Revenue/Cost framework vs business framework?

Honestly, it depends! You need to think about the industry/business context, the company context, and the situationally/problem context. Only then can you create an appropriately tailored cost breakdown.

In general, for determining cost issues, you need to break down the problem into a tree/root-cause analysis and ask the highest level (but specific) questions first! In this way, you essentially move down the tree.

How do you identify where to look? Well, you need to look into whichever of the following 5 make the most sense based on where you are:

1. What's the biggest? (i.e. largest piece of the pie...most likely to change the end result)
2. What's changing the most? (I.e. could be driving the most and most likely to be fixable)
3. What's the easiest to answer/eliminate? (i.e. quick win. Yes/No type of question that eliminates a lot of other things)
4. What's the most different? (differences between companies, business units, products, geographies etc....difference = oopportunity)
5. What's the most likely? (self-explanatory)

You can totally use your own framework, as long as it solve the problem, which means of course your framework need to be effective and comprehensive enough. You might need to to test it on a few cases and keep improving them (and customise each time the case context changes).

Best,

Emily

Hi Alex,
please do not do the classical error of copy-pasting frameworks from books or from good solutions. These kinds of structure should only be a basis in your mind to build everytime a customized case-specific framework.

Best,
Antonello

Hi,

First of all - 99% of the frameworks in case books are useless and you should not use them for MBB interviews (However they'll be ok for big4)

Secondly - you should use your structures, yes

Thirdly - there is no revenue framework. There is a profitability framework, that is disaggregating mathematically profits into revenue and costs

I would recommend the following approach:

1) Ask clarifying questions:

- Clarify the business model (i.e. how the business works and what are the revenue streams / core products or business lines). Why do you need to know the revenue streams? Because it's one of the most critical pieces in understanding the business model. An example is Oil&Gas with up-, mid- and down- streams that are completely different businesses.

- Clarify the objective both in money terms and timeline (e.g. Our objective is to increase profits by 5M in 5 years). When you have a to select from several options in a case - clarify the selection criteria

- Clarify other possible limitations if you feel that it's necessary

2) You make a classic profitability structure adapting it to the case. Sometimes cases are not that easy as just declining profits. For example, if the profits are lower than planned, it is either because we have problems with profits or we have problems with planning. Try to be MECE here.

3) While you do your structure and split revenues into price and quantity - add proactively the 3rd box with the "Mix". Thus you show your business sense and demonstrate that you know the most common case traps. Pls note that the "mix" can be anything - geography, customer, product, etc. You split the costs into fixed and variable.

Note that this approach only works if you have 1-3 products. If you have a case on retail or restaurant, for example, you should split number of customers and av check.

3) Costs I would split into Fixed and Variable

4) I would start the case by checking whether its increasing revenues, declining costs, or both - so that you could eliminate the part that is irrelevant

5) If it is the quantity problem I would further analyze whether it's the external market problem or internal one

Best!

Hello!

Without knowing how your "persona framework" looks it is difficul to say. Also, when casing, is normally dargerous to talk in absolute terms such as "is always better to...".

A priori, one would say that originality is a plus, and the traditional frameworks tend not to work to crack the interview.

Hope it helps!

Best,

Clara