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Starting with Financials

Anonymous A

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 replied on 01/10/2019
McKinsey Engagement Manager & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 60+ candidates secure MBB offers

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 01/10/2019
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

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 01/10/2019
Ex-MBB, Experienced Hire; I will teach you not only the how, but also the why of case interviews

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...)