Market Size of an Ice Rink (£) per annum

Question

Hi! I am trying to estimate the market size of an ice rink in London in terms of revenue p.a.

This is my approach. Please let me know if you agree or would modify anything-

Revenue = Number of People who visit p.a. (A) X Average spend per person (B)

A) Number of people who visit = Number of operating months x Max. people on the rink at any time x Number of sessions per week x Utilization

X

B) Average spend per person = Tickets + Extras like gloves (% of total number of ticketholders) + Food drinks (% of total number of ticketholders)

Would you agree with my approach? Also how would you triangulate this? Any help is much appreciated!

Answer 1

Hi there,

I think this approach is pretty sound! No major issues spotted here...the one thing we can't see though is your assumptions/#s...important that these are sound!

Answer 2

Hi there! I always like to reiterate -- there is never a RIGHT answer, mostly in consulting interviews, the interviewer is trying to understand HOW you think and if the LOGIC you apply can be rationalized or reconsidered.

Overall, the approach is sound, a few things I would add to improve the rationalization. I like to isolate assumptions into groupings so I can triage down the line later.

For most sizing questions, a quantity x average spend would be right. For this specific question (ice rink) it sounds like the interviewer is trying to gauge whether you will consider the factors of seasonality, utilization, etc. Given this underlying interest, I would take a further step to isolate/separate the assumptions, which will make the problem more clear overall.

Therefore, before laying out the multiplication of market sizing, I would ask some clarifying questions-- is the ice rink indoors/outdoors, and will it operate year round? Should we assume any expectation of fluctation in seasons, if operating year round? Are there any alternative revenue streams (eg. party rentals, local sports teams, etc etc). Clarifying questions should be the start point, as this is informs how you generate the sizing methodology.

A few additional ways then to dice the question:

# of months operating x number of people visiting in month x avg spend
- Isolating # of months operating allows you to bring attention to this assumption, and adjust upfront if interviewer suggests a change, without impacting the rest of the equation
avg spend x ([# of peak operating months x visitors per month during peak] + [# of nonpeak operating months x visitors per month during nonpeak]) + [expected alt revenue generated]
- If the response from the interviewer is to consider the difference between peak vs non-peak seasonality or alternative revenue streams, you might want to go with this approach

Hope this helps!

S