An MBA’s Guide to Private Equity Versus Consulting

If you’re thinking about earning an MBA to advance your career in business or finance, you may be wondering about the career paths available to MBA graduates and how they differ. Private equity and management consulting are two areas in which you could be highly successful upon earning your MBA, but which career path is right for you?

In this article, An MBA’s Guide to Private Equity Versus Consulting, we discuss the key differences between these two career paths, including work environment, job responsibilities, skill requirements, compensation, and work-life balance.^1,2 The path you ultimately choose will depend on your career goals, character traits and strengths, personal preferences and salary requirements. One similarity between the two career paths: An MBA from a highly rated institution will make you competitive and ready to excel in both.

Private Equity Versus Consulting Jobs: How Do They Differ?

There are significant differences between working in management consulting or at a private equity (PE) firm. Management consultants analyze organizations, advise businesses on their daily practices, and strategize with company executives to solve organizational and operational challenges. By providing an outside perspective, they help each company, department or project to be more successful, boosting efficiency and profits.³ PE associates perform due diligence on a firm’s prospective companies and monitor the financial health of companies that are included in their client portfolios. Private equity companies typically fund private companies that are not publicly traded, on behalf of high-net-worth investors, venture capital companies, and institutional investors.²

That’s a brief description of what each position entails, but how else do they differ?

Job Responsibilities

As a management consultant, also known as a management analyst, you’ll provide advice to a company on reducing costs and enhancing revenue. First, you’ll gather and organize information regarding a problem that needs to be solved or a procedure that must be improved. You’ll most likely interview employees about their operations and methods to learn more about current practices, and you’ll analyze the company’s financial and other data. You’ll then develop a solution, perhaps recommending organizational changes or new systems and procedures. You’ll communicate your recommendations to management teams through reports or presentations and follow up to ensure that the changes they’ve adopted are working.⁴

As a private equity associate, you’ll use analytical modeling to determine a company’s growth potential and monitor your firm’s portfolio companies to ensure that they’re performing as expected. This will involve maintaining financial reports and reviewing confidential information memoranda (CIMs) and preliminary fundraising for new funds being set up. You’ll likely work in a smaller organization than a traditional investment bank since private equity firms tend to be smaller. As a result, you’ll work closely with the firm’s partners and principals on each new investment.²

Making the Transition from Consulting to a Private Equity Firm

An individual in the management consulting profession who transitions to a private equity firm often becomes part of an operations team or is appointed as an executive at one of the firm’s portfolio companies. There are significant differences between serving clients as a management consultant and serving businesses in a PE firm. Compared to consultants, private equity professionals often have more influence and a more direct impact on the companies with which they work. With this power, however, comes greater accountability, as they’re more deeply involved as company shareholders. This can lead to greater stress in private equity than in consulting firms.⁵

In addition to having greater impact and influence, and increased accountability, in private equity you’ll work with a broad range of businesses on a deep level, although they won’t all be high-growth businesses and initial public offerings (IPOs) engaged in new markets.⁵

Operations Team

If you’re part of a PE operations team, you’ll cultivate strong relationships with your portfolio company’s leadership team. The operations group will also be responsible for putting a strong team in place at the portfolio company and might coach its executives and lower-level staff. You’ll also create a strong brand, boost productivity through new technology, and identify high-growth opportunities.⁶

Portfolio Company

As a portfolio company executive, you’ll act as its short-term overseer; your primary responsibility will be to the fund’s investors. You’ll help arrange the fund’s purchase of the organization, enhance it and then exit the company to make a return on the fund's investment. One challenge in joining a private equity organization after working as a consultant is that you’ll have to operate from within someone else’s system of ideas, beliefs, and values. If you’re embedded in a portfolio company, you’ll need to work within the culture of that company in addition to the culture of your private equity firm.⁷

Commitment Level and Work-Life Balance

Imagine that you've started the interview process with a human resources representative. If you’re looking for a Monday-through-Friday, nine-to-five job that doesn’t involve travel, then neither a career in the consulting industry nor at an equity firm is for you. Both occupations require long hours and significant commitment. The good news, however, is that neither career path is quite so demanding as one in corporate law or investment banking, which tends to require 80- to 90-hour work weeks.

Typically, consultants work 40 to 60 hours a week, not including travel. Consulting does involve a lot of travel, especially in the initial years on the job. Private equity professionals usually work between 45 and 60 hours per week.¹ They also travel quite a bit, but their trips tend to be shorter and more frequent than consultants’ trips.⁸

At a private equity firm, you’ll have very busy weeks while working on deals, interspersed with quieter times. Consulting work is equally challenging, but steadier.⁸

Compensation

In both consulting and the private equity industry, you can earn a lucrative salary, which is why these positions are highly competitive. While an entry-level management consultant with a bachelor’s degree earns $55,000 to $94,000 as an annual base salary, the salary for a professional with an MBA is approximately $149,000 at a top-level firm. A project leader can earn as much as $175,000 a year, while shareholders and partners in the firm earn even more.^1,9,10

In the field of private equity, compensation includes a base salary and bonus, and this can depend on market conditions as well as an individual's performance. The base pay can range from $85,000 to $125,000, with bonuses that can double those figures. In a favorable market, top-performing private equity professionals can earn more than $200,000 in their first year.¹

Training and Skill Requirements

Now that you know what consulting and private equity careers entail and how much you can earn, what skills do you need to be competitive and successful?

Both management consultants and private equity professionals need the functional expertise to solve problems and work effectively with various personalities. While management consultants must be able to research company processes, find areas for improvement and communicate their findings, private equity team members also need strong quantitative skills (research, mathematical computation and reasoning, quantitative modeling, surveying and analytical skills) to evaluate investment opportunities.^1,11

Management Consultant Skills

Management consultants require skills in four overall competencies: intellectual, communication, leadership and technical.¹³

• Critical thinking
• Creative thinking
• Collaboration
• Decision-making
• Communication and conflict management
• Process improvement
• Research and data analysis
• Project management
• Business knowledge
• Problem-solving
• Public speaking
• Flexibility and time management^12,13

Private Equity Skills

Private equity firms typically look for candidates who have some previous work experience in addition to college or business school credentials.²

• Analytics
• Database tools
• Modeling tools
• Financial reporting
• Fundraising
• Contract law
• Multiple languages (if investing in international companies)
• Industry knowledge (if specializing in a particular industry)
• Communication
• Networking
• Negotiation
• Public speaking and presentation²

These are just some of the hard and soft skills required.

Prepare to Succeed in a Lucrative Career

Whether a career in management consulting or private equity is the best fit for you, the William & Mary Online MBA program will help you reach your loftiest goals.

As one of the original “Public Ivies” and renowned for its rigorous curriculum and dedicated faculty of experts, William & Mary offers working professionals a convenient way to enhance their skills and move ahead in the business world without putting their careers on hold.

You’ll become an expert in problem-solving in the most challenging business environments, with courses in finance, managerial accounting, organizational behavior, business analytics, strategy, integrated technology and more. An optional Foundations in Business Analytics certificate program includes R and Python courses: the most sought-after programming skills for today’s business analysts.¹⁴

Contact an Admissions Advisor today to learn how the Raymond A. Mason School of Business Online MBA can help you take your career in management consulting or private equity to the next level.