In a structure, should I isolate the multiple revenue streams under the revenue branch?

online retail profitability Retail Structure
New answer on Aug 02, 2021
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Anonymous A asked on Jul 31, 2021

For example, a retailer can generate revenues from direct sales and revenues from retailers.

Should I isolate the revenue stream separately or should I combine them as a whole? For example, if I were to combine them then it would be the number of consumers X average price per product.

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Sidi
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updated an answer on Jul 31, 2021
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 300+ candidates secure MBB offers

Hi!

The rule is very simple: Always FIRST segment! You always first split into the segments! Otherwise you create utter chaos with mutidimensional matrices (as can be seen in your tree - because if done accurately, you would then also need to split the fixed and variable costs into the different streams, which is completely chaotic!

So instead, you split as follows:

Level 0: [Profit]

Level 1: [Profit from Direct Sales] and [Profit from Retailers}

Level 2: For each segment: [Revenues] and [Costs]

Level 3: and so on...

Cheers, Sidi

P.S.: If you have indirect costs (which can not be clearly allocated to a specific segment), then you add these indirect costs to Level 1 --> then you have three branches on Level 1: [Profit from direct Sales] + [Profit from Retailers] - [Indirect Cost]

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Ian
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replied on Aug 02, 2021
BCG | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

Sidi is absolutely right. If your problem is trying to grow revenue, then you cannot just group them all up together. Rather segment them out by whatever makes sense (customer channel, sales channel, product, geography etc.) in order to best investigate the root cause / main levers!

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Sidi gave the best answer

Sidi

McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 300+ candidates secure MBB offers
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