Market sizing: off by more than 20% due to wrong assumptions -error?

Anonymous A asked on Aug 24, 2018 - 4 answers

Hey there,

I'm currently practising a lot of market sizing. I usually get the logic and can structure it correctly.
However, my result is often twice as big or twice as small due to wrong assumptions.
I know my basics (household, life expectancy for people, different products etc.) however, I still tend to make bad educated guesses regarding some assumptions.

How important is it to be within 20 percent if the structure/logic is correct and most assumptions are correct too? Will the interviewer tell me directly that one assumption is wrong and help me to correct it? If yes, will this be regarded as a weakness?

For Bain interviews: how usual is it to get random, standalone estimation questions that do not really have something to do with market sizing directly? Case in Point author states that only smaller firms tend to do that, whereas MBB ask market sizing questions within the context of a larger case.

THX!

4 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Anonymous C updated his answer on Aug 24, 2018

I’d echo the previous response.

I’d add that when you size the market from the demand side, usually it’s good to be within +-30% range of the first input. For example, value size of market of tea in China equals to population of China multiplied by % drink hot drinks multiplied by... here you should start with a proper assumption on population of China. Ideally, you should break down the equation to as many steps as you can and your inputs should be within +-20% range of the actual values. It’s fine, however, if your final output is 2x times bigger than it is in reality. If the final number seems to be too high or too low, sanity check the response and change equation input values to lower or higher respectively

(edited)

Anonymous B replied on Aug 24, 2018

Hi there,

Precision in final results' importance is directly proportional to your access to data i.e. expectation to be correct is present as you have more access to the data. Hence, as long as we assume most of the numbers based on our reasonings, it is OK to answer within 1/10 to 10x range. What matters is your train of thoughts, so make sure you think out loud throughout the process.

Most interviewers won't interrupt the process even if your logics and/or assumptions are wrong. That said, they may ask give you a number saying that is the correct number and ask you what went wrong in your logic and/or assumptions. As long as you can point out which part of them could be wrong, it should not be viewed as a weakness.

I have not attend Bain interview before, others may enlighten you on that.

Benjamin replied on Aug 27, 2018
ex-Manager - Natural and challenging teacher - Taylor case solving, no framework
Book a coaching with Benjamin

100% Recommendation Rate

53 Meetings

470 Q&A Upvotes

USD 319 / Coaching

Hi,

As always with market sizing, I recommand to split the conversation in 2 to facilitate the discussion with the interviewer :

- Structure of the calculation : This one is critical, and you must have it right. That's basically what is evaluated in a market sizing exercice

- Assumptions : This is far less important than the structure. Make sure you know the basic numbers (population, etc.) but relax on the other hypotheses, we don't expect you to be an expert of the market you will size.

As said by Vlad, if the numbers are critical for the case resolution, the interviewer will adjust your hypotheses as long as your structure is correct.

Best
Benjamin

Vlad
Expert
replied on Aug 24, 2018
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School
Book a coaching with Vlad

97% Recommendation Rate

365 Meetings

5,406 Q&A Upvotes

USD 229 / Coaching

Hi,

You shouldn't worry about that:

  • If the exact numbers are not critical for the case - the interviewers will look for your approach and justification of the assumptions rather than the exact numbers
  • If the numbers are critical for the case - the interviewers will help you with the correct assumptions. If you have a solid justification it won't be a mistake

Best!

Related BootCamp article(s)

Market Sizing

Market Sizing Questions are used to test your quantitative & reasoning skills. Learn more on how interviewers evaluate your given answer!

1 Q&A

Getting Up to Speed

In order to repeatedly demonstrate prerequisite skills under the pressure of a real case interview, you need to learn the basics and practice cases.

Important Facts

It's essential to know some key figures regarding geographies, population, economies for your case interviews. We summarized them for you here.

1 Q&A

Related case(s)

Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise ... Open whole case

Bain Case: Old Winery

Solved 40.6k times
4.4 5 1057
| Rating: (4.4 / 5.0)

You have inherited the “Old Winery” from your grandfather, a winery which has been family owned for five generations and can be dated back to the 16th century. Half of the eleven hectares are used to grow white grapes, the other half to grow red grapes. They are grown in the conventional way, i.e. ... Open whole case

Roland Berger Case: Onlinestar

Solved 25.6k times
4.3 5 554
| Rating: (4.3 / 5.0)

Onlinestar, an online retailer of furniture and garden products (core business), has grown significantly in recent years as a result of an expansion of its product portfolio. The company mainly imports goods from Chinese manufacturers but also operates its own production of cat lavatories (special b ... Open whole case

TKMC Case: Elevators

Solved 12.6k times
4.2 5 1150
| Rating: (4.2 / 5.0)

Your customer is the market leader in the North American elevator service business. This is divided into the areas of elevator construction, elevator modernization and service. The customer has a particularly strong branch network in medium-sized cities and would now like to expand its business in ... Open whole case

Our client Pharma Finance just finalized its first investment round and received $ 40m to invest in the build-up of a pharmaceutical manufacturing company. The CEO is mainly interested in high margins and profitable markets, with a sustainable and green production. This is why he wants you to find o ... Open whole case