A Simple Guide To Calculating The Return on Investment (ROI) of An MBA

The average fee for a Master of Business Administration (MBA) in Australia is now approaching $65,000, with many globally recognised programs now costing more than $90,000. In a tight economic environment, it leaves many prospective students asking the simple question: is an MBA worth the investment?

The answer lies in a careful calculation of return on investment (ROI) that considers the quantifiable financial benefits and the more opaque strategic career benefits.

READ MORE: THE MBA SALARY BUMP IS ALIVE AND WELL

In basic terms, ROI is a measure of the financial gain (or loss) generated from an investment, relative to its cost. For MBA students, the “investment” includes tuition fees, living expenses, lost income during study (opportunity cost), and other incidental costs. The “return” is the salary increase, career advancement, and long-term earnings boost that result from completing the degree.

Calculating MBA ROI helps prospective students determine whether the degree will pay off over time—and how long it will take to recoup their initial outlay. A simple formula for ROI is:

ROI (%) = [(Post-MBA salary – Pre-MBA salary) × number of years] – Cost of MBA / Cost of MBA × 100

Let’s take a real-world example for a one-year, full-time MBA where you take a career break to study:

• Pre-MBA salary: $80,000

• Post-MBA salary: $131,000 (QS Global Employer Survey 2022)

• Average MBA Fee: $64,000 (MBA News)

• Living expenses: $40,000

• Opportunity cost (lost salary for one year): $80,000

• Total cost: $184,000

In the first year after graduating, the salary increase is $51,000. Over four years, that adds up to $204,000 in increased earnings. Subtract the total cost of $200,000, and the ROI breaks even at the four-year mark. Every year beyond that is pure financial gain.

Studying part-time or online and doing your MBA over a number of years and retaining your salary vastly improves the payback time by removing the opportunity cost of lost salary.

While salary is central to calculating the ROI of an MBA, it’s only one part of the equation. An MBA often opens doors to less quantifiable benefits, including access to leadership roles, faster promotions, global mobility, and opportunities in industries or functions previously out of reach.

Many MBA graduates experience not just a bump in salary, but a significant shift in career trajectory. That can lead to exponential growth over time that’s not immediately captured in a one-year pay rise.

Additionally, MBAs develop valuable skills in leadership, finance, strategy, and innovation—capabilities that are increasingly in demand in a rapidly changing global economy. These intangible benefits often translate into long-term success and adaptability.

For professionals concerned about ROI, online and part-time MBAs offer a more flexible and affordable path. These programs typically allow students to keep working while studying, avoiding the hefty opportunity cost of full-time study.

According to a recent GMAC (Graduate Management Admission Council) report, 60% of online MBA students experienced career advancement while still completing their degrees. With lower tuition fees and continued income, online MBAs often offer a faster ROI than traditional programs.

However, these programs may lack the networking depth and immersive experience of full-time, on-campus MBAs—another factor to consider when evaluating long-term value.

MBA ROI also varies significantly by region. Graduates from top U.S. programs like Harvard, Stanford or Wharton can expect higher immediate salary jumps but face steeper tuition and living costs. In contrast, many European or Australian MBAs are shorter (often one year), reducing costs and the time needed to break even.

Calculating the ROI of an MBA requires more than crunching numbers—it’s about aligning the investment with your personal and professional goals. For those seeking rapid career advancement, access to global opportunities, and long-term financial growth, an MBA can still offer strong returns.

But as education delivery models evolve, savvy professionals are looking beyond rankings and reputation alone, and toward value, flexibility, and outcomes. As with any major investment, due diligence is key—and the payoff can be life-changing.