# What are some top things to consider when sizing a market?

Case market market entry Market sizing MBB
New answer on Aug 27, 2019
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Hi, I am struggling with making good assumptions or starting points during my market sizing questions. What are some basic tips I can employ to get better at this? I almost always never make the right categorization. For example, if the question is to estimate the number of people who are in hospitals across the US right now, how would I proceed?

One approach could be to estimate the number of people in the US and the percentage that might be sick.
Another would probably be to estimate the number of hospitals in the US and estimate how full they might be, but how would I do the latter?

Any help and practice resources would be appreciated.

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Hi,

Both of your approaches are correct since you can calculate the things from the supply and demand sides. For example for the hospitals, you can calculate the number of hospitals per certain area (You can use your town as a proxy. E.g. I have 3 hospitals per 500k people in my hometown) and then assume a certain number of beds, turnover, and utilization.

There are certain tools that you need to understand:

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 helpyou 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 realenvironment
• 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 USof 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!

McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School
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