Hi there,

This is such a good question, and experts seem to always shy away from the answer here!

It's very simple: Do the approach the is the easiest for you given the question.

Are they asking you to estimate something where you don't even know where to begin from the top (maybe you have 0 clue as to the market size of the industry, the GDP of that country, etc. etc.)? Then do bottom-up!

Alternatively, does it seem impossible to do a realistic from-the-ground-up estimation of something (perhaps it requires just far too many steps and assumptions)? Then do top-down!

Fundamentally, you need to take the approach that just makes the most sense in that circumstance. Quickly think about the key assumptions / numbers required and whether you 1) Know them or 2) Can reasonably estimate them. If you can, go ahead!

An Example

Coincidentally, I just answered a Q&A for a great market sizing question here asking to estimate # of electric charging stations in a city in 10 years:

https://www.preplounge.com/en/consulting-forum/how-would-you-solve-this-market-sizing-question-from-roland-berger-7631

This one could be answered top-down (as I did) by estimating population of the city, # of drivers/ cars, etc. etc.

OR, it could be answered bottom-up by estimating # of stations you see per block (or # of gas/petrol tanks), % increase this might be over time (or # of EV stations that would be needed per gas tank given EV stations take 10 times as long), and # of blocks you'd estimate the city to have.

Take a look here for additional practice! https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

(edited)

Here's my simple approach for this quesiton:

Default to top-down since it's easier most of the time.

Bottom up is useful when you have a very specific constraint, like I can only do 1 per day.

It's that simple.

One more point: if you choose an approach, and believe you made a mistake, just admit it and use the other one. As an interviewer, if I see someone self-correct, I really like that. Just like in real life, the key is to know when you've made a mistake and fix it.

Hi Anonymous,

In reality it depends which data you have. If you can't get good data on many variables or even proxies in a bottom-up calculation, I would not say at all that top-down is less accurate.

Additionally, it often makes sense to use both approaches simultaneously as kind of health-check and see where the numbers get you. If both lead to the same ballpark of results, good - if not, than you need to go back and see what causes it.

Hope that helps - if so, please be so kind to give it a thumbs-up with the green upvote button below!

Robert

Dear A,

The truth is that actually you can use both approaches to structuring the market-sizing case - the top-down and the bottom-up approach. However in the case you simply should outline that there are 2 ways of thinking, 2 or even multiple ways of thinking about this market sizing case and you would like to use the following approach. So just discuss this with an interviewer and crack the case.

Then, accordingly afetr you have agreed on the logic. Usually the interviewer will guide you, if he/she doesn't like your approach, then the interviewer would ask you to elaborate a different approach. So you can, for the case of Heathrow you can use also your bottom-line approach. Simply get agreed on it with your interviewer and then go for it.

Hope it heps,

Wish you best of luck,

If you have any questions,just drop me a message.

Best,

André