Is MBA worth it? – A Financial Perspective - YouTube

Friend, many people think that MBA opens the doors for the success

They think that companies are ready to pay you a salary in lakhs if you did MBA from one of the top 20-25 colleges.

So the people who argue in favour of MBA, says that it is a one-time investment whose returns are for the lifetime

But the question arises that how much is this investment, does it actually give good returns?

In how much time you'll get the money back if you did such an expensive degree?

You might figure it out If I talk about 10-15 years back, it was not this much expensive

So you were having the chance to decide what to do in life after doing an MBA

But nowadays, MBA is super expensive

If I tell you about the average fees,

In the top 20-25 colleges, you will spend Rs. 20-25 lakhs whether you opt for a 1-year or for the 2-year program

So we will understand the arguments in favour about the good returns of MBA, in detail in this video

We'll see the calculations that after how much time the cost-benefit or payback period comes in case of MBA

On the other hand, the arguments against MBA says that in this digital world, when you can do all the courses online

Then why to do an MBA?

Many people even say that what is the need to spend Rs.20 lakhs to learn Excel and Powerpoint

The third point is, If you want to do startup or business then MBA becomes very useful

So is this mentality correct? Maybe yes or maybe no.

If we understand through calculations and look at a financial perspective, then maybe we'll be able to make an informed decision.

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Firstly, let's see what do we learn in MBA and what all subjects do we study

We can divide it into 2 categories

The first is Quantitative and the second is Qualitative.

For business skills, you need to be good at numbers and you should understand human orientated aspects

So under quantitative skills, you learn about numbers, i.e finance, accounting, statistics, economics

Under economics, you study macro and microeconomics

So these were the quantitative subjects you study

On the other hand, you have qualitative subjects where you learn human-oriented skills

In this, you have marketing, HR (Human Resource), organisational behaviour, human psychology

When you study all these subjects, you acquire business skills during MBA

Now let's understand what is the benefit of doing MBA, what should we do it?

Let's understand the points favouring MBA

The first is, you can acquire new skils

For example, you have a humanities background and you studied arts,

Then you can develop quantitative skills

On the other hand, if you're from an engineering or hard science background

Then you'll be able to understand human aspects in more detail

And if your background is already related to commerce, finance, or accounting

Then also MBA helps you in learning advanced skills

The second point is Branding.

When we start our career, no one knows us

And the top 20-25 colleges have a good brand name

Because of that, you get a name

So if you've done MBA with a reputed college, an initial brand is associated with you

And when you introduce yourself, you definitely get the benefit of that brand

3rd and major reason behind so many people doing MBA is Role Change.

If your job is coding in the software department but you're interested in finance, then you can change your career/role.

Or if someone works in the oil field but is interested in doing marketing in FMCG

Then also MBA becomes a stepping stone

In this way, if anyone wants to change career/role then MBA becomes a good option

Especially, if I tell you about myself, I started my career in Merchant Navy

And I was very much interested in finance and marketing, that's why I did MBA and especially

If all these courses are packed under the 1-year program, you get to learn more things in less time

But let me tell you another aspect, nowadays, you can do all these courses online too

When I did my MBA, at that time there were not many options available

There were no online courses or websites and not much was available on youtube as well

The 4th major reason for doing MBA with a reputed school is

You make friends who are going to be the future business leaders

If you'll go to a reputed college, the people over there will definitely grow in their careers

So your networking becomes great and in fact, nowadays there is a famous saying that

Your network is your net worth

But on contrary, if you don't study at a reputed MBA school or don't do MBA

Then is networking impossible in today's world?

We'll talk about this soon.

We understood the 4 major reasons for doing an MBA

But a huge question arises at what cost?

But before that, let's understand the arguments against MBA and why you should not do MBA.

In this, the first reason about which we already discussed that MBA is very costly nowadays

20, 25, 30 lakhs, these are the college fees nowadays.

So how much will be our payback period, we'll calculate it soon

Secondly, we need to understand that when we go for MBA, whether for 1 or 2 year programs,

We'll not be earning at that time, so there is a lost salary at that time

And we need to calculate and include it in our cost

With that, if you would have invested it, you may have got returns

That will also be counted as a loss

So the second reason for not doing MBA is the High Opportunity Cost.

