All questions tagged Market sizing - Consulting Q&A - PrepLounge.com

Hello!

This is a very typical market sizing case, where the key steps are:

• Calculate the total population
• Calculate the % of population that could be interested in this product (this could be done by clustering -the classical ones are age groups, purchaching power, etc.-)
• Calculate the % of the total adressable market that any firm in particular could have -in case it´s asked only-.

For that cited market share, consider how many restaurants need to be open.

I see you only take into consideration rush hour and accomodation during it, but what about take out? It´s huge, and growing.

I would then rather estimate the # of shops considering kitchen outocme capacity during rush hour.

Hope it helps!

Cheers,

Clara

There are many similar questions with useful answers on preplounge already, like below:

• https://www.preplounge.com/en/consulting-forum/how-would-you-go-about-calculating-how-many-solar-panels-are-used-in-a-country-9320
• https://www.preplounge.com/en/consulting-forum/how-would-you-estimate-the-market-size-for-vegan-shampoos-in-the-uk-9150
• https://www.preplounge.com/en/consulting-forum/b2b-market-sizing-no-b2c-8982
• https://www.preplounge.com/en/consulting-forum/how-to-market-size-the-opportunity-for-stripe-9290
• https://www.preplounge.com/en/consulting-forum/how-many-wealthy-people-are-in-the-uk-8819

Fundamentally the structure and approach will be equivalent in all these cases and in the example you have stated above.

Hi, in addition to the solutions proposed by the other coaches in the discussion, I would like to suggest similar cases in the platform to practice with:

• 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

Hope it helps,
Antonello

Classic type of case here :)

1. Population of country
2. Split by income/wealth level (poor, middle, upper class)
3. Estimate # of visits per year per group (of course, directly correlated with socioeconimic status...benchmark off of how often you go)
4. # of visits a dentist probably has per day (do not assume full capacity)
5. # days/weeks worked per dentist
6. Divide Q3xQ2 by Q4xQ5
7. Multiply by a factor of your choice to account for doctor holidays/days off and/or non-full capacity at doctor's offices

And voila!

Bread-and-butter type of case here!

Hello,

I think this is a market sizing where the top-down approach starting from population can work very well. In a nutshell:

• Divide population into different segments
• For each segment approximate the percentage of people that invest their money
• Assume per each segment the percentage that could be interested in such a modern asset (e.g. people between 50 and 60 years old are likely to invest but maybe not so interested in cryptocurrency)
• Multiply the previous data to obtain the volume of cryptocurrency

Additional thoughts to put on the table and discuss:

• People that have cryptocurrency without even knowing (banks or other investing entities handle their money)
• The number can vary a lot over the time (e.g. after news on cryptocurrency regulations)

You can also do a sanity check of the number comparing it with the total digitalized people of your country (if you have the data) and see if the percentage makes sense.

Best,
Luca

Hello Nicola!

Precisely the other day I was looking at the result of something similar to this question, for Spain.

The way I would approach it would be the following:

1. Total population
2. Divide into age segments -some groups, as 0-10 years, can be discarded at this point-.
3. Clarify whether wealth also means in terms of properties, etc.
4. Estimate, with an estimated average salary, the % in each age group that have a wealth of 250k - 2 Million

It changes a lot it the problem is total wealth vs. total cash for investment, so worth clarifying!

Hope it helps!

Cheers,

Clara

Hello,

Interesting question!

Firstly, I'd like to point out that your instinct is 100% correct - always take to the time to gather your thoughts and never assume that you are supposed to answer straight away. I have a friend who was unsuccessful in his final round interview because he thought the interviewer wanted him to answer straight away and then was given feedback that he was unstructured. This sort of situation is much more common than what you describe, in my experience.

That being said, I agree that there's an extra challenge here to guide the interviewer through your thinking as you are doing it. The interviewer knows this, they know you are thinking out loud, so of course they are not expecting the same answer as if you were reading your notes off a page, so it's okay if it's a little messier.

My main advice here is: After you finish, restate everything quickly in a more organized fashion. I find that interviewees don't do this often, but it's an easy way to make all your answers better and you can do it at almost any part of the interview, including behavioral to improve your answers. There's no rule that you only get one chance to say something and this is a good technique to improve your performance.

Hope this helps, happy to provide more details through the chat.

