Alle Fragen zum Tag estimation - Consulting Q&A - PrepLounge.com

Hi there,

The following Q&As should be helpful for you!

https://www.preplounge.com/en/consulting-forum/crafting-case-and-casecoach-9615

https://www.preplounge.com/en/consulting-forum/crafting-cases-master-market-sizing-9805

https://www.preplounge.com/en/consulting-forum/what-are-the-best-preparation-materials-and-how-to-prepare-the-whole-journey-in-the-most-efficient-way-6142

So while this sounds like a classic market sizing, knowing a bit about the reality, they clearly fail in this case. There is no one wall, but many different parts, partly connected, partly not, made with different technologies, mud walls, wodden pallisades, bricks, etc...with hundreds of years in between construction, supervised by different cultures, using different technologies.

But in order to be helpful here, you'd want to estimte length, widths, height, maybe split the lengths into parts that are built on different terrain (e.g. 300 km from Tianjin to the border of inner mongolia with 50% hilly terrain, x km through dessert & grassland, etc. and assume different building speeds. That would get you to a number of person-years of building time.

Then you can assume number of available workers, estimate and come up wiht a rough estimation of how long it took them to build the wall.

There are many similar questions with useful answers on preplounge already, like below:

• https://www.preplounge.com/en/consulting-forum/how-would-you-go-about-calculating-how-many-solar-panels-are-used-in-a-country-9320
• https://www.preplounge.com/en/consulting-forum/how-would-you-estimate-the-market-size-for-vegan-shampoos-in-the-uk-9150
• https://www.preplounge.com/en/consulting-forum/b2b-market-sizing-no-b2c-8982
• https://www.preplounge.com/en/consulting-forum/how-to-market-size-the-opportunity-for-stripe-9290
• https://www.preplounge.com/en/consulting-forum/how-many-wealthy-people-are-in-the-uk-8819

Fundamentally the structure and approach will be equivalent in all these cases and in the example you have stated above.

Hello!

This is a very typical market sizing case, where the key steps are:

• Calculate the total population
• Calculate the % of population that could be interested in this product (this could be done by clustering -the classical ones are age groups, purchaching power, etc.-)
• Calculate the % of the total adressable market that any firm in particular could have -in case it´s asked only-.

For that cited market share, consider how many restaurants need to be open.

I see you only take into consideration rush hour and accomodation during it, but what about take out? It´s huge, and growing.

I would then rather estimate the # of shops considering kitchen outocme capacity during rush hour.

Hope it helps!

Cheers,

Clara

It depends on the office where you are right that some offices often don't test basic market sizing/estimations. Having said that, it's a skill that is complementary to solving a case and so I would be prepared by familiarising yourself with different approaches (e.g., top-down vs bottom-up).

Hi Anonymous,

in general, the main issues with big numbers is forgetting zeros during operations. Potential tips to deal with big numbers are the following:

1. Use correctly 10^ powers in your math computation. For example 3.2B/723M can be transformed in 3200*10^6/732*10^6, which makes it easier to deal with math
2. Ask if it is fine to approximate. When you have to deal with math in market sizing, and sometimes even in business cases, you are allowed to approximate math to simplify the computation. In the previous example, for instance, you could transform the computation in 320*10^7/73*10^7, making the overall computation faster.
3. Keep good notes. One of the reasons people do mistakes with big numbers is that they don't keep their notes in order, thus forget/misreport numbers
4. Divide complex math in smaller logical steps. This is something you can use for big numbers after the application of the 10^ power mentioned above. If you have to compute (96*39)*10^6, you can divide the first element in 96*40 - 96*1 = 100*40 - 4*40 - 96*1 = 4000 – 160 – 100 + 4 = 3744*10^6
5. Use shortcuts for fractions. You can learn by heart fractions and thus speed up/simplify the computation - the most useful to know are 1/6, 1/7, 1/8, 1/9.

Hope this helps,
Francesco

Hi PK,

Overall a good and logical approach!

Just some small points on assumptions.

(1) 70% penetration of ride-hailing seems high. While it could be possible in the big metropolitan cities like NY or SF, outside the handful of big cities the penetration rate would be rather low.

(2) Don't forget there is Lyft also. So besides the 70% penetration rate, you probably need to think about market share as well. At the moment Lyft probably is comparable or just a bit smaller than Uber?

Cheers,

Emily

Hi,

Several sources:

1. Market-sizing and brainteaser books (e.g. Are you smart enough to work at Google?, How would you move mount Fuji?)
2. MBA Casebooks - the most known - Columbia, MIT, Wharton, LBS, Chicago, Cornell, etc
3. Casebooks - Vault (there are multiple casebooks), The Consulting Bible, Multiple books by Wetfeet, etc

Best,

Hello!

