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Guesstimation Logic

Anonymous A

Hello,

I'm having a hard time to tackle guesstimation questions. I usually tend to get lost each time provided with a guesstimation questions, but when i read the explanations everything makes complete sense. I'm trying to understand how to better prepare for such questions, can you please share any insight or directions?

Thanks.

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Dorothea
Expert
replied on 06/25/2018
Ex-Oliver Wyman with 100% interview success rate - specialized in female career coaching

Hi,

assuming that with the term „guesstimating question“ you are referring to market sizing questions, please find bit of advice below:

  1. Most market sizing questions can be solved in more than one way. What does this mean for you? Just think it through by drawing a tree: "What are the main factors determining the final answer?" "How can I split each of this factors further?" Go into as much detail as possible. Ideally, you have time to check your final answer by quickly applying a different approach ("do the two approaches give approximately the same answer?")
  2. Make proper assumptions: Once you have drawn the tree, take a look at the most detailed level of your tree. Are you able to quantify the factors on that level? You do not need to know the precise number, but most of the time, you can relate them to something you have seen / experienced, e.g. you need to determine the number of people living in a given city. How does this city relate to one you have lived in and for which you know the number of inhabitants? Is it of equal size, is it approximately twice as large etc.? The biggest advantage of this approach is that you show your interviewer your reasoning: You do not just come up with a number, you try to derive it. And even if this approach does not work (because you have no idea how large that city you are talking about actually is) your interviewer is a lot more likely to help you.
  3. Practice, practice, practice: As it is the case with other case types, the more you practice, the easier it gets: You will see that drawing the tree will become a lot quicker and more intuitive. Do as many cases as you think are useful and until you feel more secure.
  4. This will then get you to the point where you will lose your fear and this is probably the most important part. Once you lose your fear and you start to like market sizing cases, you can show your interviewer that you in fact enjoy solving the problem at hand. Not only will this help to solve the case at hand but it will also contribute to the interviewer's positive overall impression.

Hope this helps!

Patricio replied on 06/25/2018

Initially, most of my peers approached guestimates using the "general to particular" approach. For example, estimating the market size of Lipsticks in Country A will require to start with the number of women in the country, and then break it down by age, purchasing power, preferences, and so on. In each level of your tree, you will "plug-in" assumptions which will be used to make the calculations and arrive to a final answer.

This approach tends to be very safe since it makes easier to structure the information and allows you to start with some information you might now (population of your country or city, distribution in terms of genre and purchasing power, etc.). The problem is that it usually takes a lot of time and will require you to do a lot of calculations.

Later during my preparation, I had the chance to tackle guestimates with one of my McKinsey buddies and he gave me the following recommendations:

  1. Focus on the drivers: Instead of going from the general to the particular, try to understand what would be the 2-3 factors that could determine the 80% of your answer (remember the 80/20 principle) and start breaking down from there. In the lipsticks example, the drivers could be the number of women between 15-60 years old, the average number of lipstick purchase per year per women (this is usually driven by culture, not by income), and the distribution and average price between mass, mass-premium, masstige, and premium lipsticks.
  2. Close enough is more than good enough: Remember that you don't need to provide an exact number. Usually, you have a margin of error that can go up to a few orders of magnitude (2x-3x). The key in here is to showcase your thinking process and your mathematical abilities, not how good you are at memorizing numbers. These are the skills you will use in your day-to-day as a consultant.
  3. Leverage your interviewer: Some interviewers play the bad cop and do not give any feedback during the interview. Nevertheless, most of the interviewers will respond to your rhythm. Share your thinking process and the logic behind your assumptions. If you are on the right path, the interviewer can give you a little push to refine your assumptions or can even give you the concise information.

Once you start approaching guestimates keeping these three things in mind, you will find yourself solving guestimates with ease and precision. I hope it helps and let me know if you want to practice some!

All the best,

Patricio

(edited)

Vlad replied on 06/25/2018
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi,

Depending on what you call a Guestimate. I've seen that some books using the word "guesstimates" for market sizing, for brainteasers and for the mix of both (weight of the Boeing). The basic recommendations to practice are the following:

  • Market sizing - You should solve yourself the market sizing cases on the most popular topics: Car usage (tires, gas stations), passengers in the airports, real estate, subway, luxury, size of the particular area on the map (e.g. volumes of fish in the sea), etc.
  • Brainteasers - To prepare you simply read the 2-3 most popular books with the brainteasers (Are you smart enough to work at Google?, How would you move mount Fuji?).

Best

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