Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
6

Structuring profitability cases

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.

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)

6 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer

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

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

Book a coaching with Sibren

0 Meetings

13 Q&A Upvotes

USD 149 / Coaching

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!

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!

Book a coaching with Francesco

100% Recommendation Rate

2,963 Meetings

7,026 Q&A Upvotes

USD 379 / Coaching

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

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

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.

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.

Yes, I meant the initial background questions! Thank you for your opinion, my fear indeed was looking unustructured. Even if I were extremely clear that once it was a profitabilty case I would look into costs and revenues and so I needed to know how they were segmented, the safer option to go seems to be draw a structure first to show the enterviewer what you are thinking and why, and only then start to make questions specifically about the branch you are analysing! right? thanks again! — Cilene on Sep 09, 2017 (edited)

I agree that it's safer to stick to clarifying questions or more broader questions when asking background questions. I think it's just a good rule of thumb. Now, there are cases where you may be prompted to ask about segments initially for example, if a case said something like "Profits have been declining and sales in both of company Z's products have declined." I think this would be when it'd be reasonable to ask well what are the two products, how much has each products sales declined by or what are they, etc.. And then ask for a moment to structure your thoughts and move on through your analysis. Hopefully this was helpful, but I think it's just a safer way to ensure that you dont mistakenly get points taken off for making the interviewer potentially think that you were asking things in an unstructured manner. Plus, consultant's love the safer option, why take the risk if you don't have to, right ;)! — Dane Cooper on Sep 10, 2017

Book a coaching with Vlad

97% Recommendation Rate

389 Meetings

7,964 Q&A Upvotes

USD 239 / Coaching

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!

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!

Book a coaching with Andre

100% Recommendation Rate

87 Meetings

3,985 Q&A Upvotes

USD 239 / Coaching

Dear A,

There are different ways to structure the profitability case. As you already know, profitability is equal to revenues - costs.

There are 3 typical ways on how you can structure the revenues and segment them:

1. by customers,

2. by products

3. by geographical markets

Regarding the costs you may structure them either in the fixed and variable cost, or may also structure them by different kinds of cost - like personell cost, material cost, etc. The other way to look about it is to structure the cost along value chain.

So, depending on the case you might use different approaches and segment your revenues and cost side.

Recently I've uploaded a profitability case “Deep Water rescue” (available in English & German) here on Preplounge:
https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/advanced/deep-water-rescue-206

I used similar cases when I was interviewing candidates on my own in Central Europe (Germany & DACH Region), Eastern Europe (Ukraine & Russia) as well as Middle East (Dubai, KSA, Lebanon, and Qatar). So, this case is very advanced and could be typically used in the 2nd or 3rd interview rounds by the leading consulting firms.

Try, whether you can crack it.

Best,
André

Dear A,

There are different ways to structure the profitability case. As you already know, profitability is equal to revenues - costs.

There are 3 typical ways on how you can structure the revenues and segment them:

1. by customers,

2. by products

3. by geographical markets

Regarding the costs you may structure them either in the fixed and variable cost, or may also structure them by different kinds of cost - like personell cost, material cost, etc. The other way to look about it is to structure the cost along value chain.

So, depending on the case you might use different approaches and segment your revenues and cost side.

Recently I've uploaded a profitability case “Deep Water rescue” (available in English & German) here on Preplounge:
https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/advanced/deep-water-rescue-206

I used similar cases when I was interviewing candidates on my own in Central Europe (Germany & DACH Region), Eastern Europe (Ukraine & Russia) as well as Middle East (Dubai, KSA, Lebanon, and Qatar). So, this case is very advanced and could be typically used in the 2nd or 3rd interview rounds by the leading consulting firms.

Try, whether you can crack it.

Best,
André

(edited)

Related BootCamp article(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.

1 Q&A

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

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.

1 Q&A Quiz

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.

1 Q&A

Related case(s)

DHL Consulting case: Bike Shop

Solved 49.7k times
DHL Consulting case: Bike Shop 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 it was affected by the revenue decline, and what the priority actions are to survive the next year. (short term) In addition they would like to understand the strategic competitive position of the shop better and how to increase revenues again mid- to long-term.
4.3 5 11244
| Rating: (4.3 / 5.0)

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 49.6k times
Oliver Wyman Case: Setting up a Wine Cellar 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 appreciate in value several years down the line. The idea is to earn enough money with the “investment” section of the cellar in order to subsidize whatever I consume in the “drinking” section over time.   I'm obviously constrained by several things: the amount of money I am able to spend, the amount of wine I can (or want to) drink, the space available for the cellar, and so on.
4.3 5 3478
| Rating: (4.3 / 5.0)

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 23.7k times
zeb case: Private Bank Anytown 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 bank, the negative result of EUR -640 k in 2014 resulted in a key figure of -0.3%. Thus, the bank is miles away from the target parameter of 20% ROE defined by the supervisory board. Since no improvement is in sight for 2014, the board of directors of Private Bank is asking you for help.
3.9 5 5074
| 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 ba ... Open whole case

Bank envelope

Solved 55.6k times
Bank envelope 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 short term, our client wants to maintain his current profit level without investing in the new technology. How can you help him?
4.5 5 2259
| Rating: (4.5 / 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 shor ... Open whole case

Chewing gum

Solved 52.4k times
Chewing gum 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.
4.4 5 1913
| 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