Help - Market Sizing is always off by a 2-3 multiple

There are two things to consider here - 1) why is your estimation off, and 2) does this matter? 

Regarding 1): If your structure is fundamentally sound, then you should test the individual 'drivers' of your market sizing estimate one by one to see where you're going wrong.

For example - check some publicly available data to see if your average price for a surfboard is too high. 

If not, check the 'volume' side of the equation - how many surfboards were actually sold that year vs. your estimate? If your estimate is too high, check the drivers of volume you have identified one by one to see which factor you're overestimating. 

If you are systematically overestimating a certain variable (e.g., always pricing things too highly) it might just be a case of toning this down in your market sizings.

Regarding 2): Interviewers are not expecting you to exactly size the market, especially if it's something niche that you're unlikely to have covered. They are, however, expecting that your sizing logic is correct, the order of magnitude is correct, and that you 'sense check' your final answer to see that it makes sense (e.g., what % of the total population would be buying a surfboard every year according to your calculation, and would that make sense at all?). Being off by a factor of 2 is not ideal, but it may not be a dealbreaker - being off by a factor of 10 would be a dealbreaker.

Hi,

The core goal of a market sizing questions during the interview is the approach/structure that you can back-up with clear reasons/datapoints. If your end result is off, try to find out which parameter is the driver for that. 

Note that even if your market sizing answer would be 100%, without a solid approach, you will never pass the interview.

Let me know if you want to practice some market sizing questions together so I can provide feedback.

Mattijs

If the logic is sound (i.e. the reasoning to get to the answer), then the issue is with the assumptions itself (i.e. what numbers you are putting down when you are filling up your structure).

Normally this is a business judgment/common sense issue. One way you can reverse engineer this is to either check with the model answer (which sometimes isnt that great tbh) or check with reality - do a google search and find out what the real number is.

FYI if the logic is -really- sound, it should be pretty clear where the weird number is coming from.. 

Hi there,

I would be happy to share my thoughts on your question:

• First of all, being off by a factor of two to three times is not necessarily fine. Assuming your logic is sound based on peer feedback, the issue must lie in how you size individual figures. Have you compared your figures to real-life figures to determine the cause of the discrepancy?
• Moreover, however, please keep in mind that except for Bain in the UK and few smaller consulting firms, most consulting firms have not used standalone market size estimations for a long time. While this does not mean it never happens, this type of case study question is typically not be very meaningful for both the candidate and interviewer, as only a few skills are being tested.

You can find more on this topic here: How to succeed in the final interview round.

If you would like a more detailed discussion on how to best prepare for your upcoming pre-interview assessments and/or interviews, please don't hesitate to contact me directly.

Best,

Hagen

If the number is off, that's not a problem in and of itself. 

With market sizing, what's being tested is not whether the number if accurate, but how you structure and approach the process, and how you align the inputs and assumptions with the interviewer / client. 

That said, it is strange that you're having this issue consistently and that might point to some root cause that you have not yet identified. You should consider getting an expert perspective on this to diagnose whether something strange is going on. 

Best,
Cristian

Hi there,

It seems the problem is in the numbers you have picked to fill the variables. Thats a better problem to have than to having a hard time with the structure :)

Ideally, you should always use proxies or known numbers to (1) convey a rational behind the figures you picked and (2) make sure they are close to the reality. 
Proxies: to give you an example, if the case is about dog food market size, you can actually verify how much you eat (in kg per day, for instance) and transfer the ratio food/weight to see how much a dog would eat considering you both are mammals - I know it sounds weird, but it’s better than a number out of the blue.

For known numbers: It is actually a good idea to memorize some common numbers such as the population of the country you are, the social pyramid, the GDP, the average salary, etc. some industries figures are also relevant to know, such as market size and key metrics. You will be able to use this data directly to the case or use it as a benchmark. 

Good luck!

Best,

Mari