Getting an MBA may be the most secure way to get an education, but financing it is no easy task. We all know how student loan debt can affect a young professional's life, so it's important to build a secure perspective before enrolling in an MBA.
We all know what an investment is: it can be money, time or work, but all three play a key role in an MBA program as money, time and work are required to get an MBA. Getting an MBA is clearly a significant investment.
In this article, we will look at three aspects: whether to invest, what to invest in and how to calculate the return on investment of an MBA.
WHAT IS THE RETURN ON INVESTMENT IN EDUCATION?
There are costs associated with pursuing a degree such as an MBA, and when it comes to costs, the candidate should always be clear about how quickly these costs will pay off, especially if there is a lot of debt involved.
Return on Investment (ROI) is a performance measure used to assess the effectiveness or return on investment or to compare the performance of different projects. The purpose of ROI is to directly determine the return on a particular investment, in this case the MBA program.
It is not difficult to predict starting salaries and annual income growth, which are usually influenced by the work experience, knowledge and professional skills acquired after the MBA program. Divide the total cost of the MBA program by your salary and calculate how long it will take you to repay your loans. Once the loans are paid off, your investment will start to pay off.
Sounds a bit complicated, doesn't it? That's why we offer you simple methods for calculating your ROI, but first you need to understand the basics of MBA ROI, and then you can do the calculations necessary to get your return on investment.
HOW DO I CALCULATE MY RETURN ON INVESTMENT?
The correct way to calculate your MBA ROI is to estimate the increase in your annual salary and determine the number of years your salary increase will allow you to repay your student loan/investment over a ten-year period. The calculation should take into account pre- and post-MBA work experience, EMI, market conditions and other factors.
1) Note your current salary.
2) Then calculate the total cost (tuition and fees) of the MBA program and its duration.
3) Then calculate your opportunity cost. This is the salary you will give up during the MBA program and the cost of the program. If you expect a salary increase or promotion during this period, your salary may increase.
Next you need to find out your earnings after you complete the MBA program, which can be obtained from the school's official website.
THE RETURN ON THE MBA PROGRAMME IN 10 YEARS.
Take the income at the end of the MBA program ($100,000) and multiply it by 10 years to get $1,000,000.
Then subtract the ten years from the salary before the start of the MBA program. In this case, USD 1,000,000 minus USD 600,000 is USD 400,000.
From this amount, subtract the cost of the MBA program, i.e. USD 400,000 multiply by USD 220,000, so the ten-year return on the MBA program is USD 180,000.
The easiest way to calculate the return on investment is as follows. Start with the post-MBA income reported by the institution and add a percentage increase each year to get a more accurate picture.
WHICH MBA PROGRAMMES OFFER THE BEST RETURNS?
1) Stanford Graduate School of Business offers MBA graduates an average starting salary of $125,000 and tuition of $119,000. The return on investment over ten years is 325%.
2) Harvard Business School - with an average starting salary of $125,000, tuition fees of $122,000 and a ten-year return on investment of 320%, Harvard Business School ranks second.
3) Imperial College Business School - ten-year return on investment of $870,200, 14 times the national average tuition.
4) Ross Business Schools - a 20-month course at this institution has a 10-year return on investment of around $826,300, and students can recoup their initial investment within 40 months of graduation.
An MBA degree can have a positive impact on your career in many ways: you can gain the skills you need, expand your network of contacts and open up new job opportunities. But you need to make sure that the money you invest in your studies pays off.