{ "media_type": "text", "post_content": "🙌🏼Strategy consultants:how would you solve this question in an interview (model/framework w/out the numbers):\"what is the profitability of opening a smoothie shack in downtown LA\". Do you need data?", "post_id": "57e4fa2e9077f50e002b43d5", "reply_count": 12, "vote_count": 1, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting", "feed_type": "crowd" }
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## Assumptions: 1/ fixed costs are \$1m per year, 2/ margins are 60%, 3/ 350 customers per day, 4/ average purchase price is \$10. Daily break even sales = \$1m / 365 / 6 = 456. Since you have 350 customers now, you need to have an additional 106 customers per day to reach profitability. Alternatively, you can set profit margin to "x" and solve for the desired profit margin at currently customer volume (350). This is super a super basic example, sorry!

Why don't you give it a shot of working through it yourselves. All about the process.

Use the MECE analysis method popularized by McKinsey. "Mutually exclusive collectively exhaustive". You make assumptions in a tree diagram, then make sub-assumptions until you go further down the tree. Eventually, an assumption may prove false, so that "branch" of the tree dies, but you still have other branches. Good visual tool.

Nope! Thanks E2.

Thanks everyone! E2 that was really helpful as well!

@EY2 in your example why did you say you need an additional 106 customers to reach profitability? If daily break even is \$456, you have 350 customers a day, margin 60% at \$10 purchase price, isn't 350 x 10 x .60 = 2,100 enough to be profitable per day? By 2,100 - 456 = \$1,644 profit per day? If anyone follows this logic please comment to confirm!

Just kidding! I'm an idiot - thank you!

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