What’s the ROI of an MBA?

Many MBA programs require a substantial investment, which makes it essential for potential students to know whether or not that investment is worth it. There’s no question that this degree will help you advance in your career, but will it pay off financially? In a recent study by GMAC, over 85% of business school graduates surveyed stated that their investment in Graduate Management Education had a positive return. Data collected by Financial Times supports that survey, in which it shows that graduates from the top 100 business schools experienced a salary increase anywhere from 55% to 184%.

It is important to know what the ROI will be when deciding whether an MBA program is right for you. You’ll need to weigh factors like salary, signing bonuses, what business school you are choosing to attend, tuition fees, and the fact that you may have to stop working for a period of time as you complete your MBA.

There are some programs, like Crummer’s Executive MBA or Professional MBA, that will allow you to work while you obtain your graduate degree. However, some students determine that they need 100% of their focus on their studies and choose programs like the Early Advantage Program to obtain their degree before they enter into their career. Choosing the right program will have a significant impact on the ROI of your MBA.

What to Consider When Calculating the ROI of an MBA

The two biggest factors to consider when determining the ROI of an MBA are tuition fees and salary. If you’ve already begun your career, you are guaranteed to see a salary increase post-graduation. However, even those who wait to launch their career until after earning their MBA degree are setting themselves up for success by increasing their chances of starting out with a significant salary.

Other information to consider are signing bonuses, as that adds to your earnings and will affect the length of time it will take to see a return on your investment. It is important to factor in what school you choose to attend, as some larger-name schools have better a ROI than others. However, students should not be deterred from smaller business schools with more affordable programs, because their ROI is often just as significant, since tuition is cheaper.

Choosing to obtain your MBA degree could put your professional business career on hold for a bit, so it is necessary to consider what income you may lose in the years it takes to graduate with your degree. Considering all these factors will provide you with  important data that you will need to calculate the ROI of the MBA program that you choose.

Salary

Salary is the main consideration when it comes to accurately calculating the ROI of an MBA. Your salary prior to your MBA and your post-MBA salary are both essential components to the calculations of the ROI of your MBA. Graduates of MBA programs see salary increases that would often be unattainable without an MBA, and naturally, this increase in earnings will affect the ROI.

Signing Bonus

A signing bonus is often the most immediate impact on the cost of an MBA. According to data collected by U.S. News in 2021, the average signing bonus of 131 top-ranked business schools was $12,172. However, many signing bonuses are significantly greater than this and can sometimes go as high as $85,000. This immediate income can significantly impact your ROI because it can help you make a dent in any loans you may have taken out, while helping you get back in the positive financially if you took time out of your career to complete your MBA.

School

It may seem odd to factor in your business school when calculating your ROI, but it is critical. Graduates from top-ranking business schools tend to receive higher salaries and larger signing bonuses. According to U.S. News, the 10 business schools where graduates received the highest salaries were schools ranked in the top 15 of the 2023 U.S. News Best Business Schools list.

Tuition

Tuition is probably the second most important factor in ROI calculations, next only to salary. The more expensive your tuition, the longer your return on investment for your MBA degree. Tuition expenses at top-ranked schools can reach totals of $250,000 or more for the entirety of their program, whereas other business schools can average anywhere from $120,000 to $150,000. Crummer’s Executive MBA, comes to $93,070, and their Professional MBA program is $63,898. The Executive MBA is their most expensive program, and the Professional MBA is their most affordable, showing that no matter what program you choose at Crummer, they are overall more affordable than most other business schools.

Pause in Income

Many MBA hopefuls decide not to pursue a degree because they usually have to put their career on hold, which in turn creates a pause in income. Of course, if you choose to enroll in a full-time program and are not able to work, that will affect your ROI calculations, as you will essentially have to “earn back” the years of salary that you have lost. However, there are options like Crummer’s Flex MBA that allow the opportunity for students to continue in their career while earning their degree. Programs like these are a game changer in your return of investment.

How to Calculate the MBA ROI

To accurately calculate the ROI of your MBA degree, you’ll need to consider the increase in your salary each year and calculate how many years it will take to pay back your student loan debt and/or earn back your investment through the next 10 years. You’ll need to know:

1. The entire cost of your MBA program. This includes tuition, fees, and anything else you paid for during your program.
2. Your pre-MBA salary.
3. Your opportunity cost. If you choose to attend full-time, take your pre-MBA salary and multiply it by the years it takes to complete your degree.
4. Your estimated post-MBA income.

To calculate the entire total cost of your MBA program, you need to add together your opportunity cost and your tuition. Then, in order to calculate the ROI of your MBA, you’ll need to divide the total cost of your MBA program by your increase in salary post MBA. 

But what about the ROI in 10 years? In order to calculate that, multiply your post-MBA salary by 10 years. Subtract 10 years of pre-MBA salary from that product. Then, subtract the total cost of your MBA program from the difference, and you have your 10-year ROI on your MBA.

Considering the Aspects Beyond the Financial Benefits of an MBA

Outside of the financial gain an MBA provides, there are numerous reasons why obtaining your MBA is worth it. Graduates of an MBA program often go on to become successful managers and entrepreneurs, as well as obtaining other high-profile jobs. Individuals who hold an MBA often see great success in their careers, higher average salaries, and an overall positive outcome from their degree. 

The financial investment is worth it when you consider that many business schools have a tight-knit community of alumni, which can lead to an increase in professional relationships and great networking opportunities for the duration of your career. An MBA degree will also make it easier for you to find employment and provide you with a greater variety of opportunities. 

According to a recent study by GMAC, 87% of alumni surveyed strongly agreed or agreed that Graduate Management Education increased their employability, and 76% strongly agreed or agreed that it developed their professional network. Furthermore, 69% strongly agreed or agreed that their education prepared them for their chosen career, and 67% strongly agreed or agreed that their degree provided them with opportunities for quicker career advancement.

Which MBA Programs Have the Best ROI?

According to World Report, some of the MBA programs with the best ROI include University of California-Berkeley, University of California-Irvine, University of Connecticut, Vanderbilt University, Ohio State University, and numerous others.

Though Crummer is not a “big name” school, their tuition costs are drastically less expensive than many of these schools listed to have the best ROI. With their tailored course content, various program options, numerous concentrations, and real-world-experience education focus, you are sure to receive a quality education and obtain a job with just as high a salary as graduates of larger schools.

Employers are ready to hire MBA graduates, no matter where they studied, and the salaries offered will be competitive. According to the Graduate Management Admission Council, 86% of 2022 business school graduates were already employed at the time of graduation. MBA graduates have no need to worry about where they graduate from. Choosing a more affordable MBA program can even have a potentially favorable impact on your ROI because you will have less to pay off while still receiving a significant increase in salary.

Conclusion

An MBA is a significant investment. Knowing how to calculate the ROI of an MBA program is important in determining what program to choose, and prospective students need to weigh their options carefully when choosing a business school to attend. However, there is no doubt that an MBA will pay off immensely in the long run. 

No matter what type of program you need, Crummer has something to offer. If you are ready to pursue an MBA degree, check out these programs and get ready to invest in your career!