3rd reason is, you can learn all those skills you learn in MBA through books

And also through online courses which is much cheaper

There's no argument against this

But definitely, if you go for MBA, you get experience

You work under teams hence, learning is definitely better

The 4th argument against MBA is

If you want to do a startup, you should not do MBA according to me

It's weird but I'll tell you why am I saying that

But before that, let's go to excel and let's see what is the cost and payback period of an MBA

So I made an MBA payback calculator,

You can download it and you'll get its link and many more useful links in the description

So here, you have to enter the inputs in the yellow cells

We assumed salary before MBA Rs. 50,000 per month but you can enter your current salary

Choose whether you're opting for 1 or a 2-year program

Here you can enter the fees, I assumed Rs. 20 lakhs

Now, we need to find out the total cost of an MBA

In this, remember that MBA fees is not the only cost here

We also have to include the salary that we skipped

So the salary for 2 years will automatically be calculated here on the basis of your monthly salary

So you will forgo Rs.12 lakhs salary while studying during those 2 years

After this, if you would have invested these Rs.12 lakhs for 2 years, you may have got some returns on it

So we also calculated those returns

So I assumed that if we get 10% returns annually, then the returns will be Rs. 1,20,000 which we're losing

Besides this, while doing MBA, you might be paying some interest

Here, I took the assumption

That most of the people borrow loans for MBA

So whatever loan you're taking, if you're taking less then you can enter it here, these are the loan inputs

And if you're not borrowing any loan, then you can type 0 here.

I took the interest loan of education loan which is 9%, but you can change it according to the current market rate

Loan tenure, so generally you get an education loan for 3, 5, or 7 years

So you can assume according to you, I am taking 5 years for now.

And after that, when you'll start paying the interest of your loan, then I calculated that total interest

Total interest payable

So if you want, you'll get the loan calculator, repayment chart, and I also gave an option for prepayment

If you prepay in between, then how the calculation can vary

Let's say you got a bonus, then you can also enter those inputs

So let's get back. Our main calculation will be done here itself

So after all these assumptions, our total MBA cost is coming out Rs.42,71,003

So the actual cost is almost double the cost of an MBA

Secondly, now we have to go on the benefits side and let's see that after MBA

How much salary per month can be expected?

Because I took average fees, I took an average salary

Now many people think that they'll get a package of Rs.15-20 lakhs, and if this will happen, they'll get their fees back in just one year

So this assumption is totally wrong.

Firstly, understand that the cost is not Rs.20 lakhs

We saw that the cost is almost Rs.42 lakhs

Secondly, how much is the in-hand salary you get out of 15-20 lakhs

Let's say if your package is even 17-18 lakhs, you'll get less than 1 lakhs in hand

I assumed Rs.90,000 in hand salary

It's your wish if you want to increase it, you can, maybe your i=experience is more

You can expect more salary

But if that is the case, your current salary would also be higher, so this would not be Rs.50,000.

It may be 70-80 thousand for you

Nevertheless, let's assume the value to be Rs.90,000

The rise in salary per month means if you subtract 50,000 from 90,000, then how much is the rise in salary

You got that because of MBA

So we'll calculate the payback period of MBA because of this rise

I'll consider this extra cash flow, I'll consider the payback period because of this

I also assumed the annual increment that let's say 10% salary increment is there each year

If you want, you can change it

So after all these assumptions, the payback period comes out to be 7 years

So if you'll see the payback period of any top MBA school

But if you'll go to any tier3, 4 colleges, the salary is very less there even after doing MBA.

You can earn that much even after normal graduation

So as we say in the calculations, the time and money investment is very high in MBA

Considering this, let's come to our point that

Is MBA really helpful in startups and businesses?

If we talk about knowledge, then definitely it is helpful

If we talk about networking, then it is helpful

But at what cost?

The cost of time and money we're watching is very high according to the startup

If you will invest all this money and time in your startup,

Then you will be able to learn much more than MBA.

And let's say, your startup fails

Then you can keep MBA as a backup option because startup experience in an MBA is a very valuable experience

The second aspect is that when MBA becomes useful

If we talk about today, especially in India, most of the CV's are screened off if you haven't done MBA

because there are some profiles only open for MBA

So definitely, you get a benefit over there if you want to make a career in corporate

And you wish for the leadership positions in the corporate

Then definitely MBA from a reputed school can help you

But the perception that only MBA's can be better leaders is also changing especially in the western countries

And you can check on yourself that many entrepreneurs didn't even graduated with a college degree

Bill Gates, Steve Jobs, Mark Zuckerberg

And I don't think that the skills they acquired can only be acquired from MBA

If someone could hire them, then they might be the best hirees

If you want to improve your skillset, then you can opt for online courses or certifications

And if we talk about networking, you can also approach people on Linkedin

Because social media is so relevant nowadays

And I think if there is a business person and you're adding value to that person,

Then why that person would not talk with you

So if we conclude that in today's time, whether we should do MBA or not

So the simple answer to it is, it is a personal choice.

And if we talk about growth, then you can grow with MBA as well, that is also an option

And you can grow without MBA as well, that is also another option

So do all possible research before doing an MBA

Research about the institutes you are considering

What is the fees, what all companies visit, what are the roles you're targeting

Do those companies visit there for placement for which you're targeting

What is the average salary package there

And whether you do MBA or not, what matters most is how much value you're adding to the company

Be it with MBA or without MBA

I don't think that it matters for the company that from where the skill set is coming

And I hope that you might have also got some value out of this video

Maybe you or someone in your family or friends may be considering MBA

So share this video with them

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Till then keep learning, keep earning, and stay happy as always.