Current BCG Active Project Leader |Former A.T. Kearney |+8Y of consulting experience | Received 8 consulting offers in the past 2Y
Book a coaching

Structuring profitability cases

Anonymous A

I've seen so far that we should avoid asking questions which could already lead to a solution while doing the background check, before coming up with a framework to structure the case. That being said, I wonder if in a profitability case is it ok to ask for costs and revenues' segmentations for the business, prior to lay down the appropriate structure i.e. profits = revenue - costs, revenues=volume*...

I'm afraid that could be seen as an initial approach in a unstructured way (not a best practice), althoug I think it could lead to a more directioned approach for the framework.

(edited)

  • Upvotes
  • Date ascending
  • Date descending
Hugo
Expert
replied on 09/11/2017
Current BCG Active Project Leader |Former A.T. Kearney |+8Y of consulting experience | Received 8 consulting offers in the past 2Y

Dear Future Consultant,

At the beginning, it is tough to draw the line between the so called "initial questions" and the "structure." To master this skills would require practice, and what you have to ask on each side of the line will depend solely on the information the interviewer gives you and your preparation.

I agree with Francesco's initial approach and Dane's comments, but I would like to build on both comments and propose the following approach to any case, which also applies to a profitability case:

1) Rephrase the business problem, if you receive any numeric goals, try to do some math beforehand (e.g. "the client has hired us to increase revenues by 15% or US$ 100 MM)

2) Ask for secondary objectives, but not just ask but be proactive and state which could be some potential secondaries targets for the case (e.g., "There is an underlying goal I should be aware such as "increasing market share since the company's strategy ..... ")

3) Ask clarifying questions: This requires practice to "draw the line". Usually, I recommend not to ask more than 3 questions that are relevant or critical to understanding the business case. Nature will depend on the case, your preparation and, even, the interviewer personality. Some examples are: in which country the client operates? Which is the size and profitability of the customer? Can you explain to me more about the disease that this product is aiming to cure? How long will be the contract between the government and our client? ... etc.)

4) Lay down your structure: In a profitability, case do not stick only to revenues and cost, otherwise, you will never stand out from other candidates.

I hope this helps in your preparation,

Regards,

Hugo

Francesco replied on 09/10/2017
Ex BCG | MBB Specialist | #1 Expert for meetings done (1000+) and recommendation rate (100%)

Hi Anonymous,

I agree with Dane, in general before structuring you could ask two broad types of questions:

  1. Clarify information provided by the interviewer (eg if i got it right, industry XYZ business model works so and so, is that correct?)
  2. Clarify the specific goal you should achieve (eg which is the target in terms of profits the client wants to reach?)

Having said that, in general there are no minus if you also ask if we have information on the segmentation the client uses, but there are no major benefits compared to asking later on. Moreover, for few interviewers that may lead to think you are not very structured. For these reasons, I would rather ask for that information inside your structure rather than right at the beginning.

Hope this helps,

Francesco

Sibren
Expert
replied on 09/10/2017
Two years conulting experience, went through lots of interviews and coached several candidates to MBB offers

Hi,

I agree with the provided answers. I would avoid taking the bet on diving into a segmentation before you explained your hypothesis / structure.

However I believe it's important to gain some background info before formulating your hypothesis, in order to make it accurate enough. I'm thinking questions like:

  • Industrywide problem?
    • Allows to include or exclude external factors in the structuring
  • Any recent changes in the clients business? (orga structure, regulation, ...)
  • What exactly are they selling, doing, ... to make money?
    • Make sure you feel 100% comfortable and understand the product/business before going to the structuring part

Hope this helps you!

Dane Cooper replied on 09/09/2017

By background check, you mean the initial few background questions asked after receiving the case prompt, right? If I am interpreting this correctly, my suggestion would be to stick to more general questions first: What are Profits, what are costs, what are revenues. Then, use this to structure out your profitability problem. Obviously, depending on what the prompt asks/directs you towards should guide your questions.

That being said, I would not ask for segments up front unless there was a clear statement in the prompt leading me to do so for two reasons: one, to avoid looking unstructured, and two, because it's too specific right off of the bat. It seems like a much safer option to lay out your structure, and then verbally explain the path you want to take and why.

Now, that's just my opinion, and there are many ways to structure a case correctly. However, by not asking for segments up front, you can present something in the cost/rev segments as a potential hypothesis.

Vlad replied on 09/11/2017
McKinsey / Accenture / More than 300 real MBB cases / Collected all Big 3 offers / Harvard Business School

Hi,

Good question! From my experience, 80% of mistakes in case take their roots from the beginning of the case process (Misunderstanding objective, misunderstanding the business model, and lack of a proper structure)

The short answer to your question: I don't ask any information about the costs in advance, but I want to know what are the revenue streams. This question makes much more sense. I have seen tens of cases where multiple revenue streams was an issue. And if you are good with the industries it's quite hard to mess up with the cost structure. So just split them into fixed and variable at this point.

Overall the process should be the following:

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)

- 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) Repeat the objective and most important business model factors

3) Now when you've identified the most important factors - take a minute to make a structure

Good luck!

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.

4 Comment(s)

Case Studies

The case study is the most important element of the case interview, which you'll have to nail in order to get into strategic consulting. Here you can learn the specific skills and concepts necessary to solve them.

4 Comment(s)

Getting Up to Speed

In order to repeatedly demonstrate prerequisite skills under the pressure of a real case interview, you need to learn the basics and practice cases.

3 Comment(s)

Focusing on The Core: Mock Interviews

It is to practice as many cases as possible - both as interviewee and as interviewee. Here are a couple of guidelines to help you get started

2 Comment(s)

Related case(s)

DHL Consulting case: Bike Shop

Solved 19.9k times
4.3 5 9994
| Rating: (4.3 / 5.0)
Difficulty: Beginner | Style: Real Case | Topics: Growth strategy, Profitability analysis

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 11.2k times
4.3 5 2926
| Rating: (4.3 / 5.0)
Difficulty: Beginner | Style: Real Case | Topics: Profitability analysis

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 10.1k times
3.9 5 4816
| 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 ... Open whole case

Bank envelope

Solved 26.1k times
4.4 5 871
| 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 ... Open whole case

Chewing gum

Solved 24.0k times
4.4 5 543
| Rating: (4.4 / 5.0) |

Your client is a chewing gum manufacturer. The CEO of the manufacturing company wants you to find out why his company is experiencing a declining profit margin. He then wants you to suggest ways to improve his company’s profit margin. Open whole case