get you a job automatically–it gets you a network of other businessmen and women from that school, as well as access to career services for firms targeting that school for recruiting.

    April 25, 2012 at 9:34 am | Reply
    • NCanon

      This is probably the single most important comment that could be made. Quite frankly, an MBA that is NOT from one of the top ten (or 25, if you're feeling generous) programs will probably not open that many doors. Sure, the networking may be worthwhile, but for that, there are plenty of professional networks and boards for the working professional that offer similar opportunities.

      April 25, 2012 at 9:58 am | Reply
      • Justmakinmoney

        For those that claim that going to a top 10 (or 25) school would make a difference if an MBA is worth its price, the recruiting requirments for the top 25 schools are such that one would already be making significantly more than the average college educated work force so the opportunity cost of not working cost more in addition to the school costing more. The only clear advantage for people not working in finance is that you meet and have the opportunity to build a network within this community that may give you an advantage in raising capital if needed. But this can be done other ways at a lower cost....

        April 25, 2012 at 2:13 pm |
      • tom in connecticut

        I have an MBA from a decent schools but not a great school. It was a lot of work and a great education.

        It has not opened any doors for me at all – but the education has been valuable. I learned a great deal. As far as my ability to think critically, the advanced education makes a huge difference.

        If you are looking to go to graduate school for the purpose of getting a great education, go for it. If you are looking for "doors to open" and big dollars stick to a top 20 school, or you will be very jaded with the degree.

        It is a slow grind with a second tier MBA. The same can be true with a JD.

        April 25, 2012 at 4:36 pm |
      • theglobalroundhouse

        Yes. Having an MBA from a top school opens top doors. Recruiters target certain schools. This is really a bad situation bc it means the overwhelming majority of people who seek an MBA must do so purely for the benefit of gaining new skills in an educational environment. Otherwise, it's not such a good investment.

        This is a really bad message for all the students who are told they ned college educations to do Job X when all they really need is skills training that can be had for a much lower cost and a less substantial investment of time.

        April 25, 2012 at 10:49 pm |
    • pam

      An excellent point.

      April 25, 2012 at 2:15 pm | Reply
    • VF

      I attended a "top program" and can tell you that many HR managers could care less when they speak to you. They themselves are just looking to narrow a field for salary that they most likely have already determined, and it's usually a very low end for a new hire. Most of the secondary interviews with the person who would have been my "boss" results in me realizing that the person is threatened by my credentials and won't hire me since they know I would surpass and replace them. That's the real state of the job market. If you aren't working already, you're settling eventually no matter what degree you have or where you earned it.

      April 25, 2012 at 2:41 pm | Reply
    • Ryan

      There is a difference in the JD though.

      The JD offers a unique skill set, because once you graduate, you can sit for the Bar Exam, and then you can practice law. The education in law is also quite unique, many top firms like BCG and McKinsey, recruit JD's as well (from good schools) because it is a different skill set and analytics.

      For those in niche fields like patent law, the education along with a background in IT, bio, chem, or sets of law like import/export, patent, transportation, etc – merely having the JD, can be worth it. For accountants with a CPA, the ability to do taxes and then represent a client in an audit, can also be incredibly valuable.

      April 25, 2012 at 6:44 pm | Reply
  5. Joshua

    I got my MBA at a small Catholic University in the evenings while still working. My employer paid about 2/5 of the cost and gave me a promotion and bonus upon completion. The degree paid off financially in less than 2 years after completion and is on my resume forever.

    I am therefore biased toward this approach over a full-time MBA strategy, but if you are young and don't have a family to support (can afford not to work) then the full-time strategy works too.

    April 25, 2012 at 9:53 am | Reply
    • Joe

      Completely agree. Earning mine in the evenings now, will graduate within one year. Second-tier school, consistently ranks in the 60s by numerical rankings. It was funded by Post 9/11 GI Bill and employer reimbursement. My outlay was less than $10K. I received a promotion recently with 30% increase, and my first potential for a bonus. It was clearly to my professional advantage to go this route. My only advice is to make sure your significant other is on board- its a big time commitment away from that special someone.

      April 26, 2012 at 12:41 am | Reply
  6. j. von hettlingen

    A MBA diploma is a good auxilliary to have!

    April 25, 2012 at 10:05 am | Reply
    • deniz boro

      You are certainly right. A Turkish chidhood friend of mine was the worst student of the highest ranked Turkish University in Mechanical Engineering. He spent his time (with his pocket money from his pa) to collect and put together car parts, play around diffirential gear systems and filing away engine cylindirs rather than attending his advance math courses. Years later I heard that he came up with something called 4×4 or four wheel drive.

