Market sizing approach: formula or decision tree?

Hi there,

It's both….

Like, you have a “decision tree” (not the right name, but you have a tree), and you're multiplying those branches together.

You need to articulate both together.

As in, give the overall approach, then as you dive in, stay structured and give overall approach + explicit math associated with that.

As part of my coaching I provide my candidates videos of market sizing solutions and my articulation of them - so that they can see what optimal looks like. Feel free to reach out for these!

Hi there, 

Both work. 

But it's not so much about the method. Instead, it's about how effectively and clearly you communicate the method to the interviewer. 

At the end of the day, the interview is meant to simulate the conversation with the client. What you should be optimising for is not how ‘correct’ your approach is, but how well do you manage to co-create your approach with the interviewer so you get their buy-in. Just like you would do it with a client. 

Best,
Cristian

Both approaches are good, and neither approach is good as well.

Depends completely on the sizing problem.

There are many more approaches beyond formula and decision tree - I would be more than happy to guide you through them. Pls feel free to DM me if you'd like.

No matter which approach you take - the key is to be able to communicate it nicely and execute it correctly while maintaining grounded logic and sound assumptions.

Hi there,

tree structures usually have benefits for both the logical decomposition AND the comms. For the latter, a tree format will make it much easier to communicate in a top-down manner. Doesn't mean that you have to go down all the way when you explain - if the tree has a lot of layers, may just summarize the lower ones in your explanation to reduce complexity in your comms.

Hope this helps.

Regards, Andi

Hi there,

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

• First of all, both the formula-based and the decision-tree approach have their advantages. The choice between the two often depends on the complexity and context of the market size estimation. However, I would advise you to stick with the decision-tree approach you're currently practicing. It offers flexibility to incorporate various factors, allows for structured thinking, and demonstrates your analytical capabilities to the interviewer.
• Moreover, to better communicate your decision tree, strive to keep your tree simple, limit the number of branches, and be clear about your assumptions. Also, always make sure to explain your thought process out loud when working through the problem, so the interviewer understands your reasoning.
• Lastly, however, please keep in mind that most major strategy consulting companies 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 may not be very meaningful for both the candidate and interviewer, as only a few skills are being tested. That being said, simpler market size estimations may still be a part of a case study, for instance when estimating the revenues of the client company is required.

If you would like a more detailed discussion on how to best prepare for your upcoming interviews, please don't hesitate to contact me directly.

Best,

Hagen

Hello!

Precisely for the high amount of questions (1) asked by my coachees and students and (2) present in this Q&A, I created the “Economic and Financial concepts for MBB interviews”, recently published in PrepLounge’s shop (https://www.preplounge.com/en/shop/prep-guide/economic_and_financial_concepts_for_mbb_interviews).

After +5 years of candidate coaching and university teaching, and after having seen hundreds of cases, I realized that the economic-related knowledge needed to master case interviews is not much, and not complex. However, you need to know where to focus! Hence, I created the guide that I wish I could have had, summarizing the most important economic and financial concepts needed to solve consulting cases, combining key concepts theorical reviews and a hands-on methodology with examples and ad-hoc practice cases.

It focuses on 4 core topics, divided in chapters (each of them ranked in scale of importance, to help you maximize your time in short preparations):

·        Economic concepts: Profitability equation, Break even, Valuation methods (economic, market and asset), Payback period, NPV and IRR, + 3 practice cases to put it all together in a practical way.

·        Financial concepts: Balance sheet, Income statement/P&L and Performance ratios (based on sales and based on investment), +1 practice case

·        Market structure & pricing: Market types, Perfect competition markets (demand and supply), Willingness to pay, Pricing approaches, Market segmentation and Price elasticity of demand, +1 practice case

·        Marketing and Customer Acquisition: Sales funnel, Key marketing metrics (CAC and CLV) and Churn, +1 practice case

Feel free to PM me for disccount codes for the guide, and I hope it helps you rock your interviews!