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Can you suggest a mental framework to keep in mind when asked about listing possible revenue or cost sources?

Marta

I refer to that moment in a case interview when the interviewer asks something along the lines of "What kind of revenue sources do you think this company might have?" and keeps on pushing you saying " What else?"

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Vlad replied on 09/30/2017
McKinsey / Accenture / More than 300 real MBB cases / Collected all Big 3 offers / Harvard Business School

Hi,

Here is some inspiration for answering your question. Think of the following buckets:

  1. Type of customer: B2B, B2C, B2G, etc. (E.g. Female magazine may sell magazines to customers and advertising services to business)
  2. Product mix - you may have multiple products and variation of products. Think of breadth (e.g. collection size in fashion) and depth (e.g. sizes and colors of dress) of your product line
  3. Croselling opportunities - e.g. selling accessories
  4. Revenue models (one-time payment, subscription, etc)
  5. Online / offline

Here is the general approach how to answer such questions on creativity:

1) Ask an interview for a minute to think

2) Think of several buckets of ideas. Remember to think as big as possible

3) Narrow down to each bucket and generate as many ideas as possible

4) Present the structure (buckets) and then your ideas

Creativity is in direct correlation with your business judgment that can be trained by solving more various cases with partner / studying various frameworks/reading industry reports / reading HBS cases (google them)

Good luck!

Vlad

Matthew
Expert
replied on 10/01/2017
Only ex-McKinsey Partner on PrepLounge (also Oliver Wyman) and McKinsey MBA, Experienced Hire and Undergraduate Recruiting Leader

You want to begin with the simple frame work of thinking about revenue as Operating and Non-Operating Revenue or in accounting terms Operating and Non-Operating Income. The Non-Operating Revenue is almost always the same and includes items such as profits from investments, dividend income, interest income and gains incurred due to foreign exchange.

The Operating Revenue sources will vary greatly depending on the type of commercial transaction that the business is involved with (e.g., B2C, B2B, B2B2C) and the type of business (e.g., restaurant, chemical company, business services company, etc...). You want to obviously start with the core products and services and the associated revenue. But, since the interviewer is pushing you for other potential revenue sources, you need to consider things that are ancillary to the core products and services. Some generic buckets would include the following:

  • Core product bundles: Additional core products added on to another core product, often at a discount (e.g., home / mobile and internet, hotel / car rental)
  • Add-on products: Complementary products to the company’s core offering (e.g., warranties, extra mobile phone lines)
  • Upgrades: Premium upgrades that enhance the core offering (e.g., first class upgrades, premium engine oil, faster internet speeds)
  • Partner offers / products: Partner offers that dovetail, but don’t compete, with your products (e.g., Partner Credit Card)

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