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Does Getting An MBA Make Financial Sense? – An Answer For The Working Professional

An MBA is just like a long term financial investment, and at Scripbox we believe that investments should follow your goals. Make sure your MBA decision does too.

No other qualification is as synonymous with fat pay packages as much as MBA. But how much is hype and how much reality? Specifically for you, as someone pondering over whether to prepare for CAT or GMAT, does an MBA make financial sense?

A financial analysis of the costs of doing an MBA

If you are earning Rs 5 lakh per annum right now and normally get a 10% increment each year, for a two year program your opportunity cost (potential lost earnings) is about Rs 10.5 lakh.

If you pay Rs 12 lakh as fees for an MBA program in India, then, not adding additional expenses, you will be potentially spending Rs 22.5 lakh (12 lakh fee + 10.5 lakhs in lost opportunity cost) to gain the qualification.

If you take an education loan to fund your MBA, you should plan for the EMI as well. This amount goes up manifold if you choose to do an MBA from outside India. The same rules apply for doing an MBA outside India. The stakes, however, will be higher as an MBA abroad can easily cost you Rs 25 lakh or more.

Based on the actual costs as well as opportunity costs you can figure out how long it will take you to recover the cost based on your initial pay package (which will go up over time).

MBA – Costs vs. Benefits

The following table will help you understand what benefits you can expect and what costs you will have to pay, before deciding to do an MBA :

Based on the above classification, you should ask yourself the following:

  1. Will an MBA decidedly result in a better pay scale?
  2. Will it help me change my role or sector?
  3. Will it help me get to a certain position faster? – For example, will an MBA help me get into a leadership role faster than without doing one?

What impacts how much you will make post MBA?

#1. Your own skills - Relevance Weightage 20%

Core skills are those skills that you are actually instinctively good at- analytical or communication or creative. If you are really good at something, your MBA should enhance that skill or help you market it better.

Specialising in an area where your natural strengths or interests lie will help you get a better job when you graduate.

#2. Where you do your MBA from - Relevance Weightage 40%

In India where b-schools proliferated like mushrooms, coming from the top b-schools matters a lot, if you want a significant jump over your current pay package.

Now, this doesn’t mean smaller b-schools don’t add value. You need to talk to the previous students and understand the kind of opportunities that will be available to you when you graduate from that particular college.

While it may seem like common knowledge, but choosing a reputed b-school is among the critical factors deciding your future income, as most good employers normally get attracted to the better b-schools.

#3. What you did previously - Relevance Weightage 10%

If you have done marketing at a start-up before joining a b-school, you’ll have a higher chance of getting a lucrative marketing job when you pass out.

What you did prior to taking up an MBA and what you plan to do post an MBA, if there’s significant overlap, you stand a better chance of getting a better job.

#4. Where you end up after the MBA - Relevance Weightage 30%

Apart from your core skills, what you did previously, and the reputation of the b-school, the fourth key factor that will decide whether you end up richer post MBA is, which company or sector you decide to join. Some sectors and companies are better pay masters than others.

While the decision to pursue an MBA is yours, keep in mind the financial implications before you take the MBA leap. Ask yourself, if the b-school you will join can justify the costs, fees as well as the opportunity cost considering your long term goals.

An MBA is just like a long term financial investment, and at Scripbox we believe that investments should follow your goals. Make sure your MBA decision does too.

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