Market Sizing Help

Bain & Company BCG McKinsey
Recent activity on Oct 29, 2018
2 Answers
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Anonymous A asked on Oct 27, 2018

At the end of market sizing when you give the interviewer you estimate of (say) the UK buscuit market (for argument's sake let's say you said £6bn), and he/she says do you think that is high/low etc. What are the best ways to sense check your final answer?

I was thinking about comparing the number to the UK population - it doesn't seem unreasonable that 60 million people could spend £100 on biscuits in a year.

Thanks!

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Ibrahim
Expert
replied on Oct 27, 2018
2+ years of consulting in Dubai - Harvard grad - here to help you achieve your goals

Hello,

Great question. So, I think it's important to mention that you should make it a habit to sense-check your numbers as you solve the case. This not only helps you make sense of what you're doing and ideally helps you drive towards the correct answer, but it also shows the interviewer that you're on top of your work/estimates. So whenever you estimate a number, ask yourself if it makes sense by putting it in context. and test the interviewer's reaction for whether it makes sense.

Now in terms of the final answer, here's what I would recommend sense-checking:

  1. Your assumptions: this is the most basic and expected kind of sense-checking to do. If you change this assumption slightly, how will your final answer change? If you add a 0 to one of your assumptions. does it drastically change the final answer and no longer make sense? This is what the interviewer is ultimately looking for, especially if he asks whether it's too high or too low
  2. Against the population/number of households: this is what you mentioned and is a great step. But you still have to ask yourself, does 100GBP sound too high/low? Well that's slightly above 8GBP/month, which still seems reasonable. However, if your estimate is not necessarily household/population driven (which is kind of rare), this may not work best
  3. Against a company that operates in the industry: you might not have that information, but simply asking is a good indicator. If you realize that the largest player makes ~10B GBP/year from biscuit sales alone, you're way off, but if the largest player makes ~2.5B GBP and they should be, say 50% of the market, then at least you know your estimate is quite close
  4. Against an industry of similar characteristics: again, you might not have that information, but comparing it to the chocolate industry, or say potato chips or even sugar candy, might be insightful
  5. Against your knowledge: this is the least recommended for obvious reasons, given how some of the market sizing will be of random things you've probably rarely encountered or thought about, but you may have read something that could be relevant to the question (NOTE: it is extremely important to not let this knowledge impact the way you get to your final answer, unless the interviewer asks for it or pushes you in that direction, but in sense-checking, it should be fine so long as you make it clear)

There might be other ways to sense-check depending on context, but I would say the above are safe approaches.

Hope this helps and best of luck with your prep.

Best,

Ibrahim

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Benjamin
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replied on Oct 29, 2018
ex-Manager - Natural and challenging teacher - Taylor case solving, no framework

Hi,

This type of comment is exaclty what we are looking for during case interview. It's good to have the calculation right, but what matters in the end is how you interpretate your results.

Regarding the question asked two dimensions should be discussed :

- How accurate is likely to be the number you provided ? Basically you should point what are the weak / strong hypothesis you took givent the info available you had that could impact the calculation.

- How do you qualify the current number you have in terms of market attractivness ? You need to trust your gut feeling here and consider the context. But to be concrete let's take two example. 1. If you're looking for a mass market with most likely intensen competition and low margins anything below 500 M€ could be considered as unsifficient. 2. If you're looking at a niche market with limited competition and most likely high margin, the same 500 M€ number could be consider as attractive. In the end we need to consider the market size in regard of the opportunity to capture revenue it creates.

Best
Benjamin

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Ibrahim

2+ years of consulting in Dubai - Harvard grad - here to help you achieve your goals
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