Management Consulting terms
- 45
- terms
Consulting23
- Benchmarking
- Comparing a client's costs, prices, or performance with peers or best in class to find where it is out of line. It turns a vague goal like cut costs into a specific gap to explain.ExampleA retailer spends $1.2m a year to run each store against a peer median of $0.9m. Across 400 stores, closing that gap is worth $120m a year.See also Profitability framework, Hypothesis-driven approach, Issue tree
- Big Four
- Deloitte, PwC, EY, and KPMG, the largest accounting and professional services firms. Beyond audit and tax they run large consulting and deal advisory practices, such as EY-Parthenon and Monitor Deloitte.ExampleA summer intern in a Big Four transaction services team might spend weeks on a quality of earnings report for a PE buyer, testing whether a target's $30m of EBITDA holds up.See also Tier 2 consulting, MBB
- Break-even analysis (break-even, breakeven)
- Finding the volume at which revenue covers all costs: fixed costs divided by contribution margin per unit. Cases use it to test whether a launch, a new plant, or a price cut can pay for itself.ExampleFixed costs of $2m and a $20 contribution per unit ($50 price, $30 variable cost) break even at 100,000 units.See also Contribution margin, Fixed and variable costs, Market sizing
- Candidate-led case (interviewer-led case)
- A case in which the candidate sets the structure and decides what to analyze next, asking for data as they go. In an interviewer-led case the interviewer moves through a set list of questions, so each answer is judged on its own and you do not steer.ExampleCandidate-led: after laying out a structure, you say you want to look at costs first and ask for the cost breakdown. Interviewer-led: the interviewer asks for your structure, then hands over an exhibit, then a math question, in that order.See also Case interview, Issue tree, MECE
- Commercial due diligence (CDD)
- A consulting study of a target's market, competitors, and customers, done in a few weeks for a buyer, often a PE firm, before it bids. It answers whether the growth story in the seller's plan holds up.ExampleA PE firm bidding for a pet grooming chain hires consultants for a three-week CDD. They survey 1,000 pet owners, interview 20 competitors, and find the seller's 12% growth plan is closer to 7%.See also Due diligence, Private equity, Market sizing
- Contribution margin
- Price minus variable cost per unit: what each extra sale adds toward fixed costs and then profit. It answers whether growing volume helps, and by how much.ExampleA product sells for $50 with $30 of variable cost, so each unit contributes $20. Sell 10,000 more units and profit rises $200,000, with fixed costs unchanged.See also Fixed and variable costs, Break-even analysis, Unit economics
- Engagement
- A consulting project for one client, typically 6 to 12 weeks, staffed with a partner, a manager, and a few consultants. Consultants often call it a case.ExampleA 10-week engagement for a regional grocer: a partner, a manager, and three consultants on site Monday to Thursday, answering whether to close 40 underperforming stores.See also Engagement manager, Steering committee
- Engagement manager
- The consultant who runs the team day to day: sets the work plan, reviews every slide, and manages the client. It is usually a post-MBA role a few years into the job.ExampleOn Monday the EM gives each consultant a piece of the store closure analysis, reviews drafts Wednesday night, and walks the client's CFO through the findings on Friday.See also Engagement, Steering committee
- Fixed and variable costs (fixed costs, variable costs)
- Fixed costs stay the same whatever the volume (rent, salaried staff, software licences); variable costs rise with each unit made or served (materials, shipping, card fees). The split decides how fast profit grows or shrinks as volume changes.ExampleA bakery pays $8,000 a month in rent and wages whether it sells 1,000 loaves or 5,000, and $1.20 of flour and energy per loaf on top.See also Contribution margin, Break-even analysis, Profitability framework
- Hypothesis-driven approach
- Starting with a best guess at the answer, then gathering data to prove or kill it, instead of analyzing everything first. It is how consultants finish in weeks, and case interviewers look for it.ExampleA client's margins fell 4 points. The day-one hypothesis is rising freight costs; in week one the shipping data shows freight up 30%, so the team digs there instead of auditing every cost line.See also Issue tree, Case interview
- Issue tree
- A breakdown of a big question into smaller ones, each level MECE, until every branch can be answered with analysis. Why are profits falling splits into revenue and costs, then price and volume, and so on.ExampleShould the client open stores in Texas? Branch one: is the market attractive (size, growth, competition). Branch two: can we win (cost, brand). Branch three: does it pay back (investment, margins, payback period).See also MECE, Profitability framework, Hypothesis-driven approach
- Market sizing (guesstimate)
