Class of 2020: 12 Ways To Calculate ROI On An MBA

The risks are well-documented. If you enroll in business school, you’re going to lose two years of pay. You’ll leave a steady job and lose whatever career momentum you had. Chances are, you’ll move half-ways across the country – if not the world. On top of that, you can expect to accrue six figure debt from tuition and living expenses.

Is it worth it?

As always, the proverbial answer is, “It depends.”

Fortune favors the bold. According to a 2018 survey by the Financial Times, MBA grads nearly double their pre-MBA pay starting out. In other words, the non-MBA you will need to work two years to earn the same as the MBA you. And that gap only grows more pronounced over time, especially with debt traditionally being retired within four years.

RETURN ON INVESTMENT CAN MEAN DIFFERENT THINGS

Alas, money is only one variable in the MBA equation. Applicants also factor in network, for example, the community of peers, alumni, and friends who can open doors and act as champions, mentors, and even investors. Of course, there is always the pull of passion and possibilities, the chance to pursue a mission, alter a trajectory, or grow into leadership. That means everyone’s perception of return is a bit different.

Carnegie Mellon’s Brian Porter

Take Brian Porter, a musician and Carnegie Mellon Tepper School first-year looking to build a health analytics firm. Knowing the odds of startup success, he geared his decision towards programs where quantitative excellence was balanced with a strong mentoring and support system.

“A good MBA program delivers solutions for all these dilemmas in that it provides a safe environment in which to fail, offers mentors that have already succeeded in markets that I wish to participate in, and consists of peers that share a similar desire to succeed but who have a vast variety of skills and backgrounds,” he explains.

CRITERIA VARIES BY APPLICANT

In contrast, Carissa Sanchez adopted a “money is no object” mindset when it came to picking an MBA program. A native of Arizona, Sanchez wanted a program away from home that still boasted a deep alumni footprint in the southwest. She found it at the University of Virginia’s Darden School – though her return couldn’t be measured in job offers or Linkedin connections.

“As a First Generation college graduate and a Native American, there was never a question of value of the investment of an MBA for me,” Sanchez asserts. “I needed to do this to raise the standard of achievement for my people and prove that we’re out here, we’re smart, and we’re making things happen.”

And some members of the Class of 2020, such as Alan Man, didn’t feel the need to decipher a possible return on their MBA. “I simply trust that this experience will be worth it because of the thousands of others that have gone through the same MBA journey with no regrets,” says the U.C.-Berkeley Haas first year.

Thinking about jumping into the MBA fray? Wondering what factors should be most important to you? Last year, we asked incoming MBA candidates to share how they calculated their return on investment when they were weighing if they should tackle an MBA. Here are a dozen different approaches that students from Harvard to UCLA used to decide if an MBA degree was right for them.

University of Washington’s Aaron Sachs

1) Establish Decision-Making Criteria: “The decision criteria I used to select a school were not only mine. My wife will be joining me as we leave our home for the past seven years and the decision of which school we’d attend was as much her decision as it was mine. For us, we used the following criteria to decide which school to attend:

  • Is the school in a city that has a strong tech industry?
  • Is the school in a city that my wife could work remotely from or find other meaningful work?
  • Is the school in a city that we’d want to live and explore in?
  • Does the school provide individualized attention to all MBA students and take a purposeful stake in the success of each student? For me, class size factored into the evaluation of this question.
  • Does that curriculum offer opportunities to apply what we learn in the classroom in ways that will affect real people, with real problems?
  • Will the financials involved put us in an uncomfortable financial situation and restrict our options after the program?

With these questions in mind, I put together an initial list of schools after having spoken with a number of recent MBA grads and current MBA students, and in doing my own research. My wife and I visited several schools and ultimately were convinced that Foster best met the criteria we put together.”
Aaron Sachs, University of Washington, Foster School of Business

2) Know What Makes You Happy: “This was a huge consideration for me. I come from a lower-income family and still have a fair amount of undergraduate debt, so the thought of not having a salary for two years and taking on more debt was, frankly, terrifying. It was easy to get caught up in the short-term financial view of things as I tried to calculate the ROI of the degree, but I eventually came to realize that there is no precise answer because each person’s long-term path is so different. I knew that I would regret not pursuing my MBA, and that knowledge was enough to make me realize the experience would be worth it.

There are a tremendous number of intangibles that you can’t put a dollar amount on, including personal development, network, global experiences, and friendships. I do believe that an MBA will end up being financially “worth it” for me, but I also believe that life experiences are equally (if not more) important to consider. My advice to anyone considering an MBA would be to think carefully about things that make you feel happy and fulfilled in your life and career – will an MBA program provide those things or at least help you get on that path? If the answer is yes, then I think it’s worth making an investment in your happiness.”
Nicole Koski, Harvard Business School

3) Create A Data-Driven Model: I built an analytical model that scored each school based on a seven weighted factors: (1) the program’s fit for my academic needs (i.e. analytics coursework, dual degrees); (2) strength of career opportunities (i.e. on-campus recruiting, average starting salaries); (3) strength of the alumni network; (4) the net cost given tuition, scholarships, cost of living, etc.;  (5) class size; (6) geographic location; and (7) miscellaneous items like quality of facilities. I found it difficult to measure or even estimate a score for each school’s culture, so in the end I just tried to talk to as many current or recent students as possible to see whether we connected.”
Peter Zanca, University of Notre Dame, Mendoza College of Business

University of Michigan’s Afua Aidoo

4) Develop a Long Term Plan: “I evaluated my long-term career goals and worked out the best plan to achieve it. I wanted to experience, growth, learning opportunities, ability to connect with a wide community of individuals, resources available, ability to make mistakes, and learn in a seemingly “test” environment, the job opportunities. For the next two years, I wanted to shape my life and career and ensure I will be making an impact in this generation and beyond. These experiences are invaluable and worth the investment.”
Afua Aidoo, University of Michigan (Ross)

“The opportunity to learn alongside some of the best and brightest in one of the greatest cities in the world was a chance I couldn’t pass up. Further, I consider it an expense that can be amortized over the remainder of my career. Thinking of it within that framework makes it a lot less daunting.”
Austen Mount, UCLA, Anderson School of Management

5) Ask The Big Question: “I looked at all the factors, both quantitative and qualitative. Numbers-wise, with the career path I’m targeting, the decision made sense. That didn’t lessen the fact that this was still a huge financial investment, however. So, what sealed the deal for me was that I looked 10 years into the future and asked myself: “Would I regret this if I didn’t go?” The answer was yes and so I made the jump. You can always make more money, but you can’t buy time.”
Michael Morales Tenorio, Rice University (Jones)