Our client's profitability has been falling for two years: what do you recommend?

• A structure that talks about the client. If your tree could serve an airline as well as a bakery, it is not finished. The branches should use the words of the case: the product lines, the channels, the cost items specific to the industry.
• The reflex to locate before explaining. Asking whether the decline affects all products, all regions or all customers lets you eliminate three quarters of the tree quickly.
• The distinction between what comes from the company and what comes from the market. A margin falling in line with every competitor's does not call for the same answer as one dropping alone.
• A hypothesis. As soon as you have two or three facts, say what you suspect and test it, instead of asking questions in the order of your list.

1. 1

   Restate and pin down the objective

   Is it margin in absolute terms or as a percentage? Since when, by how much, and what level does the client want to return to, over what horizon? The answers change the rest of the case.
2. 2

   Build a structure in three blocks

   One block to locate the decline on the revenue side (price, volume, mix, by segment), one to locate it on the cost side (variable and fixed, by the items specific to the business), and a third on context: what has changed among competitors, customers or suppliers. That third block is the one candidates forget.
3. 3

   Ask for the numbers and cut branches

   If revenue is flat, say so out loud and move to costs without lingering. The interviewer wants to see that you can drop a lead.
4. 4

   Go from the cause to the levers

   Once the cause is identified, propose two or three actions, ranked by impact and timing, then close with a recommendation.

"If I restate: our client is a kitchen furniture maker whose operating margin has been falling for two years while revenue is growing, and it wants to understand why and how to get back to the previous level. Before structuring, I have two questions. Does the decline affect all its ranges? And are its competitors seeing the same trend?

I suggest looking at three things. First revenue: since sales are rising, I want to know whether that is volume or price, and whether the mix has shifted towards less profitable ranges or channels, for example more sales through distributors than through its own stores. Then costs, starting with those that weigh most in this business: timber and panels, factory labour, then fitting and delivery. Finally the context. My starting hypothesis, given that sales are up, is a mix effect..."

This example is made up: it shows the tone and the construction, not a script to memorise. Your answer has to come from your own experience or from the data the interviewer gives you.

• Reciting "revenue is price times volume, then fixed and variable costs" without a word about the industry. It is the most heard structure in interviews and sets nobody apart.
• Exploring both branches in full when the data closes one of them in the second minute.
• Stopping at the finding. "Raw material costs went up" is a diagnosis, not a recommendation.
• Forgetting mix. Stable prices and volumes per product can hide a shift towards the least profitable products.