How to answer a market sizing question in interview when you have not done it in your previous organization?

Market sizing
Recent activity on Feb 04, 2019
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Anonymous A asked on Feb 04, 2019

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Vlad
Expert
Content Creator
replied on Feb 04, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

It doesn't matter whether you've done any market sizing or not. Market sizing is just a type of a case and you should be able to solve the cases on the case interview.

Here are some useful market sizing skills:

1) First of all, there are 2 ways to structure market sizing:

  • Formula - basically a math formula to come up with a solution. The problem with the formula is that it is easy to forget something or get lost.
  • Tree - same as with regular cases you build a tree. A very simple example: you need to calculate the number of dogs on manhattan. A number of dogs = share of households having a dog * # of households. # of households = population / average household size. In the end, you'll have a pyramid where you have to fill the numbers on the base of the pyramid. This approach is much easier and help you track all the numbers

2) You should learn the key market sizing techniques:

  • Making assumptions based on personal experiences (Use the example of your house where out of 100 apt-s 10 have dogs)
  • Adjusting numbers (NY is a busy city thus fewer people have dogs)
  • Sanity check - try to apply your calculations to real environment
  • etc.

3) Never say - let's assume 50%. Your assumption should always be based on something:

  1. Personal experience (e.g. in my apartment building with 100 households, I see 10 people walking with the dogs every morning. So I would assume that 10% households have a dog)
  2. General knowledge (e.g. The average family size is 3 people)

You should also adjust your assumption where it's possible (E.g. The average family size is 3 people, but since we are talking about New York where people are mostly single, I would assume the av. household size of 2 people)

4) You should learn the key tools:

  • Using age even age split (suppose life expectancy is 80 years. Assuming even age split we have 4 mln people in US of each age group)
  • Using 80/20 split (suppose 20% people earn 80% wealth and the average salary is xx...)
  • Using approximations (Length of NY-SF flight and plane speed to calculate US length)
  • etc.

5) Learn key numbers: populations, gas price, gas consumption, Boeing speed and number of seats, average salary, # of gates in the airport, GDP growth rate, inflation, etc.

6) Practice 10-15 cases and you'll be fine

Feel free to PM for clarifications or a session. I give 10 cases as homework and then we discuss them

Good Luck!

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Anjali on Feb 04, 2019

Thank you so much Vlad :)

Guennael
Expert
replied on Feb 04, 2019
Ex-MBB, Experienced Hire; I will teach you not only the how, but also the why of case interviews

Overall, market sizing is one of the easiest parts of a case interviews. You can practice this very easily. There are a number of good sources around; PrepLounge has some, the book 'Case In Point' does too (I hate the book in general, but this specific section is about the only valuable chapter).

At a high level, there are two ways to approach:

- Top-down, usually "back of the envelope" type of math. This will take 2-5 minutes, and insert itself within a much longer/complex case. Often relevant at MBB and top tier-2

- Bottoms-up, involving a number of complex assumptions and calculations. You cannot do this in your head. It may become nearly the whole case, usually at lower ranked companies including big 4 and boutiques

No matter which you do, make sure to ask yourself at the end if the number makes sense (i.e., saying there are 1.5 billion police officers in NY would more than likely not be correct!)

Happy practice

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Anjali on Feb 04, 2019

Thanks a lot Guennael :)

Vlad gave the best answer

Vlad

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McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School
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