Hi,

You should make the following assumptions:

• Peak, non-peak hours and total operational hours
• # of planes landing and taking off during peaks and non-peaks
• Max # of passengers per plane and avg occupancy rate

Best

Hi Firas,

first of all I would ask the interviewer to clarify whether the market size is in

- Dollar term

- Number of house sold (volume term)

Also when we say real estate, I would ask whether this include only new houses sold around the country or also the rent market.

Let us assume no rent market included

One approach ("top down") could be

- Start from US population

- Come up with a # of people x household

- # of houses = US population / # of people x household * (I am assuming a tiny percentage of people lives under a bridge etc... not uber precise)

- Now you should make an hypothesis about the % of house ownership in the US (lower than europe I guess) to segment the market of people that have a house

- YOu can now use the "useful lifetime" rule and come up with an avg. number of years in which people stick with the same house (you can segment population if a single number is too rough)

- House sold / bought every year = Total House owned in US (see above) / avg. # of years people stick with the same house

This is just the "real estate - buy a house" market. I think you can now imagine how to size the rent part

Alternative possibility is to start with population, segment by age and assing a # of house per age bracket (e.g. no age below 18) and the once again go through the house ownership / house renting % to get to the market size.

Hope this helps.

Write me if not super clear.

Regards,

Paul

Hi,

• Segment UK area into cities / rural
• Calculate the number of active digging per 1km in both based on personal experience / observations.
• Calculate each segment
• Assume some utilization rate (e.g. there are diggers that are idle)

Best!

Hi,

1) First of all, there are two ways to calculate market size:

• From supply side (e.g. vending machines spots)
• From demand side (e.g. vending products consumption)

2) 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

3) 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 real environment
• etc.

4) 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 group)
• 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.

5) 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.

6) Practice 10-15 cases and you'll be fine

Good Luck!

Hi,

It should not be calculated with the replacement theory.

First of all, you can always ask in clarifying questions if we are taking into account the commercial usage.

The approach case by case is different:

For example, once you calculate the household cars you can use your personal experience and mention that every 5th car on the street is commercial and divide the households cars number by 80%

For the Malls and hospitals, you need to calculate the commercial vs non-commercial real estate areas and then apply a different number of fo bulbs per sqm

Best

Plenty of good options below.

Another way to think of this is to think from a population perspective and not split it upfront but start with overall usage for those that do not have access to personal machines

So calculate # of household and % of population with access to laundry at home - like you have already done

Then population that does not have indiviual access at home (live in apartments without laundry in unit so use building laundry etc.) Make assumptions on number of laundry machines per 100 people and calculate laundry machines needed here

Then look at special population needs - e.g., students, hospitals, laundromats, hotels. and make individual assumptions - e.g., students you can use the same number as what you calculate for population without individual machines, for hospitals and hotels you might need different assumptions and maybe even the same one.

Hope this helps

Udayan

Hi,

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 so I personally recommend using this one.

Additional things that can be helpful:

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 number 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!

An overall strategy can be: Total number of educational institutions in the UK--> Schools/Coaching centers--> Government/Private--> Average number of teachers per school--> Average Number of government employed/non supply teachers (-Avg # government teachers retiring every year)--> Avg. number of supply teachers---> mutiply by total number of schools/coaching centres---> total market size.

Hi,

You should just make an assumption of how frequently the used car is sold during the lifetime based on your personal experience. Sales will equal The Total number of used cars * # of times it's sold per lifetime / lifetime

Best

Let's try to estimate this for the city of London

I start with formulating the approach in the form of an equation

Step 1: Raincoat market size ($) = City population(#) * (% of pop. that feels the need for a raincoat) * (Avg number of raincoats owned) *(1/Life of a raincoat in years) * (Avg. price of raincoat in $)

Step 2: Input my assumptions

London city population - ~10M
% of pop. that feels the need for a raincoat - Since London has high rainfall, I will assume a large % of the population would buy raincoats (~80%)
Avg number of raincoats owned - I would assume ~2 considering high rainfall in London
Life of raincoat - ~4 years
Avg. price of a raincoat - ~$50

Step 3 - Calculate using my assumptions
Market size ($) = $200M

Step 4 - Do a sanity check
Dividing $200M by the population of London (10M) gives $20 which means each person in London spends on average $20/year on raincoat purchase. This does not seem far fetched.

Conclude - Considering my assumptions, the market size for raincoats in the city of London should be in the vicinity of ~$200M

Hi,

I would look into two things. First, what's the annual profits? Revenues can be calculated by the number of cars (commercial and individual) passing per day, which will be dependent on population, frequency of passing (due to business and leisure purposes), its % share in cars owned, and the price. In terms of the cost, you can assume no running costs (so assume away any maintenance etc). Second, you need to multiply this annual profit by a certain EBITDA multiplier e.g. 10 years, to reach the company value i.e. NPV of this investment. So your selling price should be at least this value.

Best,

Deniz

Hey,

I would say you can solve this by going from a supply or a demand side.

I would probably say that I would go from the supply side and try to see # bands capable of hosting 50K+ events. I would say using my own country (~10M) as a referrence point there are ~10 bands capable of filling a venue like that. Using it was a proxy (1 bands per 1M) for the entire world there will be ~8,000 bands capable of doing that.

