How to Calculate the ROI of an MBA
You can think of your master of business administration degree, or MBA, as an investment. You spend money to make yourself marketable and skilled so that your potential income is increased enough to make more than you have spent to acquire the MBA. To determine the profit from an MBA degree, you could calculate the return on investment, or ROI, just like any other investment vehicle.
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Instructions
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Calculate the cost of your degree. As an example, if it took you two years to complete and each year cost you $20,000 in tuition and books, then your cost is $40,000. You don't have to factor in food and dormitory fees, since you would be paying for food and a place to live regardless of the degree.
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Calculate the loss of money from another source. In the example, if you had a $40,000 a year job but quit to go back to school, then you lost out on $40,000 per year, or a total of $80,000.
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Add those two calculations to determine your total investment. In the example, you invested $40,000 plus $80,000, which totals $120,000.
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Calculate the increase in salary as a result of your MBA. In the example, if your MBA landed you a $100,000 job, then you would be making $60,000 ($100,000 - $40,000) per year more than your original job.
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Determine the investment period. As an example, if you have been in the job for 10 years, you might decide on a 10-year period.
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Multiply your salary increase times the chosen time period. In the example, you have made $600,000 ($60,000 x 10) more in salary with your MBA during those 10 years.
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Subtract the total investment to calculate your total profit. In the example, $600,000 minus $120,000 equals a profit of $480,000.
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Divide the total profit by the total investment, and then multiply by 100 to calculate the ROI. In the example, the ROI is 400 percent: ($480,000 / $120,000) x 100.
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References
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