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Starting with Financials

Anonymous A asked on Jan 10, 2019

What is an ideal way to start a structure whether it be market entry, investment, or profitability?

Is it okay to start with the financials to evaluate if it numerically makes sense to invest, enter market, and then evalue the market, company itself, etc?

Or should you analyze the market, and company first to see if its big enough and we have key capabilities, and then do the math?

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Sidi updated his answer on Jan 10, 2019
McKinsey Engagement Manager & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 80+ candidates secure MBB offers
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Hi Anonymous,

the market, the company, the customer preferences etc. all play into the financials. The financials are DRIVEN by these factors! So you need to outline the numerical driver tree, and then connect the aforementioned factors to the metrics and sub-metrics in your tree. Then in analyzing, you need to examine the market, customer preferences etc. in order to derive the financials.

Cheers, Sidi

(edited)

Vlad replied on Jan 10, 2019
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Hi,

Whatever you are assessing you are assessing with the numbers. How can you assess the investment without the market / company growth rate? As far as I remember it's the part of the DCF valuation formula:)

Best!

Guennael replied on Jan 10, 2019
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I think you can go either way. Personally, I like to understand the bigger picture so typically start with a business-focused framework; others will prefer to dive into the numbers right away. Both work, just make sure to be MECE and address the relevant paramaters (revenue / demand, costs, trends, risks, capabilities...)