Usually a band like that goes on tour ~4 months per year, making 1 mega show per week, meaning that each band will have 16 mega events per year. Taking into account the 8,000 bands that we mentioned we will have 128,000 mega concerts in the world per year.

As a sanity check I could say that my countries population is roughly thousandths of the entire world meaning that there are ~128 mega concerts per year there. taking into account the country has less than 10 venues able to holding a crowd that large having roughly ~13 nights fully booked per year seems a bit low. Most likely we underestimated number of mega concerts 1 band does per year.

Hi,

Why don't you calculate the meat consumption in China from the population and then get the number of pigs from that?

Best

Hi,

I may be misreading, but I think you made a major mistake here: Ventilators are used primarily for life support, not for people with respiratory issues.

I.e. lots of people have asthma (repsiratory problem), but an inhaler is more than sufficient for the vast majority.

Just like in a case, you need to make sure you understand the question. Clarify your assumptions about what a ventilator is and who would need it before jumping into the sizing blindly.

Hi,

For market sizing questions the following 3 aspects are important:

• State your approach: Which approach would you take? For example top-down approach, bottom-up approach, demand side, supply side etc.
• Sensitivity check: What are the parameters that significantly influence your result?
• Sense check: Conduct another approach, or even a third approach (often not necessary, but state this because you would do this in a real case!) and triangulate around your results

In general – and I am sure you know that – the result of your approach is much less important than you approach! Hence, use the opportunity to show that you can see the bigger picture but also consider the details and that you are structured in your approach.

Also: Do communicate with your interviewer!

Now, how could you structure your approach using a demand side framework?

• Start with the population of LA. Assume 8m inhabitants. Ask for a better number and use it if nothing else is provided.
• Assume a life expectance of 80 years and assume a uniform population distribution. Given these assumptions, there would be 1m people per 10 year age bucket (do use numbers that are easy to work with, especially in situations under stress)
• Assume bike penetrations (percentage of population that would use a bike):
  • Age bucket 11-20: 5% --> 1m x 5% = 50k bikers
  • Age bucket: 21-30: 10% --> 1m x 10% = 100k biker
  • Age bucket 31-40: 5% --> 1m x 5% = 50k bikers
  • Hence, there are 200k “would-be” bikers in total.
  • Comment: For simplicity, assume 0% for the other age buckets. Ask the interviewer if you should be more specific – if so, make assumptions for the other age buckets as well.
• Assume that for each age bucket (note: simplification!), 80% of those who would use a bike own their own bike and 20% do not own a bike. Hence:
  • 200k “would-be” bikers x 20% = 40k bikers that do not own a bike
• Assume that for each age bucket (note again: simplification!), 50% of those bikers who do not own their own bike would indeed pay for renting a bike. Hence:
  • 40k bikers without own bike x 50% = 20k bikers who do not own their own bike but are willing to pay for renting a bike
• Assume that all of these bikers are served with an average capacity utilization of 20% (do ask for a better number!). Hence:
  • 20k bikers who do not own their own bike but are willing to pay for renting a bike x 20% = 4k rental bikes

Now, in reality you would (and so you should do in an interview) sensitivity and sense check your numbers! In a sensitivity check, you would discuss with the interviewer what you think are the parameters that drove your result, e.g. is it realistic that there are no bikers aged 41-50 that would rent bikes? Probably not, so state again, that this is just a simplification. In a sense check, you would conduct a totally other approach, e.g. a supply side approach or try to get reference numbers from public registers, insurance registers etc.

Remember that the result is much less important than your approach! The interviewer wants to see that you think in a structured way about problems and he wants to be confident that you can easily replicate these results! Therefore, it is important that you communicate with your interviewer and let him participate in your approach. If you are given the problem, take 10 minutes without talking with the interviewer and then state the correct number you will not pass the interview.

I have more market sizing cases available and am happy to coach.

Hope this helps.

Best regards

Hi,

You still have an objective - calculate the number of X. That's how you start:

1. Our objective was to calculate the number of x
2. Based on our analysis it will be Y
3. There is a number of drivers that influence that number: a,b,c
4. Additionally, if we had more time we can calculate more precisely... / we can make a sanity check / we can calculate from the supply side and triangulate

Best

Hi!

You'll really get the best out of this exercise if you try it yourself. Why don't you post what you're thinking and we can help?

Hint: What's the lifecycle of a cow?

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,
you do that like any other market sizing question. The idea is to find the number of potential customers for the whole market.

One way to do it is to look at the number of flights per year. First of all, it would be good to understand if the question is related to a specific country or not as you need to start with a population number. Then you could think of how many flights does an average person take per year. Let's say an average person take 2 flights per year. Then you would need to estimate how many people on a plane carry devices with WiFi-connectivity. Let's say 80 per cent of passengers (alternatively, break that down again; to estimate the number of WiFi devices use the replacement concept (every three years a person buys a new smartphone on average etc.)).

The market would have a size of:
Percentage of WiFi Users * Population * Number of flights per person, for the US that would be 0.8*320M * 2 = 512M

In the end, you may propose some options of how to actually charge customers for this service. Of course, you can always add some more features to your estimates.

There you go!
Best,
Daniel