Some problem in market sizing

Question

I came up with an answer of 10billion dollars home renovation market per year. But, I think I have done something wrong because numbers is very small. I think assumptions are off. Someone can help please

Answer 1

Sorry to tell you, there are plenty of mistakes in there.

If you want to segment between large renovation and small renovation, treat each of these as a segment (i.e. estimate separately the total renovation value for each segment). Using your approach, you did a mistake: the % of major vs. minor renovations on the left is 10-90%, but on the right is 1/10 (10%) vs. 1/3 (33%), which is actually 10/43% vs. 33/43%. Basically you are assuming different breakdowns for the same thing.
Looking at the right, you are considering new homes… (that 2% growth rate). That is not renovation, so no reason to be here
Then on the % of renovations below, you have the 1.1% number. Well, it's a math mistake. 1/10 + 1/3 =10% + 33% = 43%. I don't even understand how you got to 1.1%. But you can see, just from here, that using your assumptions the correct number for this would be 40x what you had.
Still on the last two… if you have 3.1% renovation per year…that means a house being renovated every 30 years (which is inrealistic). You have to make these types of calculations to check your number.

Other than that, the values you have for large and small renovations are low - but the values you use here will depend on the frequency of renovation you chose.

An alternative approach would be to consider a certain “use period” for the house components and thinking how much % of them is “used per year”. Paint may last 10 years (10% per year). But floor, hardware (e.g. cabinets), appliances, maybe last 20 (5% per year); electrical, plumbing, ceramics… maybe 50 (2% per year). Estimate their cost and apply the % and you get to your target value.

Answer 2

Hi there,

growth rate on RHS not needed
Where'd you get major/minor improvement %?
Might be worth splitting by pop by income/wealth
Major/minor improvement numbers are way too low

I actually have a super cheap market sizing video course that you can use to practice your market sizing - definitely consider it to improve!

Market Sizing Analysis: Approaches, Techniques, and Exercises (preplounge.com)

Answer 3

First of all, my neck is sore from having to look horizontally at the image :)

Fully agree with Pedro's approach.

Aside from this, I do appreciate the structure that you used, in the sense of approaching it like an issue tree. Typically, you either go for an issue tree or a linear set of filters and you made a good choice in this case.

Best,
Cristian