# Market sizing procedure

Market sizing Market Sizing Beginner Level preparation
New answer on Dec 31, 2021
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Hi all, I have finished an interview but find the market sizing part quite challenging.

Would appreciate hearing some advice on these questions:

1. What to clarify after an interviewer ask you to do market sizing?

For instance, should I ask whether market sizing is a full case or just a quick market sizing quiz? Is it okay to ask for segmentations first?

2. What is the procedure of a market sizing question?

Is it always stating my structure (or function first), then ask whether interviewer has

related data? Or should I do the calculation based on my assumptions?

3. How detailed should the market sizing be? For instance, the market sizing could be

very detailed (ex: different segment according to age). On the other hand, I can just

list down a math function and allocate my assumption of numbers in it. Does it

depend on how much time the interviewer expects you to complete the market

sizing?

• Date ascending
• Date descending

I approach market sizing questions with the frameworks discussed in Case in Point by Marc Cosentino. For market sizing questions your answer should be based on logic and assumptions. Analyze the question and throw it into 3 categories: population based, household, or proposterous.

I have seen a lot of population and household cases so far and this is how I approach them:

You need to memorize SOME things about your country: population, life expectancy, how many people in a household (change number slightly so it devides out nicely into population).

Remember this golden rule - it is better to be good enough than to be precise. In market sizing questions you need to make A LOT of assumptions and you need to round numbers and percentages. You need to think about presenting this information to a client - how would I be able to present this information to someone in a very simple way.

EXAMPLE CASE: How many dining room chairs where bought in the United States (where I am from) this year?

1. identify what kind of question it is: population based
2. think about the information you will need to solve this problem: Population of the US: 320million, Average HH size: 3.2 (nice number to devide into 320million), 320/3.2 = 100million HHs
3. Assumptions - this is where a lot of people get uncomfortable with market sizing questions because you need to make educated guesses. Educated guesses for market sizing questions need to be justifiable to some extent, but it can be more losely coorelated than one of a different type of case (THE INTERVIEWER DOESN'T CARE ABOUT THE ANSWER AS LONG AS THERE IS A GOOD PROCESS THAT CAN BE DUPLICATED): the assumptions that I am going to make in this case are as follows
1. I will assume that the average household has 4 chairs based off the 3.2 people per HH.. = 400million chairs
2. I will assume that the average life of a dining room chair is 10 years - based on the fact that none of my dining room chairs have needed to be replaced in 15 years, but I assume that is on the higher end of the spectrum - 400million/10years = 40million chairs
3. Since it is August I will take 40million*(8/12 or 3/4) = 30million
4. Answer - I estimate that 30million chairs have been purchased in the US this year.

Hope this helps! Feel free to schedule a practice case with me - I am a beginner at cases but I am putting a ton of time into them.

Best,

Jacob DeCoste

.Hey Jacob, good structure! I would like to point out two things though: 1. the demand of newly furbished households were not considered. 2. the commercial sector has not been included. It is more complicated but I think it might be able to be estimated based on typical restaurants sizes and number of chairs,

### Market Sizing

Hi,

1) First of all, there are 2 ways to structure market sizing:

• Formula - basically a math formula to come up with a solution. The problem with the formula is that it is easy to forget something or get lost.
• Tree - same as with regular cases you build a tree. A very simple example: you need to calculate the number of dogs on manhattan. A number of dogs = share of households having a dog * # of households. # of households = population / average household size. In the end, you'll have a pyramid where you have to fill the numbers on the base of the pyramid. This approach is much easier and help you track all the numbers

2) You should learn the key market sizing techniques:

• Making assumptions based on personal experiences (Use the example of your house where out of 100 apt-s 10 have dogs)
• Adjusting numbers (NY is a busy city thus fewer people have dogs)
• Sanity check - try to apply your calculations to the real environment
• etc.

3) You should learn the key tools:

• Using age even age split (suppose life expectancy is 80 years. Assuming even age split we have 4 mln people in US of each age)
• Using 80/20 split (suppose 20% people earn 80% wealth and the average salary is xx...)
• Using approximations (Length of NY-SF flight and plane speed to calculate US length)
• etc.

4) Learn key numbers: populations, gas price, gas consumption, Boeing speed and nmber of seats, average salary, # of gates in the airport, GDP growth rate, inflation, etc.

5) Practice 10-15 cases and you'll be fine. Almost all casebooks have good market sizing examples and the solutions

Feel free to PM for clarifications

Good Luck!

### Market Sizing

Hi,
there is no a gold rule to structure every market sizing. For sure you are going to solve it with a formula, sometimes a logic tree will help to better estimate and explain it.
Here some helpful examples of good market sizing:

• https://www.preplounge.com/en/consulting-forum/how-much-would-you-charge-to-clean-all-the-windows-in-seattle-4965
• https://www.preplounge.com/en/consulting-forum/market-sizing-milk-consumption-5087
• https://www.preplounge.com/en/consulting-forum/how-would-you-calculate-the-value-of-a-cow-4982
• https://www.preplounge.com/en/consulting-forum/estimate-number-of-traffic-lights-in-a-london-5692

I have specific sessions to crack it, feel free to text me for more details.

Best,
Antonello

Hi there,

Providing some market sizing thinking for anyone revisiting this Q&A:

Remember that there's rarely a "best" answer with market sizing. What's important is that you break down the problem the way it makes sense to you. Importantly, break it down so that the assumptions you make are the ones you're most comfortable in.

For example, do you know all the major brands? Great go with that. Do you understand all the segments of that country's population (either age or wealth or job breakdown)? Go with that. Do you know the total market size of the tourism (or hotel) industry? Then break it down that way.

Some tips:

1. Just like in a case, make sure you understand the question - what are you really being asked to calculate
2. Decide whether a top-down or bottom-up approach is best
3. Figure out what you know you know, and what you know you don't know, but could estimate
1. This helps you determine how to split out buckets
4. Stay flexible - you can start with a "high-level" market sizing, but gauge your interviewers reaction....if it looks like they want you to do more...then go along level deeper in terms of your splits

### Market Sizing

Hi Anonymous,

both could be fine, however I usually recommend to use a tree or a table for market sizing questions, simply because they make easier to add numbers and calculate the final result. If you struggle with market sizing please feel free to give an example of what you find challenging.

Best,

Francesco

### Market Sizing

Hello!

I agree with the approaches posted below.

Only would add that this is like every other case, only comes better with lots of practicing -not so much with a recipy-.

Good luck!

Clara