Best,

Allen

I struggle to understand the difference - especially I don't fully understand what "all possible/potential cheeseburgers that could have been consumed last year" means. Two hypotheses:

• If you mean Cheeseburgers that were sold, but not consumed, then this is included in the market size
• If you mean the total number of Cheeseburgers that could have been produced based on kitchen capacity, cattle farm capacity or whatever, but were not produced, because no one wanted to eat that many Cheeseburgers, than they will certainly not be in the market size. That would be the global production capacity.

Hi Floyd,
the approach is good, but you should review 2 assumptions:

1. Cars do not go to the gas station every day -> you should estimate the frequency and divide the total number of cars
2. 1 refuel does not last 1 hour -> if you assume 6 minutes per refuel with an utilization of 50% you have 10 cars served per pump per hour. I suggest using a smaller utilization for night hours

I would like to suggest similar cases in the platform to practice with:

• 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 developed specific frameworks to crack all the market sizing. Feel free to text me for additional details.

Hope it helps,
Antonello

I'd suggest thinking through whether consumption patterns differ substantially between HHs and individuals. This seems likely.

One could argue an individual will order both on a standalone basis and in a group (HH) and so the smallest unit to model would be per individual.

Then you could always segment this into different segments of individuals e.g.

1 - young, solo living

2 - couple

3 - young family

4 - older couple

Within each of these segments you can then assume order frequency and also taking into account # individuals / HH

Hope that makes sense

Hi,

B2B can be measured by:

• Businesses
• Employees <- Businesses

In any case, there are Small, Medium, and Enterprise businesses. Each of these segments has certain revenue thresholds and # of employees thresholds

How do you calculate each of them?

• SMBs - most probably by geography. Can you calculate the number of barbershops per district? Or barbershops per certain population size? - that's relatively easy
• Enterprise - there are not that many big companies, especially if you split them by industry. And you can also take F500, F100 and apply 80/20 rule

Best,

Hi there,

The best way to learn is by doing :) Post your approach here and we can provide feedback!

General Tips for Market Sizing

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

Hi Valentine, in addition to the solutions proposed by the other coaches in the discussion, I would like to suggest similar cases in the platform to practice with:

• 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

Hope it helps,
Antonello

Hi there,

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

Hi there,

What's important here is the process of figuring it out. Why don't you post your initial thinking/approach and we can critique it? Just getting the answer won't help you develop as much!

First question: Do you think top-down or bottom-up would be more straightforward?

Second question: What breakdown allows you to estimate things reasonably?

Hi there,

When you say "Felt it's a very complicated question, with little data" that's exactly what these interviews are testing!

Now, I think it's crazy to start with population.

For this approach, you need to start with expected foot traffic in this mall and THEN think about what % of that foot traffic would be likely to use the centre.

The other approach is how big this branch could be (as in physical size)...then estimate capacity based off of that.

Hi all,

comes down to experience too. Frankly, whenever I am confronted with a market estimation, my mind automatically performs a certain process:

1. Think about formula (not just a flimsy approach, literally an algorithm)
   1. How many approaches are there (bottom-up vs. top-down)?
      1. In your Malaria case using population proxies of any kind is in my book bootom-up, using however the revenues earned by Malaria medicine manufacturers for example, breaking down how many perople there MUST be given the revenues they have would be top-down.
   2. What are the upsides / downsides of each approach? Which one should I choose given the limited time in a case? Explain this to the iviewer.
2. Necessary assumptions / key drivers (no numbers at this point, just in terms of important Proxies by thinking VERY practical). This is why you should ask follow-up questions after the case prompt. Not for the sake of asking but to help you identify Step 1 and 2. If you dont understand the basic business model and how the service / product PRACTICALLY works and is used, I dont see how you can comfortably estimate the market size.
3. Do the Math transparently using clear language. No mumbling. Double-check your numbers before you speak up.
4. Sense-check the result (!) 2 ways mostly work: checking your calculations and scrutinizing your key assumptions. Or using other "proxies", perhaps other bottom-up or top-down approaches brain-stormed before. E.g. if you have a number of Malaria patients... does this correspond to perhaps the number of available hospitals or the revenues earned by Malaria meds producers? You need to be able to tell me as an iviewer if you think your result is too high / low at least. Ideally also give me a rough range of the expected result with a rationale.

Best,

Denis