I agree with the overall approach, and it´s very detailed.

I agree the numbers end up being a bit high, but this would probably mean that some of the assumptions are overstated.

In any case, what the interviewer looks into here is the methodology, and this one is solid.

Furthemore, this problem is far too complex for an MBB interview.

Well done in any case!

Cheers,

Clara

Hi Piyush,

I would not worry too much about your estimation error, a 50% estimation error would not be a big deal, you just need to get magnitude of a number.

Interviewer don’t want you to get the exact number, they are more worried about your reasoning.

Looking at your estimation process I think you should pay attention to the question: you are asked to estimate the number of houses (including single family houses and condos).

From your calculation seems you estimating the number of homes, (same as estimating the number of households), rather than the number of houses.

A different approach to this question could be the following:

• Hypothesis:
  • Avg. household size: 3 people
  • People leaving in single-family house: 70%
  • People leaving in condos: 30%
  • Avg. number of apartments per condo: Avg. number of floors * Avg. number of apartments per floor
    • Avg. number of floors = 5
    • Avg. number of apartments per floor = 5
• Number of single-family house = Total population * people living in single-family house / household size
• Number of condos: Total population * people living in condos / households / Avg. number of apartments per condo

Please reach me out if you want to discuss it further,

Thanks,

Ale

Hi Piyush,

I've read carefully all your assumptions, looks very good! In the real estimation within the case probably the second part would be left out (dividing demand by # of rides) because it becomes too cumbersome. You would probably just need to estimate it from the population top town, would arrive at 9.6 M and the interviewer would already stop you there.

Best,

Daniel

Hello!

Your breakdown indeed is good, however, I think you are leaving out another branch of the tree.

• Basically, you 1st break down into commercial and military, and then discard military.
• Then, in the commercial bucket, you would need to make the difference between passenger and cargo. There, you chose passenger
• Finally, the split I believe you are missing is that the prompt is "Estimate the number of planes that are in the air in an hour, in the US". Hence, you need to consider:
  • Planes taking off
  • Planes going over the US "aerial space", whose destination/origin is not the US. THis is the part you are missing and you would need to include

Hope it helps!

Cheers,

Clara

Yes they are - it's not as common and often buried within a case but they are definitely a tool that people use.

Hello!

This is a classical and rather simple market sizing -you will see that, after doing some, they are all the same-.

I would:

1. Calculate the total # of households in the UK, for which you divide:
   1. Total population
   2. Average household (usually for Europe and US is 3)
2. Asuming each household only asks for 1 mortgage loan (you can also double check this with the interviewers, in case they want you to do 1.2 or 1.3 for those who have more than one, investors, etc), and each household´s life is 80 years (average life), divide by 80

Hope it helps!

Cheers,

Clara

Hello Piyush, overall agree!

The only challenge that I would make is that the assumptions on video consumption are rather low -particularly in your middle segment. Devopping countries, from my experience, do have better internet access than what you have estated.

However, for the market sizing purpose of the exercise, this does not matter -at most, they would correct on the spot some of this metrics if needed-. What counts is the approch, and this one is solid.

Congrats.

Cheers,

Clara

Hello PK,

I have alredy answered to some of your questions regarding market sizing, they are truly interesting.

I believe tought you always have the same flaw: you only consider one of the two big segments (personal vs. professional users)

In this case, for instance, you assume they are only private users.

Hope it helps!

Cheers,

Clara

Hello!

Overall agree, but you are focusing on the household markets and forgetting the "public" pianos (e.g., restaurants, music schools, concert halls, etc.)

Cheers,

Clara

Hi PK,

Your approach makes sense but you are not considering one important driver of required storage which would be the number of photos that are being deleted on a daily basis. It may not make a huge difference but maybe reduces the required storage by 5-10%. I do think it should be included in an ideal answer though to show you have a comprehensive answer!

Best,

Axel

Hello!

This is the classical market sizing question. This would be my overall approach:

1. Calculating total customers:
   1. Segment population of the given city
   2. Seeing at which times those groups go shopping most (in person, keep in mind online purchases, etc.) to see which is the max. number of people in peak hour
2. Calculating how many cash registers are needed given:
   1. Peak hour
   2. Normal hours (e.g., you cannot only dimension for peak hours if you would have empty cashiers the 90% of the time)

Hope it helps!

Cheers,
Clara

Hope it helps!

Cheers,
Clara