Hi guys,
I heard that one of my friends got this question during her interview. How would you approach this: Calculate the number of divorces/year.
Hi guys,
I heard that one of my friends got this question during her interview. How would you approach this: Calculate the number of divorces/year.
Hey Ana-Maria,
Let's hear from you first and we can provide feedback!
To start, do you think it makes more sense to do top-down (i.e. # of people in the country, # married, divorce rate, and so on) or bottom-up (i.e I know x people married, x divorced, in x demographic, and extrapolate)?
Hi Ana,
That is an interesting market sizing exercise. My suggestion would be to always try to solve those cases yourself first. This will help to sharpen your case solving skills (especially breaking down the market sizing and making the right assumptions).
What always helps is after you solved it to sanity check your answer with the actual answer and the assumptions that you have taken.
Back of the envelop approach that I would use is as follows:
Looked up the actual divorce rate, which is between 30-35k in the Netherlands based on the national statistical agencies.
However, it is NOT about finding the answer it is about how you break-down the problem, the way you think, the assumptions you make and the ease of your math calculations
Thank you Ian and Sadik for the answers. I was thinking also about a different approach: let's say the population of US is 300 mil, life expectancy is 80. That would mean that each year 4 mil people die. We know that the majority of the people that die are married so let's assume 90%*4 mil=3,6 mil are married, this would result in 1,8 mil marriages each year. I assume also a divorce rate of 40%, that would mean that 720k of those marriages would end up in a divorce. This is a simplistic approach not considering remarriages ( that can maybe result in a second divorce), however when I Google the correct answer which is 827k my approach yields a close number :) .
(edited)
Interesting approach. As indicated in my answer it is not about the actual answer, rather your way of thinking. The key advice I would give is try capture as many relevant elements as you can and add some reasonable assumptions to those.
Hi, first of all thank you for elaborating your approach. I'd like to ask about the estimating number of divorces per year using the "renew rate". What's the reasoning behind dividing the 1 million by 20 years or 30 years? I didn't quite get it why it was 20 or 30 years. What does this number represent and where we can derive that number? Thank you in advance!
(edited)
Hi Ana,
I would keep it simple. Let's say the population is 80M. Average marriage age is 30 and life expectancy is 80. Average marriage number is 1. Almost all above 30 married at least once. So roughly 50M people are a candidate for divorce or they already divorced. They live 50 years after they marry. Let's say 50% of them will divorce at any year in those 50 years. It means that on average every year 1% (50%/50) of them will divorce. The answer is roughly 1M divorce a year.
Cheers
Serhat
Thank you Ian and Sadik for the answers. I was thinking also about a different approach: let's say the population of US is 300 mil, life expectancy is 80. That would mean that each year 4 mil people die. We know that the majority of the people that die are married so let's assume 90%*4 mil=3,6 mil are married, this would result in 1,8 mil marriages each year. I assume also a divorce rate of 40%, that would mean that 720k of those marriages would end up in a divorce. This is a simplistic approach not considering remarriages ( that can maybe result in a second divorce), however when I Google the correct answer which is 827k my approach yields a close number :)