expert
Expert with best answer

Vlad

97% Recommendation Rate

346 Meetings

4,770 Q&A Upvotes

USD 319 / Coaching

"I'd like to segment Revenue into its components" - Victor Cheng

Dennis asked on Feb 06, 2019

As many of the readers of Victor Cheng might have noticed he is advising not to think too much about the possible ways to split revenues in a profitability analysis (#sales*rev./sale, price*quantity, #customers*rev./customer) but rather ask the interviewer directly for the segmentation to save time. I just want to run a reality check on this, do the interviewers today handle it the same way and hand you that arguably valuable information on a silver platter once you ask for it or would they ask you to make a reasonable assumption and explain why.

3 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Vlad replied on Feb 06, 2019
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School
Book a coaching with Vlad

97% Recommendation Rate

346 Meetings

4,770 Q&A Upvotes

USD 319 / Coaching

Hi,

Agree with Guennael,

  1. I would ask about the revenue sources even earlier, in the clarifying questions before the actual structure. "Could you pls tell a bit more on how the company is earning money?"
  2. If there are multiple revenue streams - you can segment the revenue by the revenue streams in your structure
  3. If there is a single revenue stream - you simp0ly split the revenues into price / units / mix or customers / avg check

Best!

Sidi
Expert
replied on Feb 06, 2019
McKinsey Engagement Manager & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 90+ candidates secure MBB offers
Book a coaching with Sidi

100% Recommendation Rate

296 Meetings

1,754 Q&A Upvotes

USD 319 / Coaching

Rigorously disagregating revenue always means to break down revenue into the different streams at the first level, and then disaggregate further by means of Price*Quantity and further down.

Best, Sidi

Guennael
Expert
replied on Feb 06, 2019
Ex-MBB, Experienced Hire; I will teach you not only the how, but also the why of case interviews
Book a coaching with Guennael

99% Recommendation Rate

246 Meetings

1,230 Q&A Upvotes

USD 319 / Coaching

"I'd like to segment revenue into its components" is only the first part of the equation. Next, you must lay out how you will break that revenue down. That won't be sufficient though: If you ask point blank "what are the costs", I will think you are fishing for an answer and will then not want to help you.

Something like "Next, I want to look at the fixed costs; typicall costs I can think of would be rent and utilities; do we have numbers for these? Is there any other fixed cost I am not thinking of that would be relevant here?" => you show me you did your homework and came up with a couple of likely examples. Only then will I want to help you and move along.

PS: Probably >50% of all worldwide MBB admist for the last 7-8 years have used one or more of Victor Cheng's products. For better or for worse, he is basically the baseline reference now.

Related BootCamp article(s)

Profitability Case

Learn to crack Profitability Framework Consulting Cases, which are the number 1 reason for real consulting projects and hence are an important case type.

Related case(s)

DHL Consulting case: Bike Shop

Solved 39.6k times
4.3 5 10804
| Rating: (4.3 / 5.0)

You have been hired to support the owner of a bike-shop as a business consultant. The bike-shop has suffered a significant revenue decline during the last year, and now the owner would like you to assess the situation and options for the way forward. They want to know last year’s profit, i.e. how i ... Open whole case

Oliver Wyman case: Setting up a Wine Cellar

Solved 33.0k times
4.3 5 3274
| Rating: (4.3 / 5.0)

I’m thinking about setting up a wine cellar in my basement. The way I see it, shelf space would be divided into two sections: (1) a “drinking” section where I store bottles for my own consumption and (2) an “investment” section where I store bottles that I intend to sell at a profit after they appre ... Open whole case

zeb case: Private Bank Anytown

Solved 19.4k times
3.9 5 4978
| Rating: (3.9 / 5.0)

Private Bank Anytown disposes total assets of approx. EUR 3 bn on December 31, 2014. The growth strategy of the institution determined at the end of 2010, however, has a higher impact on the cost side than on the income side. Aggregated to the return on equity as defined central parameter of the ba ... Open whole case

Bank envelope

Solved 44.6k times
4.4 5 1762
| Rating: (4.4 / 5.0) |

Your client, Customlope, is the leader in the US secure envelope manufacturing industry. Banks buy these envelopes for operations such as money deposits and high value transactions. Next year, a new digital technology will reduce the overall number of units sold in the industry by 25%. In the shor ... Open whole case

Madflix.com

Solved 42.5k times
4.4 5 2042
| Rating: (4.4 / 5.0)

Our client is madflix.com, a website similar to Netflix. The biggest difference is however that Madflix targets mainly men and provides a majority of “mad movies”, such as action, horror or science-fiction movies. Clients sign up online, order online, receive the movie and mail it back. Madflix is ... Open whole case