But you’ll have to pay a premium for such a prestigious qualification. According to our Cost of MBA Report 2024, tuition fees alone at some of the leading MBA programs in the world now exceed $170,000.
With that in mind, it’s worth asking whether an MBA is really worth it. And the best way of figuring that out is by calculating the degree’s return on investment (ROI).
How to calculate the ROI of an MBA
To calculate the ROI of an MBA, you’ll need to work out the following:
- Your current annual salary, excluding taxes and bonuses.
- The total cost of your MBA, including tuition fees, living costs, application fees, and interest paid on student loans.
- The opportunity cost of your MBA. In other words, how much salary are you losing by pursuing an MBA? For example, if you study a full-time, 12-month program then you can add one year’s salary to your total investment.
- Your prospective post-graduation salary. You can find this information on the school website, in the Financial Times Global MBA Ranking or our Cost of MBA Report. Schools such as Wharton, Harvard and INSEAD also publish employment reports with details of graduate salaries.
Let’s say your current salary is $100,000, and you’re thinking of studying a one-year, full-time MBA with a total cost of $100,000, including living expenses.
If you forgo a salary of $100,000 during the course of the program, the total investment is effectively $200,000.
And let’s say the average salary of graduates from your MBA program is $150,000.
That means you’ll be earning an extra $50,000 per year after graduating. That’s an annual ROI of 25%, which leads to a 100% return on your investment after four years (although of course you’ll need to allow for interest if you need to take out a loan).
This is a simplistic way of calculating the ROI of your MBA, but should give you a decent idea of the earning potential and career boost the degree can provide you with. Tools such as the Bloomberg ROI calculator can go into more detail.
Download the free BusinessBecause Cost of MBA Report 2024
Which factors affect your MBA ROI?
Length of the program
The longer you spend out of the workforce, the higher your opportunity cost. So it’s worth bearing that in mind when you’re deciding whether to do a one- or two-year program. In North America, MBAs tend to be two years, while one-year options are more common in Europe.
Study mode
If you decide to study a full-time program, then you won’t be earning money during your MBA— which reduces the ROI. You can continue to work alongside a part-time program, but that option can come with its own challenges.
Location
If you decide to study in another city or country, you need to factor in the difference in living costs. And this also applies to your post-graduation plans. For example, you might have a post-MBA salary increase of 50%, but that may be offset somewhat by higher living costs in a new city or country.
The non-financial factors to consider when deciding on an MBA
Although we like to place the ROI of an MBA in purely financial terms, in truth the benefits of the program extend way beyond simple economics:
- The ‘hard’ skills you’ll learn in an MBA—accounting, marketing, management, strategy— are highly valued by businesses across the world.
- You’ll also develop ‘soft’ skills such as communication, leadership, and teamwork. These will benefit you throughout your personal and professional life.
- Research shows that 9 out of 10 MBA alumni would recruit a student from their alma mater. So being part of a school’s global alumni network really can give you the edge when applying for new roles.
We’ve listed some key benefits here, but that’s still only scratching the surface as to the wide-reaching benefits an MBA could have on your career and personal life. Simply put, you’ll be a new person after your MBA.
How to increase the ROI of your MBA
So how do you maximize the ROI of your MBA?
Studying a shorter program, getting a scholarship, and working alongside a part-time MBA are all ways of reducing your financial burden (and increasing your ROI). But there’s plenty you can do during the program, too.
According to Brian C. Mitchell (pictured), associate dean of the full-time MBA programs at Emory University, Goizueta Business School, embracing the entire MBA experience is vital for maximising your ROI. “Students should take full advantage of the co-curricular programming, networking opportunities, global experiences, and the myriad of activities that envelope the academic experience,” he says.
“Goizueta alumni consistently tell us that their expectations were exceeded and the MBA was worth it, in large part, because they immersed themselves in the community and formed strong relationships with their professors and classmates.”
Conrad Chua (pictured), executive director of the MBA at Cambridge Judge Business School, believes focusing on your network will provide the biggest long-term benefits.
"Students should look at both the numerator and denominator for the ROI of an MBA,” he explains. “They can maximize returns by working hard on academics, networking and developing career skills. The returns from an MBA can stretch many years after the program through the strong alumni networks that you build.”
So, is an MBA worth it?
Feedback from MBA graduates overwhelmingly suggests that the degree is worth it.
According to the latest GMAC Alumni Perspectives Survey, 85% of MBA graduates believed their investment had a positive return. Eighty-seven percent said it helped increase their employability, 77% said it boosted their earning power, while 76% agreed that it helped them reach leadership positions in their career.
However, the answer depends on you. Instead, ask yourself this: Will an MBA help me achieve my life goals? If the answer is yes, then an MBA is most likely worth it.
