For Small Business Owners, The ROI on an MBA Isn't There
Fellow McCombs M.B.A. alumnus Liz Picarazzi, also 52, agrees the stuff she learned in class hasn't helped much in her current business, CITIBIN, a Brooklyn-based maker of rat-proof outdoor trash bins, or at her previous startup, a handyman company, which she started in 2011 and sold in 2017 to focus on producing and marketing bins. She built the first enclosure herself in 2012 in her Brooklyn backyard because she wasn't able to find anything on the market that was durable or decent-looking enough to satisfy her or her picky handyman clients. Today, CITIBIN has a line of products that serves everyone from home and apartment owners to major cities, with bins installed in Times Square and dozens of other New York City locations and in Baltimore, Boston, Chicago, Hoboken and Philadelphia. Now, Picarazzi is dealing with new challenges, like planning for tariffs on foreign made products.
Even if the M.B.A. hasn't been much help in her small business life, Picarazzi is still glad that four years after graduating with a B.A. in Russian and political science, she returned to school to get that business credential. Why? It opened the door for her to work corporate jobs for a decade, including more than six years at American Express. Those jobs, in turn, allowed her to pay off her student loans and realize that she wasn't cut out for the corporate world. 'I needed to go down that path to become an entrepreneur,' she explains.
The experiences of Pentz and Picarazzi add some real life nuance to a perennial debate on LinkedIn about whether earning an M.B.A. makes sense if you want to buy or build a small business. The wisdom that emerges: Get the degree if you're aiming to make PowerPoints at consultant McKinsey; model leveraged buyouts at Goldman Sachs; or ascend to the C-Suite of a blue chip company. It's also a good choice if (like Picarazzi) you aren't sure where in the business world you belong, since the prestige and network of an M.B.A. from a top school will help you launch your career. But if your goal is building or buying your own small business, particularly something like a chain of car washes, an HVAC business, or a maker of rat-proof enclosures, it's not obvious an M.B.A. is going to help–and it could even hurt.
Business school typically teaches strategy, finance, and management, along with case studies to analyze real-world challenges. That all comes at a steep price. Tuition averages $46,700 a year for an in-person degree, and for an elite school like University of Michigan's Ross School of Business it amounts to more than $70,000 per year. To this you should add the opportunity cost of two years of not making money and not actually running a business. (For reference, the average small business owner makes $99,979 a year, according to ZipRecruiter. Add in two years of lost lifetime earnings, and the real cost of getting an M.B.A. is on the order of $300,000 or more.)
An M.B.A. could cost you even more if you're trying to buy a business, Pentz argues. Flaunt a big name business credential and it's likely the seller will raise the price, he says. 'They'll probably be like, oh, fancy boy's got a bunch of money.'
George Tibil is always moving forward. The 36-year-old Romanian came to the United States in 2009 on a full tennis scholarship from the University of Buffalo. He earned a B.S. in business administration and M.S. in mathematical finance from Buffalo plus an M.B.A. from the University of Memphis; worked as a tennis coach and adjunct business professor at Buffalo; and spent five years climbing the corporate ladder at Buffalo, New York's M&T Bank, rising to V.P. and head of a risk modeling team. In 2023, he quit the bank and took the entrepreneurial plunge, setting up a partnership with two Buffalo buddies to invest in, own and operate, small businesses. As a first step, they bought–and Tibil runs–a ServiceMaster Clean franchise in Buffalo. He's expecting its revenues to hit $2 million this year, up from $1.1 million in 2023.
Looking back, Tibil says, he could have skipped that M.B.A., which he earned online in his spare time mainly to punch his corporate ticket. While the case studies and financial training were helpful, he says, he could have learned the same material on his own for a fraction of the cost. The real value of an M.B.A. he says, is the network and cache it provides, but that doesn't help–and can actually backfire–in small business. When you're dealing with blue collar workers in a business like ServiceMaster, it can make building a rapport more difficult, he says. And like Pentz, he thinks it hurts you if you're haggling to buy a small business. 'I don't think it's in your best interest to mention your M.B.A.'