      April 26, 2012 at 2:00 pm | Reply
  7. Al Hutson

    Entrreprenuer to me means private sector business and mostly small to medium size types of businesses. In large Icorporate environments (IBM, Exxon, etc) an MBA probably helps. But in a 100 employee firm where the successful business owner wears many hats and may not have an MBA or even any college education and still runs the business. Going up the Corporate or government ladder, an MBA may opens doors but those employees or future corporate executives are not entreprenuers. I have known out of work MBA holders to strike it from their resumes because they are overqualified as an MBA. The undergrad has a better chance to land a job in this market. MBA not worth it.

    April 25, 2012 at 10:23 am | Reply
  8. Walter

    With 53% of recent graduates underemployed or unemployed, the whole notion of the value of any degree is getting more discussion than ever. I suspect everyone is going to start thinking twice (or three times) before they "invest" 10s or 100s of thousands of dollars in a 50/50 proposition.

    April 25, 2012 at 10:46 am | Reply
  9. Emm

    For entrepreneurs, I agree an MBA may or may not be worth it. Because you're either an entrepreneur or you're not. I don't think that is something that can be learned. I for one am switching careers and have found my MBA degree to be quite fruitful on a personal and professional level.

    April 25, 2012 at 11:03 am | Reply
  10. The_Mick

    For my sister-in-law, the MBA meant going from earning significantly less than her husband to earning significantly more. Win-win all around.

    April 25, 2012 at 11:05 am | Reply
  11. larvadog

    Appearing on the chart – "MBA paying dividents"

    Perhaps CNN might try hiring editors who have successfully completed their high school English requirements.

    April 25, 2012 at 11:34 am | Reply
  12. Tom

    I'll go for my MBA, but wait a minute. Does this mean I'm stuck working the 9-5?. NO THANKS, I'll stick with my own small business and work the hours I set, 11-9, sometimes I open, sometimes I don't and hit the beach. Being an entrepreneur has it's perks.

    April 25, 2012 at 12:06 pm | Reply
    • gcamacho

      Most small business owners work substantially more hours. Working 9-5 would be a luxury for most of them. People who work a 9-5 can go to the beach too. It's called paid vacation and if you work for a good company, it is amazing.

      April 25, 2012 at 2:11 pm | Reply
  13. Dodd, T

    I earned my MBA in 2008...the jury is still out for me...

    April 25, 2012 at 12:06 pm | Reply
    • Bryan B

      I earned mine in 2009 and have been trying to change my career to no avail. It would seem an MBA without experience(if you're not an entrepreneur) isn't worth all that much. Of course it doesn't help that my preferred industry is Finance which just happened to be the root cause of our recession.....I'm thinking of going the accounting route and getting my industry experience there. It would still be a hell of a lot more satisfying(and better paying) than my current insurance gig

      April 25, 2012 at 1:13 pm | Reply
  14. Khalil

    I am an entrpreneur and the only reason I am getting an MBA is to expand my education. Getting more educated has never hurt anybody AND will never hurt anybody.

    April 25, 2012 at 12:15 pm | Reply
  15. Rob

    I'm confused – I worked and earned my MBA in just over 2 years. What is this nonsense about not working to achieve an MBA? – I'm on to the next article.

    April 25, 2012 at 12:28 pm | Reply
  16. palintwit

    Coming soon... "The Palin Manifesto". Painstakingly written by Sarah Palin herself in that same authoritative literary style we've seen on the palm of her hand. Describes in infinite detail her vision for the future of our country. Order your copy today.

    April 25, 2012 at 1:09 pm | Reply
  17. twotwotango

    Individually it may pay [sic] 'dividents' but MBAs are HIGHLY overrated and overcompensated for what they contribute to a company or start-up compared to engineers, designers, and marketing folks with masters in their profression.

    April 25, 2012 at 2:07 pm | Reply
    • Steve Jobs

      Hear, hear. And they often create a "cool kids" clique which dismisses the skills of the others to the detriment of the overall team. It also creates an "MBA ceiling" which anyone else, no matter what their skills, can't elevate beyond.

      April 26, 2012 at 8:25 am | Reply
  18. pam

    "Dividents" and another 'scholar' above mentioned he/she got "A MBA". Soo....A MBA pays dividends. Hmmm.

