Week 1. Profitability Case #3. Inspired by McKinsey. 2021.

Five Ladies

Q1. Make sure the candidate follows these steps

Step 1. Do The best practice is to start with a 15-second big-picture overview, e.g. “I’d like to
horizontal assess this problem through the lens of four areas – first, …; secondly, …; thirdly, …;
presentation and finally …”

Check if the candidate covers all key points typical for a profitability case structure:
Profitability analysis Business model External factors
Step 2. Hit • Revenue analysis • Client segments • Growth rate
key points • Cost structure • Product portfolio • Competition
• Typical margin

To avoid cookie-cutter/generic approach, the candidates can incorporate 2-3 stories

into their structure presentation, e.g.:
• “In terms of the growth rate I’d think this is a mature market that has been
around for a while, so I don’t expect it to grow fast, maybe low single-digit
Step 3. Add numbers similar to the GDP growth rate”
stories • “I’d imagine this is a fairly consolidated space as the price pressure is high,
(optionally) margins are slim and you need to have scale to succeed”
• “Given strengthening interest for healthy food and cook-at-home meal-kits, the
client’s sales might be under growing pressure”

At the end of the structure presentation, it is helpful for candidate to show that they
Step 4. Finish can drive team forward and prioritize, e.g. “If this approach makes sense, I’d like to
with a explore financials first. Do we have any revenue data?”
question

© 2021 Peter K. More at Peter-K.org | 41

Week 1. Profitability Case #3. Inspired by McKinsey. 2021. Five Ladies

Q2. Key cost items

Your teammate is going to cover revenue analysis, and the manager asked you to explore
02 costs. What are the major expenses of Five Ladies?

Variable costs
Fixed costs
7• Labor [this is a labor-intensive business
1• Rent and utilities [as this is offline
with likely low level of automation]
customer-facing business]
8• Food supplies, packaging and smallware
2• Maintenance [to support cooking and
commercial equipment] 9• Distribution fees [in case Five Ladies use
UberEats, DoorDash or similar distribution
3• Marketing [likely high as this is a
partners]
commoditized industry and players win
market share through active marketing and • Credit card commissions
10
high brand awareness]
• Discounts [in case of promotions]
11
4• Overhead

5• R&D

6• Transportation

Note: This is just one of many potential ways to brainstorm. Please treat this example only as a reference point and develop your own style. [The candi-
date is usually expected to generate at least 4 ideas. The best practice is 7-8 ideas, structured approach, and on-the-fly delivery without taking notes]

© 2021 Peter K. More at Peter-K.org See e-course: “Brainstorming”, Lecture 4. “Key cost items” (10 min) | 42