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Vai

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5

What is the best approach to tackle a guesstimate?

I have some difficulties to find solutions with as little assumptions as possible

I have some difficulties to find solutions with as little assumptions as possible

5 answers

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Book a coaching with Vai

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Interviewers are looking for following skills when evaluating a guesstimate

  • How structured is your approach?
  • Are you able to make quick checks on the efficiency of different methods?
  • Can you make back of the envelope calculations, justify with reasonable assumptions, and validate the magnitude of numbers?

So your approach could be:

  1. Find the right proxy (makes the most difference between a well done and bad guesstimate)
  2. Segment the problem to find MECE sub-structures which are easier to estimate
  3. Do round offs and simplify calculations wherever you can (Interviewers are not interested in precise numbers so ballparks are fine)
  4. Sense check the magnitude of the answer with other potential proxies and if the number seems off, think about what could be external factors affecting your guesstimate and can explain the difference

Further, practice lots of guesstimates to familiarize yourself with common proxies such as population, demographics etc .

Interviewers are looking for following skills when evaluating a guesstimate

  • How structured is your approach?
  • Are you able to make quick checks on the efficiency of different methods?
  • Can you make back of the envelope calculations, justify with reasonable assumptions, and validate the magnitude of numbers?

So your approach could be:

  1. Find the right proxy (makes the most difference between a well done and bad guesstimate)
  2. Segment the problem to find MECE sub-structures which are easier to estimate
  3. Do round offs and simplify calculations wherever you can (Interviewers are not interested in precise numbers so ballparks are fine)
  4. Sense check the magnitude of the answer with other potential proxies and if the number seems off, think about what could be external factors affecting your guesstimate and can explain the difference

Further, practice lots of guesstimates to familiarize yourself with common proxies such as population, demographics etc .

Thanks, makes sense — Anonymous A on Apr 24, 2020

Book a coaching with Clara

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Hello!

The core skills being tested are:

  • Ability to think on your feet
  • Ability to be structured even when not having a proper business cases
  • Agility with quick numbers and estimations, which includes:
    • Back of the envelope calculations
    • Having the right "magnitude" of numbers (e.g., don´t skip a zero)
    • Being able to challenge the numbers correctly, leveraging, for instance, benchmarks.

Hence, you need to keep calm and guide your interviewer through your toughts step by step, from the structure to the different calculations.

Essentially is the same than a case, but with higher stress for lack of time to structure and more vague scenarios.

Hope it helps!

Cheers,

Clara

Hello!

The core skills being tested are:

  • Ability to think on your feet
  • Ability to be structured even when not having a proper business cases
  • Agility with quick numbers and estimations, which includes:
    • Back of the envelope calculations
    • Having the right "magnitude" of numbers (e.g., don´t skip a zero)
    • Being able to challenge the numbers correctly, leveraging, for instance, benchmarks.

Hence, you need to keep calm and guide your interviewer through your toughts step by step, from the structure to the different calculations.

Essentially is the same than a case, but with higher stress for lack of time to structure and more vague scenarios.

Hope it helps!

Cheers,

Clara

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Hello Benjamin,

The only effective way to do it is to breakdown your problem into several sub-problems. The question that you should ask yourself is: "Would I be able to defend this assumption?" If the answer is not, than you should try to breakdown the problem.

Let's do an example: How many icecreams you eat every year?
I guess that you wouldn't know how to defend any kind of assumption here. Hence, the strategy is to divide the problem into smaller ones:

  • How many ice creams you eat every week in the summer?
  • How many ice creams you eat in Autumn, Spring and Winter compared to summer?(e.g. 1/2)

You can answer these questions doing appropriate estimation that you can defend. Putting together these hypothesis, you can then answer the original question.
Remember that the final number is not important, most of the times the interviewer has no idea of the answer. The most important thing is to be fact based during your resolution and to justify every step.

Feel free to text me if you want to discuss this further,
Luca

Hello Benjamin,

The only effective way to do it is to breakdown your problem into several sub-problems. The question that you should ask yourself is: "Would I be able to defend this assumption?" If the answer is not, than you should try to breakdown the problem.

Let's do an example: How many icecreams you eat every year?
I guess that you wouldn't know how to defend any kind of assumption here. Hence, the strategy is to divide the problem into smaller ones:

  • How many ice creams you eat every week in the summer?
  • How many ice creams you eat in Autumn, Spring and Winter compared to summer?(e.g. 1/2)

You can answer these questions doing appropriate estimation that you can defend. Putting together these hypothesis, you can then answer the original question.
Remember that the final number is not important, most of the times the interviewer has no idea of the answer. The most important thing is to be fact based during your resolution and to justify every step.

Feel free to text me if you want to discuss this further,
Luca

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Hi Benjamin,

there are 4 main approaches for market sizing that help to cover basically all the situations (they are not the Cosentino’s ones, which are just a bad subset of the real ones). Most people forget at least one of them in their prep. Once you know the approaches, you won’t need much prep to master them. Please feel free to PM me for more info.

Best,

Francesco

Hi Benjamin,

there are 4 main approaches for market sizing that help to cover basically all the situations (they are not the Cosentino’s ones, which are just a bad subset of the real ones). Most people forget at least one of them in their prep. Once you know the approaches, you won’t need much prep to master them. Please feel free to PM me for more info.

Best,

Francesco

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