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In this profitability case interview example, I’m going to show you the three steps you need to take to solve any profitability case. You’ll have a robust profitability framework that will differentiate yourself from other candidates.

Profit and loss case interviews are the most common types of cases you’ll encounter in consulting first round interviews. There is a very high likelihood you’ll see one of these in a firstround interview, especially at firms such as McKinsey, BCG, Bain, Deloitte, or Accenture. Therefore, you should be very familiar and comfortable with these types of cases.

A profitability case will sound something like this: “An electric car manufacturer has recently been experiencing a decline in profits. What should they do?”

To solve this, you need to take three steps:

First, you want to understand, quantitatively, what is the driver that is causing the decline in profits? Is it that revenues have gone down, costs have gone up, or both?

Second, you want to understand qualitatively, why this is happening? You'll look into areas such as customer needs and preferences, suppliers, competitors, and market trends.

Third, you want to brainstorm ideas to improve profits and determine which recommendation is best by assessing the advantages and disadvantages of each option.

If you build an intuition for thinking about profitability cases in this structured way, you’ll be able to solve any profitability problem with ease. With enough practice, profitability cases will be fairly straight forward and repetitive for you.