- Estimating the size of a market from logic and round numbers, such as how many coffees are sold in Chicago each day. Interviewers care about a clear structure and a sanity check, not the exact answer.ExampleCoffee shop cups sold in the US each day: 330m people, about half drink coffee, a third of those buy one out daily. 330m x 0.5 x 1/3 is about 55m cups.See also Case interview, Issue tree
- MECE
- Mutually exclusive, collectively exhaustive: splitting a problem into pieces that do not overlap and together cover everything. Revenue = price x volume is MECE; marketing plus online sales is not.ExampleSplitting customers into under 30, 30 to 50, and over 50 is MECE. Students, young professionals, and city residents is not: one person can be all three, and a rural retiree fits none.See also Issue tree, Pyramid principle
- Porter's five forces (five forces)
- A way to judge how profitable an industry can be: rivalry among existing players, the threat of new entrants, the threat of substitutes, the bargaining power of buyers, and the bargaining power of suppliers. Strong forces squeeze margins.ExampleAirlines face fierce rivalry, powerful suppliers (two big plane makers, unionized pilots), price-shopping buyers, and substitutes like trains on short routes, which helps explain thin margins.See also Value chain, Market sizing, Commercial due diligence
- Price elasticity (elasticity of demand)
- How much the quantity sold changes when price changes: the percentage change in volume divided by the percentage change in price. Above 1 in absolute value, a price rise loses revenue; below 1, it gains revenue.ExampleWith elasticity of -2, a 10% price rise cuts volume 20%. Revenue becomes 1.10 x 0.80 = 0.88 of what it was, a 12% fall.See also Profitability framework, Contribution margin
- Profitability framework
- The standard structure for a profit decline case: profit = revenue - costs, revenue = price x volume, costs = fixed + variable. Strong candidates tailor it to the industry instead of reciting it.ExampleProfit fell from $20m to $12m with fixed costs flat at $30m. Revenue is flat at $100m, price up 5% and volume down about 5%, so the $8m came from variable costs rising from $50m to $58m.See also Case interview, Issue tree, MECE
- Pyramid principle
- Communicating with the answer first, then the supporting arguments, then the data under each. It is how consultants write emails, slide titles, and the recommendation at the end of a case.ExampleSlide title: close 40 stores to add $25m of profit a year. Under it, three reasons (they lose money, their sales shift to nearby stores, their leases end within two years), each with its own data.See also MECE, Hypothesis-driven approach
- Steering committee (SteerCo)
- The regular meeting where the consulting team presents progress and findings to the client's senior executives. Most of the work on an engagement builds toward the next one.ExampleEvery other Thursday the team presents to the client's CEO, CFO, and COO: what it found, what it recommends, and what it needs decided. The late nights cluster in the two days before.See also Engagement, Engagement manager
- Tier 2 consulting
- Strategy firms just below MBB in recruiting prestige, such as Oliver Wyman, L.E.K., Kearney, Strategy&, and Roland Berger. The work is similar and the classes are smaller.ExampleA student without an MBB offer takes one at a tier 2 firm and spends the first year on pricing and operations projects for large companies, on teams smaller than an MBB case team.See also MBB, Big Four
- Unit economics
- Revenue and cost for one unit of the business (an order, a customer, a store) rather than the whole company. If one unit loses money, more volume makes losses bigger, whatever the growth rate.ExampleA meal kit sells for $60; food is $25, shipping $10, packaging $5, so each order contributes $20. With $80 to acquire a customer, that customer must order four times before paying back.See also Contribution margin, Customer acquisition cost, Lifetime value
- Up or out
- A promotion system in which people either move up to the next level within an expected window or are encouraged to leave. Common at consulting firms and some banks, it keeps the pyramid shaped and moves people along quickly.ExampleA consultant expected to make engagement manager within about three years who is passed over twice is counseled to look for an outside role, often with help from the firm.See also Engagement manager, MBB
- Utilization (utilization rate)
- The share of a consultant's available hours billed to clients. Firms watch it closely because billed time is what they sell; low utilization means time on the bench between projects.ExampleA consultant with 2,000 available hours in a year who bills 1,600 of them runs at 80% utilization.See also Engagement, Staffer
- Value chain
- The steps a product passes through from raw input to the customer, with who does each step and what margin each one earns. Mapping it shows where profit pools sit and where a client could move up or down the chain.ExampleCoffee runs from farms to traders, roasters, distributors, and cafes. If roasters earn 20% margins and cafes 8%, a cafe chain weighing whether to roast its own beans starts there.See also Porter's five forces, Issue tree, Commercial due diligence