Anecdotal stories casting doubt on the value of an M.B.A. are backed by at least some research. In 2022, the Foundation for Research on Equal Opportunity (FREOPP), a non-partisan think tank, analyzed the return on investment (ROI) for nearly 14,000 graduate degree programs, based on the Department of Education's College Scorecard, which shows median earnings for each program four years after graduation. In this study, investment is calculated to include both tuition and opportunity cost and the return is the projected cumulative extra income over a lifetime. The analysis found that the median master's degree offers a net ROI of $83,000. However, this average masks significant disparities: masters degrees in engineering, computer science, and nursing often yield returns exceeding $500,000, while the M.B.A. frequently falls short, with more than 60% of such programs providing no positive ROI.
That hasn't sapped the popularity of masters in business (which includes, but isn't exclusively the M.B.A.)—they're far and away the most popular advanced degree, according to data from the National Center for Education Statistics. In 2021-2022, more than 205,000 business masters were conferred, 50,000 more than the second most popular curriculum, education. Since 1970, the number of business degrees awarded has increased ninefold, while education degrees have less than doubled.
Applications for M.B.A. programs were up more than 8% for 2024-2025, according to the Graduate Management Admission Council (GMAC). Business degrees really started to take off in the late 1990s, thanks to globalization and a more financialized economy. As companies grew, so did the need for people with skills in management, finance, and marketing. Now, an M.B.A. is one of those degrees that can go places other degrees can't. It'll help you land a job in almost any field, from tech to industry, while a health or education degree probably won't.
But what works for big companies doesn't always apply to small businesses.
Tibil acknowledges there are exceptions to his generally negative view of M.B.A.s. He cites programs like Stanford's ($82,455 annual tuition) or Babson's ($73,710 for the first year, $43,050 for the second), which were among the first to offer entrepreneurial tracks, as schools where the M.B.A. aligns more closely with the needs of those who want to become entrepreneurs by acquiring small businesses.
Paul Oyer, The Mary and Rankine Van Anda Entrepreneurial Professor at Stanford's Graduate School of Business and author of Roadside M.B.A.: Back Road Lessons for Entrepreneurs, has been teaching at Stanford for 29 years. By his own admission he's biased, but he believes that the concepts taught in business schools—like scaling, managing costs, and defining markets—are universally valuable, even for small business owners.
What sets Stanford apart, Oyer says, is its focus on taking traditional small businesses, such as HVAC companies, and showing students how to scale them. It also exposes students to an entrepreneurial ecosystem that's hard to match anywhere else, especially given Stanford's proximity to Silicon Valley.
Oyer suggests those looking to go into small business consider the content of an M.B.A. program carefully. He believes that a traditional two-year program can be extremely valuable for someone with the ambition to grow a business, but it may not be the best fit for someone just looking to be their own boss. He advises looking for programs that offer practical, high-intensity exposure to entrepreneurship. At Stanford, for example, the Start-Up Garage class gives students the opportunity to test business ideas, work on unit economics, and figure out what will scale. Oyer also notes that 20-25% of Stanford graduates go on to start new ventures, and others join firms like Alpine Investors, a private equity firm which focuses on acquiring and growing small businesses.
While Stanford offers a unique focus on scaling small businesses, Babson has its own take on what makes an M.B.A. valuable for entrepreneurs. John Hallal, an adjunct professor at Babson and founder of Network Blue, a consulting firm that helps small businesses grow, has spent 15 years teaching at the school just outside Boston. He says the right program can help individuals understand how to search for small businesses to buy, source deals, and operate small businesses effectively. He advises students who want to go into small business to look for programs with strong entrepreneurial ecosystems and hands-on learning. At Babson, for example, students get exposure to small and family-owned businesses (partly from case studies, partly from joining a student body that more than most hails from family business backgrounds), helping them learn how to handle real-world challenges.
'Many schools are reporting that entrepreneurship is among the top career choices' for their M.B.A. students, Hallal notes. While that's certainly not proof that an M.B.A. will pay off for a would-be business owner, it does suggest that at least some would-be entrepreneurs think it's worth the investment.
M.B.A. skeptic Alan Pentz isn't swayed by the idea that any program can truly replicate the experience of diving in headfirst. While an M.B.A. can teach you how to read financial statements, the reality of small businesses is often far messier, Pentz says. Many don't have textbook-perfect financials, and things rarely go according to plan. In Pentz's words, most deals to buy a small business don't happen until, basically, 'somebody dies.'
That said, Pentz does acknowledge one situation where an M.B.A. might actually make a difference. 'There's got to be a use case, right?,' Pentz says while smirking. 'Well, maybe if you were targeting a business to M.B.A. students.'
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