How many babershops are there in NYC?

To answer this, you need to solve 2 questions:
 

1. How many haircuts are done by barbers each year in NYC. Consider: 

• Male Population + incoming workers
• % cutting their hair in NYC (not all incoming workers will cut their hair in NYC)
• % cutting hair in a barbershop (vs. home or not cutting)
• How frequently they cut their hair (for those going to the barber)
• Note: you can also apply an age based segmentation here, as old people have less hair and growth speed, sand that can influence numbers, but I think this would be overcomplicating.

2. How many “hairs” can an average barbershop handle:

• Average hours open
• Average seats per barbershop
• Time it take to to cut a hair (these 3 multiplied give you the capacity of the barbershop)
• Average “occupancy"/utilization rate - please consider “peak” and “valley hours"

You divide 1 by 2 and you get the number of barbershops.

Then you do a sanity check. Considering NYC number of streets, or neighborhoods, or blocks, think about how many barbershops per block does that number represent, and see if that is an acceptable order of magnitude. (note: this would also be a good and efficient method of estimating the number of barbershops, i.e., consider an average number of barbershops per street and then multiply by the number of streets, but it is usually less precise).
 

Dear Yosra,

there are many ways to structure this question. For example try to figure out what the demand would be and go from there. For example, population in NYC> percentage who need a haircut>how often they need that to adjust for yearly figures> percentage who go to a barbershop to do so instead of getting the haircut another way>average amount a barbershop can serve based on working hours and staff level and time for different types of haircuts>deduce from this the amount of barbershops needed.

How many barbershops are there in NYC? 

1) population of NYC 

2) how many areas in NYC 

3) how many barbershops in each area approximately 

The case interviews have a few common formats:

1) Context business cases:

• Profitability Optimization.
• Pricing Optimization.
• Industry Landscape & Competitor Dynamics.
• New Product or Project.
• Growth Plan/Strategy.
• Market Entry or Expansion.
• Merger/Acquisition/Joint Venture.
• Start-Up/Early-Stage Venture.

2) Estimation cases (or market size)
Your case “babershops are there in NYC” is an example of an estimation case. I couple of tips for this type is:

You’re not expected to know the answers, but instead to show a logical way to deduce it. Your approach needs to be reasonable, include key factors that would affect the size of the market, and your assumptions need to show good business judgment.

tip #1: Explain your rationale clearly
The interviewer wants to see how you break down a problem and if you can structure your thoughts in a hypothesis driven way.

I will assume that the NYC population, and then assume that only a % of the population are barber shop potential consumers, which adult males, I will assume that % of the potential consumer actually go to barber shops.. etc etc

tip #2: you don't need to know specific numbers but knowing basic populations numbers helps + round your numbers
Nobody expects that you will know the NYC population, but it is expected that you will know that the USA has around 300M habitants, that often the population is 50 male 50 female etc

A good way to practice is to get used to using these macro-demographics numbers and breaking down the number using your hypothesis.

tip #3: Bottom up vs Top down

Top down – Start from the total population and divide your way down to the relevant market.
Bottom up – Start with a single base unit (a typical customer or sale or business outlet) and multiply your up to the entire relevant market.

tip 4#: Ask clarifying questions

Let me know if you need any help preparing for you next interviews
Best
Raquel 
 

Hi Yorsa,

Welcome to the Q&A!

You'll get the best out of this exercise if you try it yourself and post here for feedback.

How to think about Market Sizing

It's very simple: Do the approach the is the easiest for you given the question.

Are they asking you to estimate something where you don't even know where to begin from the top (maybe you have 0 clue as to the market size of the industry, the GDP of that country, etc. etc.)? Then do bottom-up!

Alternatively, does it seem impossible to do a realistic from-the-ground-up estimation of something (perhaps it requires just far too many steps and assumptions)? Then do top-down!

Fundamentally, you need to take the approach that just makes the most sense in that circumstance. Quickly think about the key assumptions / numbers required and whether you 1) Know them or 2) Can reasonably estimate them. If you can, go ahead!

Remember that there's rarely a "best" answer with market sizing. What's important is that you break down the problem the way it makes sense to you. Importantly, break it down so that the assumptions you make are the ones you're most comfortable in.

For example, do you know all the major brands? Great go with that. Do you understand all the segments of that country's population (either age or wealth or job breakdown)? Go with that. Do you know the total market size of the tourism (or hotel) industry? Then break it down that way.

Some tips:

1. Just like in a case, make sure you understand the question - what are you really being asked to calculate
2. Decide whether a top-down or bottom-up approach is best
3. Figure out what you know you know, and what you know you don't know, but could estimate
   1. This helps you determine how to split out buckets
4. Stay flexible - you can start with a "high-level" market sizing, but gauge your interviewers reaction....if it looks like they want you to do more...then go along level deeper in terms of your splits

An Example

Take a look here for additional practice! https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

And here's a practice Q&A:

https://www.preplounge.com/en/consulting-forum/how-would-you-solve-this-market-sizing-question-from-roland-berger-7631

This one could be answered top-down (as I did) by estimating population of the city, # of drivers/ cars, etc. etc.

OR, it could be answered bottom-up by estimating # of stations you see per block (or # of gas/petrol tanks), % increase this might be over time (or # of EV stations that would be needed per gas tank given EV stations take 10 times as long), and # of blocks you'd estimate the city to have.