AC 1st Round Interview

Paper Records Storage Co.

Reminder: Do not prepare print-outs for the candidates – all

information is to be provided voice-over only

DRAFT
Case structure overview

Case flow
Situation
• Read out the situation, complication, and key questions
• Answer questions from the candidate on the situation, using the background information

Question 1
• Q1: How would you structure your approach to help the client?

Question 2
• Q2a: The CEO mentioned that they were thinking of changing the pricing structure, reducing the storage price to $10 per box but increasing destruction
rate to $40 per box. Assuming that the number of boxes stored and destroyed remains the same as today, should they change the pricing structure?

• Q2b: What would the number of boxes stored have to be for this new pricing structure to result in the same revenue as the original scheme? Where is the
breakeven point?
• Q2b: Follow-up: Is it feasible to reach this breakeven?

Question 3
• Q3: Given that the pricing scheme change seems unlikely to help with boosting revenue, what other things could you try? Again, this is focusing on
revenue.

Wrap up
• Ask candidate for their overall recommendation / summary of the case

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Situation, complication, and key questions

Situation • Your client is a paper records storage company. The company picks up boxes full of paper at
various corporations (banks, for example) and stores them
• Your client uses a 160,000 cu ft facility to store the boxes, and charges an annual rent for
storage per box.
• Your client also destroys/shreds the boxes with documents when asked by the customer, at
a price per box

Complication • Business has been declining as customers use less paper and use digital tools more
• Due to this, the client is looking for ways to boost their revenue. They are hoping we can help
them out!

Key questions • Q1: How would you structure your approach to help the client?
• (Hold further questions until candidate sets out structure, included here for interviewer
reference) Further questions to be explored are:
– Q2a: Does a new pricing structure result in increased revenue?
– Q2b: What is the number of stored boxes required for the new pricing structure to work?
– Q3: Outside of a pricing change, what else could the client do to boost their revenue?

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Question 1:
Approach Structure

Question 1 • How would you structure you approach to help the client?

Info • N/A
provided

Model • Candidate should draw framework that explores quantity and price components of revenue. Sample framework provided below
answer
• Revenue framework:
– Price
> Change prices (e.g., increase, tiered pricing)?
– Quantity
> Capture new clients (e.g., advertising, M&A, geographic expansion)
> Capture higher volume from existing clients (e.g., new services)

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Question 2a:
New pricing structure

Question 1 • (Guide candidate towards price component for this question)

• The CEO mentioned that they were thinking of changing the pricing structure, reducing the storage price to $10 per box but increasing
destruction rate to $40 per box. Assuming that the number of boxes stored and destroyed remains the same as today, should they change
the pricing structure?

Info • Key datapoints (can be shared in previous stage if interviewee asks as part of clarification questions):
provided – Share if asked: Standard size of a box is 2x2x2, i.e. 8 cu ft.
> Do not share: Warehouse can hold 20,000 boxes at 100% utilization (for simplicity we can neglect space in between boxes / walkways)
– Share if asked: Warehouse is currently at 90% utilization
> Do not share: Means currently holds 18,000 boxes (for simplicity we can neglect space in between boxes / walkways)
– Share if asked: Current annual rent per box is $12
– Share if asked: Current destruction fee is $30, note that destruction would happen at ‘end of year’ and price would be additional to that year’s rent, for simplicity
– Share if asked: There is a net outflow (i.e. destruction) of 500 boxes per year, assume unchanged given price change

Model • Revenue under current pricing scheme:

answer – Revenue from storage = 18,000 boxes x $12 per box = $216,000
– Revenue from destruction = 500 boxes x $30 per box = $15,000
– Total revenue = $231,000

• Revenue under new pricing structure

– Revenue from storage = 18,000 boxes x $10 per box = $180,000
– Revenue from destruction = 500 boxes x $40 per box = $20,000
– Total revenue = $200,000 ($31,000 less than the revenue under the current pricing scheme)

• Interviewee should answer they shouldn’t do it

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Question 2b:
Breakeven destruction rate

Question 2 • What would the number of boxes stored have to be for this new pricing structure to result in the same revenue as the original scheme? Where
is the breakeven point?

Info • All the information needed is provided in previous questions

provided

Model • Revenue under original scheme = $231,000

answer
• Revenue from new scheme = XX boxes * $10 per box + $20,000 outflow boxes

• XX boxes * $10 = $231,000 - $20,000 = $211,000

• Answer: XX boxes = $211,000 / $10 = 21,100 boxes is the breakeven point

Follow-up • (If not addressed by interview) Is it feasible to reach this breakeven?

question – Answer: no, breakeven would surpass maximum number of boxes that fit into storage based on space / utility constraints. Given this, a
different pricing scheme would be needed / it would be optimal to explore volume levers to increase revenue

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Question 3:
New revenue sources brainstorming

Question 3 • Given that the pricing scheme change seems unlikely to help with boosting revenue, what other things could you try?
Again, this is focusing on revenue.

Info • N/A – all the information needed is provided in previous questions.

provided

Model • Potential good answers:

answer – Additional services (i.e. document delivery, digitization, transcriptions, etc.)
– Store other records that are not paper (tape, hard drives, etc.)
– Use shredded paper for secondary business (i.e. compost, packaging material, etc.)
– Geographic expansion / acquisition of competitors

• Potential bad answers:

– Shifting to cost perspective and forgetting that objective was to raise revenues
– Completely unrealistic ideas (i.e. “get customers to use more paper”)

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Wrap-up

Conclusion • The CEO would like to know your recommendation. What do you tell them? How do you summarize
what we have just covered?

Assessment • A conclusion should be succinct, cover the main takeaways of the case analysis, and provide a final
recommendation
• Interviewee should hit on key points evaluated in past 3 questions

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