Hi,

It is the most common misconception with Viktor Cheng Materials. There are two ways to use the hypothesis:

First - presenting a structure using the hypothesis. You always should make a full structure!!! For example, if you are having a PE (private equity) case, you should do the following:

1) Make classic structure (market, company, competitors, feasibility of exit)

2) Make subpoints (e.g. in market: size, growth rates, profitability, segmentation, etc)

3) Present your 1st level Hypothesis:

• - "In order to understand whether we should invest in Company A, I would like to check a set of the hypothesis: whether the Market is Attractive, the Company is Attractive, the competition is favorable and whether we have good opportunities for of exit"

4) Present the main 2nd level Hypothesis:

• "In the market, I would like to make sure that the market is big enough and growing;
• In the company I would like to find additional opportunities for growth;
• In competition I would like to check that the market is fragmented enough;
• Finally, I would like to check if we have potential buyers and can achieve desired exit multiples"

In your case of declining profitability, the hypothesis will be:

• Declining revenues
• Increasing costs
• Both of the above

As you can see, you are always making a full structure, not just looking at revenues or costs in isolation.

Another way to use hypothesis is using the hypothesis to prioritize your analysis (still making a full structure):

1) Make a structure: "Problem in the sales department may be related to Sales Motivation, Sales Strategy, Team Composition, and Sales Process

2) Prioritize a part of the structure based on your knowledge / common sense / available data: "Taking into account that motivation is the core problem of the sales organization, I would like to prioritize this part of the analysis"

Good luck!

(edited)