There are many types of consulting case interview types, one of the most popular is the classic profitability case.
The profitability case covers the most core propositions in business…. profit! Profit naturally consists of revenues of a company minus their costs.
Revenues
Revenues consist mainly of two things, the products/services offered and their volumes. Usually, increasing revenue means either changing the products/service offered or increasing the volume of what is currently offered. Think for example of a grocery store, where they might have to change up what they offer or focus on selling more of what they currently offer.
Costs
Costs, the other side of the equation, consist of two parts, fixed costs and variable costs. Fixed costs are costs that generally don’t change based on the number of goods offered. Think with the grocery store example as the retail location or the number of employees in the location. Variable costs are costs tied to the number of goods sold, for example a factory would need more components to produce electronics which would have increasing variable costs.
Metrics
In the profitability case interview, generally the focus would be to balance both sides of the profitability equation to reach the desired goal of either increasing profitability or at least getting the firm to profitability. The time frame of this would depend on the different profitability metrics for example:
Net Profit Margin – This measures how much net income is generated as a percentage of sales.
Gross Profit Margin – This shows the relationship between a company’s revenues and the cost of goods sold (COGS).
Operation Profit Margin – This margin considers operating profit, which is the profit earned from a company’s core operations, excluding deductions of interest and taxes.
Frameworks
In order to solve the issue of profitability there are a number of frameworks available. One of the most popular of these frameworks is the 3 Cs framework, standing for customers, competitor, company. By focusing on what the customers, competitors, and the current company are doing, it is easier to see where changes might be needed to bring a company to profitability.
Another key method based the Cs framework is benchmarking. Benchmarking against competitors of the company is important to gauge how well it is performing and what might be out of alignment.
Besides frameworks there are many other things to consider like sales channel, geographies, and customer types. All of these areas play a key role in building strategies to improve a company’s profitability.
In summary, the profitability case is one of the most frequently used cases for case interviews. Preparing for it is key to having a good chance at landing a role in consulting.
About PrepareConsult:
PrepareConsult is a platform to practice the consulting case interview with AI and peers. PrepareConsult is founded by Milad Mohammadi and Sahhas Nathella.
Milad Mohammadi – 7+ years of experience in consulting and professional services with experience across North America and Europe.
Sahhas Nathella – 5+ years of experience in consulting and professional services with strong experience in complex digital transformations.
PrepareConsult 