Recruiting12
- Case interview
- A consulting interview where you work through a business problem with the interviewer, such as whether a client should enter a new market. It tests structure, math, and judgment. In candidate-led cases you drive; in interviewer-led cases you answer set questions in order.ExampleA regional airline's profits fell 20% last year: why, and what should it do? You lay out a structure, ask for revenue and cost data, do the math out loud, and finish with a recommendation.See also Market sizing, Profitability framework, MBB
- Coffee chat (informational interview)
- A short call or meeting, usually 15 to 30 minutes, with someone at a firm to learn about their job. It is the core of networking, and a good one ends with a referral or another name to contact.ExampleA sophomore emails a second-year analyst from her school, gets 20 minutes on Thursday, asks three questions about the group, sends a thank-you that night, and is introduced to a VP the next week.See also Networking, Fit interview
- Diversity program
- An early insight program or internship track for students from underrepresented groups. Many open earlier than the main summer analyst program, some to freshmen and sophomores, and some lead straight to an internship offer.ExampleA bank's sophomore diversity program takes applications in the fall, runs a two-day event in spring, and gives strong participants an early interview for the junior summer analyst class.See also Sophomore program, Summer analyst
- Exploding offer
- An offer with a short deadline, sometimes only days, meant to get you to decide before you hear from other firms. Asking politely for more time is normal; the worst answer is usually just no.ExampleA bank makes an offer on Monday with a Friday deadline, and another bank's superday is next Tuesday. Telling the second bank about the deadline often gets its process moved up.See also Return offer, On-cycle
- Fit interview (behavioral interview)
- The questions about you: walk me through your resume, why this firm, why this path, a time you led or failed. Every finance process has them, and weak answers sink otherwise strong technical candidates.ExampleWhy investment banking? A strong answer names something you did (a valuation for your investment club), what you liked about the work, and why this seat gives you more of it.See also Technical interview, Superday, HireVue
- MBB
- McKinsey, Bain, and BCG, the three most prestigious strategy consulting firms. They hire mostly through case interviews.ExampleAn undergraduate MBB process is usually two rounds, each with two or three case interviews, and fit questions folded into every interview.See also Case interview, Tier 2 consulting
- Networking
- Building relationships with people at firms through emails, coffee chats, and events, so someone knows your name when applications open. It matters more in finance than in most industries, especially from schools where banks do not recruit on campus.ExampleTwenty emails in September lead to eight calls, and two of those turn into referrals. When the program opens in January, two people at the firm can put your name forward.See also Coffee chat, On-campus recruiting
- On-campus recruiting (OCR)
- The process where firms post jobs and interview through your school's career center. Schools where firms recruit heavily get the most slots; elsewhere, networking and direct applications carry more weight.ExampleAt a school with OCR, a bank posts its role on the career portal, collects resumes, and runs first rounds in campus interview rooms. At a school without it, you apply online and lean on referrals.See also Networking, Summer analyst
- Online assessment (OA)
- A timed online test sent after you apply: numerical reasoning, logic games, or personality questions for banks, and math or coding problems for quant roles.ExampleA bank's online assessment gives you 20 minutes for 18 numerical questions, such as working out a company's year-on-year revenue growth from a bar chart.See also HireVue, Superday
- Return offer
- A full-time job offer given to an intern at the end of the summer. At most banks it is the main path into a full-time analyst job, so the internship works like a ten-week interview.ExampleA class of 80 summer analysts is reviewed in August. 65 return offers is an 81% rate, and the 15 without one recruit again in the fall.See also Summer analyst, Exploding offer
- Sophomore program
- An early program for second-year students, such as an insight week, a spring program, or a sophomore internship. Some feed directly into the junior summer analyst process, which now recruits a year or more ahead.ExampleA bank runs a three-day spring insight program for 60 sophomores. Strong participants get fast-tracked into interviews for the junior summer analyst class.See also Diversity program, Summer analyst
- Staffer
