How to ask clarifying questions on a profitability case?

Hello,

It's completely understandable to want to approach a case interview with a structured and effective methodology. Let's clarify the best way to start a profitability case:

Clarifying Questions: Begin by asking clarifying questions to gather essential information about the business. This might include questions about the company's products or services, target market, geographic reach, and any specific context related to the case. Asking about the revenue and cost structure can be part of these initial clarifying questions. It helps you establish a foundation for understanding the business.

Profitability Framework: After gathering the necessary context, you can then proceed to outline your profitability framework. This framework typically includes revenue and cost components. Here's a simple breakdown:

Revenue: Break down revenue into its components. Ask about pricing, sales volume, and any other relevant factors affecting revenue. Calculate total revenue based on these components.

Costs: Similarly, break down costs into different categories. These may include fixed costs, variable costs, and any other cost elements specific to the case. Calculate the total costs based on the information provided.

Analysis: With your framework in place, proceed to analyze the profitability of the business. Calculate the profit margin by subtracting total costs from total revenue and express it as a percentage. This provides an overview of the business's profitability.

By following this approach, you start with clarifying questions to ensure you have a solid understanding of the case context. Then, you introduce your profitability framework as a structured way to dissect the case. This method allows you to demonstrate your problem-solving skills effectively.

Remember that case interviews are not just about finding the right answer but also about showcasing your ability to structure complex problems, think critically, and communicate your thought process clearly.

If you have any more questions or need further clarification on this or any other case-related topic, please feel free to ask.

Best regards, Frederic

Hi there,

I would be happy to share my thoughts on your question:

• First of all, given your confusion, I would highly advise you to revisit some basic case study material, like the case interview basics from PrepLounge. The aim of clarifying questions is to develop an initial structure that is specific to the case study question and therefore need to come first. However, asking about the revenue and costs structures would not be meaningful clarifying questions.
• Moreover, while it may be a common approach to look broadly into revenue and cost structures, it's not always the right approach. Depending on the case details, there may be a more suitable approach.

If you would like a more detailed discussion on how to best prepare for your upcoming interviews, please don't hesitate to contact me directly.

Best,

Hagen

Hi there,

Q: Should I first ask about the revenue and cost structure of our business as a clarifying question, or should I lay out profitability framework and then ask? 

It depends on what you mean exactly by “ask about the revenue and cost structure of our business”. 

If you mean asking clarifying questions about the operating model of the client (eg what do they sell or how do they sell it), that’s a fair clarifying question. If you mean details on how revenues or costs changed, this is an analysis to conduct after you have presented the structure.

In general, I would recommend asking clarifying questions in order to:

• Define the objective and constraints of the client
• Understand the operating model of the client (what do they sell, to whom and how)
• Clarify the elements that are not clear in the prompt

Best,

Francesco

When approaching a profitability case, it's important to start by asking clarifying questions to gather essential information about the business. This will help you establish a foundation for understanding the revenue and cost structure. Here's a suggested approach:

Begin with clarifying questions: Ask about the company's products or services, target market, geographic reach, and any specific context related to the case. This will provide you with a better understanding of the business and its operations.

Ask about revenue and cost structure: Once you have gathered the necessary context, you can then ask more specific questions about the revenue and cost structure. This might include questions about pricing, sales volume, fixed costs, variable costs, and any other relevant factors affecting revenue and costs.

Outline your profitability framework: After gathering the necessary information, you can proceed to outline your profitability framework. This framework typically includes revenue and cost components. Break down revenue into its components, such as pricing and sales volume, and break down costs into different categories, such as fixed costs and variable costs.

By following this approach, you will demonstrate your ability to gather relevant information and structure your analysis effectively. Remember to be concise and focused in your questioning, and always tie your questions back to the profitability of the business.

Hi there,

I would ask about how the business works in the clarifying questions - I think this is a fair clarifying question. 

The danger is if you go ahead and start your structure, and then actually your structure isn't really applicable (because it's not tailored to the case context), then it pretty much becomes less useful.

All the best!

Hi there,

I always recommend to have all the context and info you might require in advance so ask anything yo need to frame the case. 

There might be new data points you need as long as you progress on the case but try to have the broadest picture at the beginning. A lot of times you will be expecting data that the interviewer don't have or will ask you to make an estimation.

