Planning to go contracting before MBA

[tpsman]

Hello all,

This is my first post on these forums, and as is typical for a newbie, I'm in need of some help. I've been having a read of past threads, and it's been interesting, but doesn't address my situation.

I'm currently a full-time employee of a software house, doing implementation work. I have decided to apply for a 18 month MBA course starting in September 2014, which is going to cost a fair bit of cash. I have a decent warchest, but I need to earn a lot more money over the next 10 months to be able to afford to do this course, and probably take a loan from my siblings (estimated £48k living costs for two years, plus £60k course fees). Due to commitments with my partner, I cannot postpone - either I start it next year, or I don't do it at all.

I am a specialist in an banking software product, and I've been hearing of lots of demand, so I am hoping that I can go contracting for my remaining time before starting the course. I'm wondering how much I'll need to charge to have enough money to support myself through the MBA course. I'm thinking that I can build up the company's accounts over the next 10 months, then pay myself a post-tax salary of between £1500 to £2000 to keep me stocked up with paper, ink and the occasional pint of cheap beer. Will I be allowed to pay myself a salary from my company accounts, even though I'll effectively be a student?

I will be hiring an accountant, but I'm hoping to get some advice in advance.

[Martin at NixonWilliams]

I'm thinking that I can build up the company's accounts over the next 10 months, then pay myself a post-tax salary of between £1500 to £2000 to keep me stocked up with paper, ink and the occasional pint of cheap beer. Will I be allowed to pay myself a salary from my company accounts, even though I'll effectively be a student.

It is possible to pay a salary during this time but it is not tax efficient. You will incur a lot of unneccessary PAYE/NI and you may not receive Corporation Tax relief on the salary paid.

Assuming you will not be bringing in any other income you can utilise your basic rate band by paying dividends from your warchest - the dividends will effectively be tax free whilst your gross income does not exceed the higher rate tax threshold (£41,450 for 2013/14).

I hope this helps.

Martin

[Wanderer]

Assuming you will not be bringing in any other income you can utilise your basic rate band by paying dividends from your warchest - the dividends will effectively be tax free whilst your gross income does not exceed the higher rate tax threshold (£41,450 for 2013/14).

Following on from that, you can retain money in your company to pay out in future years when you have no income rather than paying it out this tax year and becoming a higher rate tax payer but that will take a bit of planning.

I will be hiring an accountant, but I'm hoping to get some advice in advance.

Yep, you really need to go through this with an accountant and discuss how much you have earned this year so far and strategies for drawing retained funds from the company in future tax years. Make sure you draw enough to use up your full allowance each year too. Feel free to come back and summarise what the accountant tells you and we can give an opinion on how good their advice has been.

[northernladuk]

I think you are kidding yourself a little bit here. The hardest part of contracting is getting your first gig, the second hardest is getting your second one without a long stint on the bench. You have to try and dovetail leaving perm to go contracting which is very difficult. The only way to do it properly is to jack your job in and start looking so more risk of bench time before you even start. With such an aggressive timescales just a month or two on the bench is going to put your overall money in bank lower than if you stayed perm

What you want to charge is irrelevant. It is how much the gigs are paying. Researching jobserve can help you here.

Have you thought about an Open University MBA? I did the first 2 years of the course which gets you some certificate in Management (forget the actual name), costs a lot less and you continue to work. I didn't go beyond this as I started working at a level that the full MBA wouldn't have added any value so got what I wanted from it in just 2 years. Why such a big commitment for an MBA. Are you sure this route will pay for itself in the long term? Will it match you skills to be help you make the jump from where you are to where you want to be?

I don't think dipping in to contracting just to suit your personal circumstances is ever a good idea. It's not a free ride, it's a way of life but that is just my personal opinion.

[BlasterBates]

In my view a fulltime MBA is a waste of money. Only worth doing if you're sponsered, i.e. you are definitely heading for the top.

If you are not a high flyer now, you probably won't be after the MBA. I would go for a distance learning MBA eg Warwick and Open University.

These days MBA's are ten a penny and you don't want spend all your savings doing one, i.e. you won't be earning 150 grand at McKinsey-

The distance learning MBA's are quite affordable, and will give all the knowhow you're looking for, and get you a reasonable managerial position. If you are thinking about investment banking I would go in as a contractor not as a permie and focus on your IT skills.

...and just think for a moment would you really want to do 14 hour days at McKinsey? wouldn't be better to earn 600 a day at an Investment bank where you go home at 5 pm because you're a contractor.

[PEEL]

I won't attempt to offer accounting advice, but I will say that going to a top school for an MBA is worth the outlay based on the connections you make alone. If you are going to learn at a place that is under-subscribed I'd suggest it won't be worth it the cash, and in that regard an OU MBA is just a pile of crap.

[northernladuk]

I won't attempt to offer accounting advice, but I will say that going to a top school for an MBA is worth the outlay based on the connections you make alone. If you are going to learn at a place that is under-subscribed I'd suggest it won't be worth it the cash, and in that regard an OU MBA is just a pile of crap.

Can't put in to words how much crap I think this is.

[Dominic Connor]

Which package ?

A lot depends on which package you have expertise in, for the quick hit you want you need something for which the market is liquid, not just well paid.

[RockyBalboa]

I completed my MBA in the mid-2000s and it was the best thing I ever did because I actually enjoyed it and learnt a great deal.

Whilst a top-school MBA may not be the golden ticket to a ££££££ job as it once was, it still is very useful for contacts. Whether it's worth it or not is a question for how you're going to fund it.

With regards to lower-mid-school MBAs, they are still useful providing you have at least a few years of prior experience - there are many MBAs from growing economies who don't know their bum from their elbow as it has become the fashionable thing to do.

[PEEL]

Can't put in to words how much crap I think this is.

Because I believe that undertaking an MBA at a crap school isn't worth the money? Or because I think an MBA at a good school creates its value in the connections you make?

Feel free to say both.