What is ROI for an MBA?
ROI means Return on Investment. In simple words this means how fast you recover your investments on a product.
What is MBA ROI?
Calculation of the ROI of an MBA is a little complicated process.
As neither MBA is a tangible product nor your career. After MBA you keep on earning for your whole life and the enhancement of your earnings is directly linked with the reputation of your MBA institute.
The value you generate through your specialization knowledge, skills you learned during the MBA program, networking made, and the application of your knowledge, you have gained during your college days and thereafter.
So, the ROI of an MBA should be seen as how much social and economic status you achieve in your life. A relatively higher cost of an MBA usually corresponds to better learning and career prospects. It may lead to a slightly lower ROI in the short run but would lead to a much greater life-long earning and career satisfaction.
There are 100s of ways suggested on internet to calculate MBA Return on Investment (ROI).
Most of them suggest divide the total cost of an MBA with an average salary as offered to the students of that particular B School. How misleading this MBA ROI figure could be! For example business School -'A' with a Fee of Rs. 3.0 Lakh, offering an average salary of Rs. 3.0 Lakh will have an ROI of 1 year while another business School- 'B' with a Fee of Rs. 15 Lakh, offering an average salary of Rs. 10.0 Lakh have an ROI of 1.5 years. All possible calculations on the web suggest School 'A' is better. This is misleading!
Calculate How Soon You Will Become Crorepati or Millionaire
Here we have adopted a practical approach by calculating which PGDM/MBA institute makes you crorepati faster.
Calculate and compare Upto 3 Business Schools with MBA ROI Calculator
After discussions with heads of a couple of elite Business Schools, we worked out the method of MBA ROI calculation. And it is simple. Best School is the one who makes you crorepati or Millionaire in less number of years. Considering the above example School – B will make you crorepati in almost 6 years whereas for School-A this duration could be 15 years.
We have taken into consideration almost all possible variables which include:
- Opportunity cost: This is the salary you were earning before starting your MBA, keep it Zero in case you were a fresher and not opting for Job for the next 2 years.
- Tuition Fee: This is the cost of doing your MBA without Boarding and lodging, which in any case you need to bear whether you do or don’t do an MBA.
- Interest on Loan: We have included the interest on loan and EMIs on that.
ROI of an MBA is highly misleading:
In fact, many MBAs do earn more money after graduation. Across the business, MBA salaries are high. And for graduates of elite Business Schools, they are very high. At the same time, yet, there are significant costs associated with pursuing an MBA which might ranges from Rs 3.0 Lakhs to 30 Lakhs in India for two years. And surprisingly tuition fees for top MBA/PGDM programs in India and abroad continue to rise. The number of aspirants every year is growing. For many, paying for Business School means taking on the loan, which can hang on for five to ten years. For full-timer MBAs, there’s also an enormous opportunity cost linked with taking time off from work and this happens usually during prime working years to pursue an MBA.