What is MBA Return on Investment (ROI)?

Before choosing an MBA college, it is very important to know the ROI of degree obtained from that college. Read below to know what is MBA ROI, how it is calculated and what impact it has on your career. Also get the list of college for MBA with highest ROI.

What is MBA ROI?

What is MBA ROI? It is important for every management aspirant to know MBA ROI, so that they can choose the best suited B-School for pursing the course. Today, MBA is one of the most popular professional degree across the world for its lucrative career trajectory and handsome pay packages. However, management programme is in itself an expensive affair. The MBA course fee at a college with good infrastructure and faculty is minimum INR 10 lakh. The MBA fee goes up to as high as 30 lakhs+. 

While on an average each student spent nearly INR 7-10 lakh on a two-year MBA programme, the salary offered after the course does not always match the investment. A majority of MBA graduates have difficulty in finding jobs because salary offered to them is not enough to repay education loan they had taken for the programme. 

Also Read:

• IIM Fees for MBA – Check Complete IIM Fee Structure
• MBA colleges in India with low fees

What is MBA ROI: How to calculate best ROI for MBA?

The right way to calculate the MBA ROI i. e. Return on Investment, of an MBA degree is to estimate the annual increase in salary and figuring out how many years will it take to recover the student loan/ investment through salary increases over a period of 10 years. The MBA Return on Investment calculation should also take into account pre-MBA and post-MBA work experience, EMIs, market conditions and so on.

The formula for ROI can be understood as: (profit minus cost) / cost. 

Example:

If your pre-MBA salary is INR 500000, your post-MBA salary is INR 1500000, and the total cost of the MBA is INR 1200000, then:

ROI = (1500000  - 1000000) x 100   = 41.66 %

                      1200000

Best ROI on MBA can be considered the one, in which a candidate can get the amount invested in the shortest time from their salary/job secured on the basis of the degree. While, comparing ROI in an MBA programme with salary offered in campus placements, does not provide a correct picture, it nonetheless gives an idea of the MBA ROI. Among top MBA colleges in India, FMS Delhi, TISS Mumbai and IIT Bombay (SJMSOM) have the best MBA ROI. 

While calculating the ROI of an MBA course, one should take into account three aspects:

Cost of MBA: this includes course fee, living expense and lost income (opportunity cost of not working for the course period).

Financial Return: The ROI incluses salary hikes, bonus and incentives and career advancement opportunities after completing the degree.

Strategic Return: Benefits like wider career prospects, industry networking, upskilling and personal growth for long term success.

Factors Affecting MBA ROI

There are some factors that affect MBA ROI year on year. The profitability of an MBA programme, is measured in long term. One needs to keep the following mind.

• Tuition fee: The average fees of the course.  
• Starting salary: Companies often offer decent starting salaries in campus placements.
• Signing bonuses: Some colleges may offer signing bonuses. The amount can help in study load repayment.
• Salary increase rate: On an average, it is seen that the minimum salary increase every year is atleast 3 percent.
• Opportunity cost: If a candidate decides to drop a year after completing MBA, they tend to lose money in loan repayment as well as lose prospective income.

Factors to Consider for Calculating MBA ROI

Before choosing an MBA college to pursue the degree one should evaluate the ROI prevent financial loss. One usually takes education loan to pursue MBA. The best ROI is when they can repay the loan in the shortest time after completing the programme.

1. B-School Ranking: Top B-schools have higher placements with higher salaries. Mid-tier and low-tier colleges may not get you the best ROI if their fee is high but placement rate is not good. 

2. Career Goals: Evaluate your career goal viz. the MBA degree. Your decision to pursue MBA should directly support your career in the long term.  

3. Cost of Living: College expenses and the cost of living in that city is an important consideration while evaluating the MBA course/college.

4. Financial Aid: Evaluate MBA fees and loan options to understand how much financial burden will you have to handle during and after completion of the course. And how quickly can you recover from it with your salary.

5. Market Conditions: External factors like job market or economic condition are important considerations while evaluating ROI. Unpredictable market conditions can cause major dent. 

Best ROI - MBA Colleges in India

Here’s a list of a few top B-Schools in India, their fees and salary package offered in campus placement, to compare and find out MBA with highest ROI. Take a look:

*The salary figures mentioned in the table are as per the latest placement data avaiable. 

Why ROI is Important?

As we all know, MBA is an expensive degree and the ultimate goal is a financially rewarding career. One cannot spend over INR 10,00000 on a degree that cannot ensure a job with satisfactory salary. Choosing an MBA degree has to be an informed decision. The MBA college you choose must fit in your budget and ensure a good start to career. If you are willing to go over budget, the course/college you choose must compensate effectively. The ROI can help you to assess the financial commitment required for the degree. Working professionals need to evaluate the MBA ROI simply to ensure the income loss incurred during the course, is recovered appropriately and in time.  

Also read:

• IIM Placements - Highest Salary Package & Top Recruiting Companies
• MBA Placements: Placement Report of Top B-Schools in India
• Average salary package of non-IIM graduates in India: NIRF-MHRD Rankings
• Top Management Institutes in India: NIRF 2024
• International salary packages offered at top Indian B-schools