- The person at a bank, often a senior associate or VP, who assigns analysts and associates to deals. A good relationship with the staffer affects which deals you get and how busy you are.ExampleAn analyst on two live deals tells the staffer she is at capacity. The staffer gives the new pitch to someone else, and remembers who was honest about their load.See also Generalist pool
Accounting4
- Capital expenditures (capex, CapEx)
- Cash spent buying or upgrading long-lived assets like plants, equipment, or servers. It shows up in investing activities on the cash flow statement and as PP&E on the balance sheet, then reaches the income statement slowly through depreciation.ExampleA manufacturer spends $30m on a new production line with a 10-year life. Investing cash flow shows -$30m this year, PP&E rises $30m, and the income statement takes $3m of depreciation a year for ten years.See also Depreciation, Unlevered free cash flow, Cash flow statement
- EBITDA
- Earnings before interest, taxes, depreciation, and amortization: operating income with D&A added back. It is a rough proxy for operating cash flow that ignores how the company is financed, and the denominator in most valuation and leverage multiples. It ignores capex and working capital, so it is not free cash flow.ExampleRevenue of $100m and operating costs of $60m, including $10m of D&A, give operating income of $40m. Add back the $10m of D&A and EBITDA is $50m.See also Operating income, EV/EBITDA multiple, Leverage ratio
- Gross margin
- Revenue minus the direct cost of making or delivering what was sold (cost of goods sold), as a share of revenue. It shows how much each sale leaves to pay for everything else: sales, research, overhead, interest, and tax.ExampleRevenue of $100m and cost of goods sold of $60m leave $40m of gross profit, a 40% gross margin. A software business might run 75%; a grocer nearer 25%.See also Income statement, Operating income, Unit economics
- Income statement
- Revenue minus expenses over a period. The usual order runs revenue, cost of goods sold, gross profit, operating expenses, operating income, interest, taxes, and finally net income.ExampleRevenue $200m, COGS $120m, gross profit $80m. Less $40m of operating expenses leaves $40m of operating income; less $10m of interest and 25% tax on the $30m left, net income is $22.5m.See also Net income, Operating income, Balance sheet
M&A and deals2
- Due diligence
- The buyer's investigation of a target before signing: financials, contracts, legal exposure, customers, and management. What turns up can change the price or end the deal.ExampleDiligence finds that one customer is 30% of revenue and its contract renews in six months. The buyer cuts its bid from $400m to $350m or asks for part of the price as an earnout.See also Data room, Commercial due diligence, Letter of intent
- Synergies
- Extra value created by combining two companies. Cost synergies come from removing overlap, like duplicate offices; revenue synergies come from selling more together and are harder to deliver, so buyers discount them.ExampleTwo merging companies close a duplicate headquarters and save $30m a year. At a 10x multiple those cost synergies are worth about $300m, which is how a buyer justifies paying a premium.See also Accretion/dilution analysis, Due diligence
Venture and startups2
- Customer acquisition cost (CAC)
- Sales and marketing spend divided by the number of new customers it brought in over the same period. Read next to lifetime value: a customer worth less than it cost to win loses money.ExampleA company spends $300k on sales and marketing in a quarter and adds 600 customers, a CAC of $500.See also Lifetime value, Unit economics, Burn rate
- Lifetime value (LTV, LTV/CAC)
- The gross profit a customer brings in over the whole time they stay. A simple version is monthly gross profit per customer divided by the monthly churn rate. Investors often want LTV at three times CAC or more.ExampleA customer pays $100 a month at an 80% gross margin, so $80 of gross profit. With 2% monthly churn the average customer stays 50 months: LTV is $4,000, eight times a $500 CAC.See also Customer acquisition cost, Unit economics, Net revenue retention
Markets and macro1
- Gross domestic product (GDP)
- The total value of goods and services produced in a country over a period. US GDP is reported quarterly as an annualized growth rate. Two negative quarters in a row is common shorthand for a recession, though not the official definition.ExampleReal GDP grows 0.5% in a quarter. The headline reports it annualized, about 2.0%, since 1.005 to the fourth power is about 1.020.See also Nonfarm payrolls, Consumer price index
Quant1
- Expected value
- The probability-weighted average outcome. A bet that pays $10 with probability 0.3 and nothing otherwise has an expected value of $3. Quant interviews test it constantly with dice, cards, and betting games.ExampleRoll one die and get paid the number in dollars: the expected value is (1 + 2 + 3 + 4 + 5 + 6) / 6 = $3.50. Pay $3 to play and you have a 50 cent edge per roll.See also Kelly criterion, Market-making game