60 Years Later: A GMAT Test With Profit Margins Better Than Apple

GMAT testSixty years ago on Feb. 6, 1954, slightly more than 1,000 people sat down in 100 different places around the world to take a test for the very first time. It was the precursor to the Graduate Management Admission Test (GMAT), the de facto entry exam to the best business schools in the world.

Back then, the 1,291 prospective students paid just $10 each to take the paper-and-pencil exam. It was offered only three times a year in five countries, and candidates had to wait three to four weeks to get their results. Only 54 business schools accepted GMAT scores at the time.

Today, the computer-adaptive GMAT costs $250 a pop and if a test taker wants the results sent to more than five schools, there’s an additional $28 charge for each score report. The test is offered year round at more than 600 sites in 113 countries. Anxiety-ridden test takers receive their scores within five to seven days, and more than 2,100 schools all over the globe now require the GMAT for admission.


The growth of the test itself mirrors the spectacular growth curve in the popularity of the MBA degree, arguably the most successful educational product of the post-war period. The credential’s prosperity has oddly made the GMAT as hot a “product” as a tech device that wows a generation of gadget-loving consumers. In this case, however, if you really want to earn an MBA from a world-class business school, it’s hard to opt out of the test users are more likely to dread than crave.

So it may be little surprising that for the organization that oversees the test, the Graduate Management Admission Council, the profit margins on the exam are even better than the margins Apple makes on either an iPad or an iPhone. GMAC says it collected $87.7 million in fees in 2012, yet it cost the organization only $45.7 million to administer the test, according to documents filed with the Internal Revenue Service. The effective gross profit on the actual exam is roughly 47.9%, nearly 11 points higher than Apple’s current gross profit margins.

All told, GMAC reported that its “program service revenue” came to $92.7 million in 2012, up from $88.5 million a year earlier. The organization’s “investment income” alone amounted to another $30.7 million. When you kick in other revenue, GMAC recorded total revenue in 2012 of $125.1 million, up from $92.7 million a year earlier. Though it is a non-profit which does not have to pay taxes, the organization reported a tidy $22.4 million in cash after paying all its expenses for the year.


GMAC says the expenses to administer its test do not include such things as test design, score reporting, test taker accommodations and the cost of running its own website where test takers register for the exam. “These are all activities that are intrinsic to the delivery of the test and are not covered in those operating expenses,” says Rich D’Amato, vice president of corporate communications at GMAC. “In addition, there’s (a) smaller expense group around fulfilling our responsibility – part of our being a nonprofit — to invest in (the) promotion of graduate management education as a field of study.”

The reported expenses on the test do not include another very big line item in the organization’s budget: its salaries and benefits to GMAC staffers. In 2012, GMAC’s total compensation amounted to $25.9 million for a staff that numbered only 141 people.

At the very top of the non-profit are some very generously paid talent. David Wilson, who until Dec. 31 of last year was president of the GMAC, was paid $1,914,845 in salary, benefits and deferred compensation in 2012, more than three times the $662,000 that Harvard Business School Dean Nitin Nohria made in 2011. Indeed, Wilson made substantially more than ETS President Kurt Landgraf who was paid $1.3 million in the same year for leading an organization with total revenues that are eight times greater.

What’s more, at least 15 other officials at GMAC make at least a quarter of a million dollars a year in pay. Margaret Jobst, an executive vice president, made $539,058, according to GMAC’s government filing. Julia Tyler, an executive vice president for global market development, pulled down $562,378. Robert Rosecrans, chief information officer, made $465,327. In all, six-figure bonuses were paid to nine GMAC officers, including a $448,000 bonus for Wilson, whose 2012 annual compensation was especially inflated due to $745,485 in deferred pay.

GMAC defends those salaries, saying that they are not out of line with what peer organizations pay their top leaders. “We are a global revenue generating enterprise with a not-for-profit mission,” says D’Amato.  “We were recruiting to ‘build’ a company, not just staff an existing organization in a very competitive recruitment market.” Every two years, he adds, the board hires Towers Watson, a major HR consulting firm, to benchmark the compensation of its executives against a group of organizations of which 80% for-profit and 20% are non-profit. “We recruit from the for-profit marketplace,” explains D’Amato.

The majority of GMAC’s staff, including its most senior officers, work on two quiet floors of a modern office park in Reston Town Center, VA, where Google, Rolls-Royce and the College Board also lease space. The brightly-lit facility features what its architects call a “monumental” open staircase with a two-story waterfall structure, a cafe, and a testing center. Before moving here five years ago from nearby Tysons Corner, the organization did a zip code study and found a location that would improve the commute of 80% of its employees.

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