Best,

Alberto

Starting a case interview with a profitability question is a common and effective approach. It's a structured way to understand the financial health of a business and sets the stage for a more in-depth analysis. Here's a step-by-step approach:

Profitability Framework Introduction: Begin by explaining to the interviewer that you'd like to start by assessing the profitability of the business. Mention that you will first ask clarifying questions about the revenue and cost structure before diving into the analysis.

Clarifying Questions: Proceed to ask questions about the revenue and cost structure. This helps you gather essential information that will inform your profitability analysis. These questions can include:

• "Could you provide more details about the sources of revenue for the business?"
• "Are there any specific revenue streams that contribute significantly?"
• "What are the major cost components for the business, both fixed and variable?"
• "Are there any recent changes in pricing, product mix, or cost structure that I should be aware of?"

Profitability Framework Analysis: After obtaining a clear picture of the revenue and cost structure, you can then proceed to analyze profitability using a structured framework. Typically, this framework includes components like revenue, cost of goods sold (COGS), operating expenses, and profit margins.

By starting with clarifying questions about revenue and costs, you demonstrate your analytical approach and ensure you have a solid understanding of the business context before diving into the analysis. This method is generally well-received in case interviews as it shows your ability to gather relevant information and structure your analysis effectively.

Hi there,

Clarifying questions should come before the framework.

Remember, the whole point of clarifying questions is to HELP you CREATE the framework.

==============CLARIFYING QUESTIONS============

There is not single question you "must" ask. Rather, every case is different. You need to ask questions that help you better understand the situation (objective, business model, etc). AND help you narrow your scope and focus your framework.

If there's no specific timeline there's no specific timeline.

Let me add to this - please don't ask timeline questions just for the sake of asking timeline questions. If, for example, the prompt is "We've seen an increase in demand and need to ramp up production", asking for timelines is silly...we know the answer to be ASAP. If you ask timelines, you both waste a question and show you don't think critically about problems!

I'll repeat: You need to ask questions that help you better understand the situation (objective, business model, etc). AND help you narrow your scope and focus your framework.

Here are some more dos and donts of casing:

https://www.preplounge.com/en/articles/dos-and-donts-in-a-case-interview
 

https://www.preplounge.com/en/articles/candidate-led-cases-what-to-expect-and-example-cases

Hi there!

It depends (I can't stand writing these two words, but honestly, it depends). 

It depends on the type of case - if you have an interviewer-led case it makes sense to drop the whole structure end to end right at the beginning. If you have candidate-led it makes sense to be more targeted and then you'd only want to deep dive in the parts that are most relevant for identifying/ developing / strengthening the hypothesis. 

It depends on the prompt - even if it's a profitability case, I wouldn't go straight to the typical revenue / cost type of structure.  Try to show creativity and come up with something that is tailored to the client situation. 

It depends on the interaction with the interviewer - ideally the interview should resemble a conversation. If the interviewer is chatty and interactive with you a lot, then reflect their style and start asking more questions from the beginning. 

In the end, the interaction with the interviewer is all about connection and calibration. It resembles a dance to a certain extent.

Best,
Cristian

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• Clarifying questions are questions you ask at the start to get more info about the case. They are not probing questions, which you ask later to test your ideas and dig into the data.
• Clarifying questions should be relevant, specific, and concise. They should help you understand the case better and plan your structure and approach.
• A good way to ask clarifying questions is to follow the MECE principle. This means you should ask questions that cover everything without missing or repeating anything.
• Some good clarifying questions on a profitability case are:

1. What is the time and place of the case?
2. What is our client’s profitability and how does it compare to others?
3. What are the main things that affect profitability and how are they measured?
4. What are the main changes in profitability and why?
5. What is our client’s goal and how do we know if we succeed?

• You should avoid asking clarifying questions that are too broad, vague, or obvious. For example, don’t ask:

1. What is profitability?
2. How can we make more money?
3. What are the best ways to improve profitability?

• You should also avoid asking clarifying questions that are too detailed, complex, or analytical. For example, don’t ask:

1. What is the exact math for profitability?
2. What is the best price change for profitability?
3. What is the effect of each factor on profitability using math?

• You should also avoid asking clarifying questions that are leading, suggestive, or biased. For example, don’t ask:

1. Is profitability a problem for our client?
2. Should we focus on revenue or cost?
3. Should we suggest a merger or acquisition?

Hope this helps you ask better clarifying questions. Good luck!