I am getting more and more familiar with market sizing approaches. I can understand the ones that have clearly attributable characteristics like consumption of fuel per car or cars per household. However, I really don't know how to structure an approach that wouldn't involve too much random guessing to estimate the amount of elevators in Germany or another country / city. The answer for Germany is 300,000 to 500,000 by the way, if that helps.

Hi,

I am getting more and more familiar with market sizing approaches. I can understand the ones that have clearly attributable characteristics like consumption of fuel per car or cars per household. However, I really don't know how to structure an approach that wouldn't involve too much random guessing to estimate the amount of elevators in Germany or another country / city. The answer for Germany is 300,000 to 500,000 by the way, if that helps.

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Anonymous updated his answer on Jun 21, 2017

Interesting question.

If we want to estimate the number of elevators in Germany it is necessary to start by asking what type of elevator are we talking about (electrical, mechanical, a particular manufacturer, etc) for arguing sake lets consider all of them but to facilitate the estimation lets just consider elevators found in apartment buildings and then adding 10-20% more to allow for all the other elevators that are found elsewhere.

There are a lot of ways to estimate how many elevators are found in apartment buildings but let's consider the following:

80M pop. in Germany - if we consider 3 people per family we will have roughly 27M households - let's consider that 50% live in apartments (2+ units) and 50% live in single-family homes (you may argue where the heck did you get that 50 %? Well you may argue that a regular apartment building has on average 20ish units so it is the equivalent of 20 single-family homes so If the ratio between apart. building and single homes are 1:20 they even out - obviously this is a very rough estimation but I actually went online and the number is certainly possible) - that means that roughly 14M live in apartment buildings. If we consider the average apartment building to have 20 units (5 floors with 4 apartments per floor - again you can work around this number) means we will have 700,000 apartment buildings in Germany. If we consider that 50% of those have elevators (smaller buildings and older buildings usually don't have elevators) means that 350,000 elevators can be found in apartment buildings. Going back to my initial point that not only apartment building have elevators, you can add 10% do the value that we got ending up with 385,000.

It is always important to run a quick sanity check - you already provide us range so that's a start but if you haven't I would relate number of elevators with number of households for example - with this calculation we have 1 elevator for every 70 households (including every household) which is something that is certainly possible.

This is just a quick estimation but in my opinion something good enough for a case interview where you have to come up with a quick estimation.

Hope it was helpful

Interesting question.

If we want to estimate the number of elevators in Germany it is necessary to start by asking what type of elevator are we talking about (electrical, mechanical, a particular manufacturer, etc) for arguing sake lets consider all of them but to facilitate the estimation lets just consider elevators found in apartment buildings and then adding 10-20% more to allow for all the other elevators that are found elsewhere.

There are a lot of ways to estimate how many elevators are found in apartment buildings but let's consider the following:

80M pop. in Germany - if we consider 3 people per family we will have roughly 27M households - let's consider that 50% live in apartments (2+ units) and 50% live in single-family homes (you may argue where the heck did you get that 50 %? Well you may argue that a regular apartment building has on average 20ish units so it is the equivalent of 20 single-family homes so If the ratio between apart. building and single homes are 1:20 they even out - obviously this is a very rough estimation but I actually went online and the number is certainly possible) - that means that roughly 14M live in apartment buildings. If we consider the average apartment building to have 20 units (5 floors with 4 apartments per floor - again you can work around this number) means we will have 700,000 apartment buildings in Germany. If we consider that 50% of those have elevators (smaller buildings and older buildings usually don't have elevators) means that 350,000 elevators can be found in apartment buildings. Going back to my initial point that not only apartment building have elevators, you can add 10% do the value that we got ending up with 385,000.

It is always important to run a quick sanity check - you already provide us range so that's a start but if you haven't I would relate number of elevators with number of households for example - with this calculation we have 1 elevator for every 70 households (including every household) which is something that is certainly possible.

This is just a quick estimation but in my opinion something good enough for a case interview where you have to come up with a quick estimation.

I am new to market sizing. My approach could be wrong as well.

Start with the population of Germany

80 million

Number of households in Germany = 80/3 ~ 27 million households

Number of people of each age group in Germany assuming 80 years as the life expectancy = 80/80 = 1 million

Working population in Germany, assuming 18-65 (working) = 48 * 1 ~ 48 million

On an average, lets assume every organization employs 1200 people.

Number of organizations in Germany = 48 million/1200 = 480000/12 = 40000 organizations

Let’s say every organization has at least 3 offices. So, total number of offices = 120000

Number of employees per office = 48000000/120000 = 400

Also, assume that 20% offices are government or public utility offices or retail outlets where people visit on a day to day basis. Number of such offices = 20%*120000 = 24000

Now assume on a regular day there are 100 visitors per office => Total visitors to public offices = 24000 * 100 = 2.4 million

So other than the people who are working in the offices, there are additional 2.4 Million visitors.

Let’s assume there is one elevator per 500 people in office building.

Number of elevators in office buildings + retail outlets = 50.4 million / 500

= 100800 elevators

Assume 30% of households are multi story households and also assume that there is 1 elevator per 50 people in a residential building.

Number of residential elevators = 27 million households * 30% /50 ~ 162000

Total elevators in Germany = 262800 elevators

I am new to market sizing. My approach could be wrong as well.

Start with the population of Germany

80 million

Number of households in Germany = 80/3 ~ 27 million households

Number of people of each age group in Germany assuming 80 years as the life expectancy = 80/80 = 1 million

Working population in Germany, assuming 18-65 (working) = 48 * 1 ~ 48 million

On an average, lets assume every organization employs 1200 people.

Number of organizations in Germany = 48 million/1200 = 480000/12 = 40000 organizations

Let’s say every organization has at least 3 offices. So, total number of offices = 120000

Number of employees per office = 48000000/120000 = 400

Also, assume that 20% offices are government or public utility offices or retail outlets where people visit on a day to day basis. Number of such offices = 20%*120000 = 24000

Now assume on a regular day there are 100 visitors per office => Total visitors to public offices = 24000 * 100 = 2.4 million

So other than the people who are working in the offices, there are additional 2.4 Million visitors.

Let’s assume there is one elevator per 500 people in office building.

Number of elevators in office buildings + retail outlets = 50.4 million / 500

= 100800 elevators

Assume 30% of households are multi story households and also assume that there is 1 elevator per 50 people in a residential building.

Number of residential elevators = 27 million households * 30% /50 ~ 162000

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