    April 25, 2012 at 2:18 pm | Reply
  19. pam

    Sorry, my own correct spelling got in the way..."A MBA pays dividends" is what I meant to write above. And I don't even have one.

    April 25, 2012 at 2:19 pm | Reply
  20. pam

    Just figured out my computer keeps correcting this. It refuses to spell it incorrectly. It is a Mac. Oh, yeah, Steve Jobs dropped out of school. So did Bill Gates...perhaps entrepreneurs don't need "A MBA".

    April 25, 2012 at 2:21 pm | Reply
  21. Patrick Zaharoff, President of Key Resource Associates

    I really enjoyed the article. Another aspect not covered in the article is obtaining your MBA right after your undergraduate degree. I teach graduate courses and don't see the benefit for recent grad's to enter the MBA program right away. There is not a sufficient level of real world work experience to apply to the program at that time resulting in their not getting as much from the program.

    April 25, 2012 at 2:41 pm | Reply
  22. jim

    hows come the NBA you guyz are talkkin abut isn't on TNT? I be lookin for it on my local channels on de TV.

    April 25, 2012 at 3:15 pm | Reply
  23. Ray

    If you get your MBA while working, then you would remain on the black line until shortly after completing your MBA and then begin to see a steeper slope for when the MBA begins to pay off. Been there no regrets and no one can take my MBA away from me.

    April 25, 2012 at 3:40 pm | Reply
  24. Mike

    Getting an MBA directly after an undergrad or from an on-line college and expecting the same ROI as someone with experience who goes back to an actual school at a top-50 program is absurd. I can tell you as someone who is involved with hiring professionals, a MBA graduate date of 2 years after a Bachelors is looked better upon than an online MBA, but a MBA after 5-10 years of Post- Bachelors experience carries a lot more weight than either of them

    A MBA is what you make of it, you can either utilize it as a tool to further your knowledge, experiences, and networking tools and it can be worth it; or it can be just another piece of paper that means you paid for a piece of paper.

    Personally, after 9 years post BS in Engineering (and 15 doing Product Development), I'm going back for an Executive MBA from a top 25 school starting this fall. For me the ROI appears to be extremely positive.

    April 25, 2012 at 3:53 pm | Reply
    • Scott

      Good luck, and an EMBA from a top 25 school is indeed a great route. You're right about expected ROI – folks who have a degree from a top school do earn more, and controlling for school, having work experience contributes to a higher post-MBA salary, at least in the first few years.

      April 25, 2012 at 3:57 pm | Reply
  25. Scott

    The data are pretty clear – going to a top school like Duke, NYU, Vanderbilt, or Stanford (or the like) conveys a huge career advantage. The next level (e.g., many state schools) also pays quickly for the majority of students. Avoid the for-profit online scams (Phoenix etc.) like the plague.

    April 25, 2012 at 3:54 pm | Reply
  26. palintwit

    Sarah Palin has no edumakation at all. And looky how smart she is !

    April 25, 2012 at 4:29 pm | Reply
  27. mogu

    I wanted to get into NBA. But I am only 5ft 5". 😦

    April 25, 2012 at 4:39 pm | Reply
  28. Dave

    An MBA might be a ticket to help get a job, but it definitely won't help you keep the job or get promoted. Performance is key. Today, Master degrees are the norm rather than the exception. When I sit on position hiring review boards, 90% of the applicants have Master degrees. The degree and school might matter for an entry level opening, but it definitely doesn't matter for mid to senior level jobs. It's performance.

    April 25, 2012 at 4:48 pm | Reply
    • TC

      Spot on Dave – I wrote the same thing.

      April 25, 2012 at 7:00 pm | Reply
  29. Michael Rae

    I will agree that a college education is the insurance policy against economic downturn. If you in your late 20's or early 30's its worth it but if your close to or past 40 your better putting that money in deferred savings because you are not going to get hired to some hot shot job unless you uncle or dad runs the company. after i earned my computer science degree I looked into Wake Forests' program were you can get you JD and MBA on the same track back in 2007 but decided the 60k it would cost would be better invested in rental property and five years later 15 houses paying rent i think i made a wise choice.

    April 25, 2012 at 5:50 pm | Reply
  30. Kevin Patrick Leech

    Why spend two years and $100,000 when you can just download The Bond Villain MBA?

    http://www.amazon.com/The-Bond-Villain-Vol-ebook/dp/B007W45DB8/ref=sr_1_1?s=books&ie=UTF8&qid=1335198639&sr=1-1

    April 25, 2012 at 5:51 pm | Reply
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