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How would you size the market for the maintenance of water pipes under the ground?

Market sizing water pipeline market
Recent activity on Jan 24, 2019
2 Answers
1.7 k Views
Anonymous A asked on Jan 24, 2019

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Anonymous replied on Jan 24, 2019

An alternative from a 'city budget' angle:

1. Anchor the context in a city, like NYC; estimate the GDP of NYC as 10% GDP of USA, which would be 10%* $20 trillion = $2 trillion

2. Make reasonable assumption that NYC's annual budget is 10% of its GDP, which is $200 bn. That intuitively sounds high so let's say 5%, or $100bn.

3. Estimate the main categories of spend: payrolls, security, construction, etc, and maintenance -- if we assume that anything built today will last 10 years, and will require annual maintenance of let's say 5% of total cost, you now know that annual city maintenance costs are half of annual city construction costs. So you can do your own reasonable ranking to come up with a number for total annual maintenance costs

4. If you categorize total maintanance costs into 1. transport 2. buildings. 3. water and 4. other, and you assume that costs are spread evenly across these and that water maintenance is 50% underground pipes and 50% other, you find that maintenance of water pipes costs 1/8 of the total maintenance costs. This is assuming all such maintenance is covered by the city gov -- if you think it's more reasonable to split it somehow with the private sector, adjust your number accordingly!

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replied on Jan 24, 2019
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers

Hi Anonymous!

  1. Estimate (A): the total length of water pipes in a given city in km (some inspiration how to do this here:
  2. Estimate (B): the cost of maintenance (=revenue to the maintenance provider) per km of water pipes
  3. Estimate (C): the maintenance frequency for water pipes (e.g., every 5 years)
  4. Compute (A*B)/C to get the yearly market size

Cheers, Sidi

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