1. What are market-sizing and guesstimate questions?
They are among the most popular question types you will get in a case interview. These questions ask you to estimate a quantitative variable relevant to the case you are solving. A “guesstimate” question which you have to estimate the size of a market is called a “market-sizing” question. In terms of approach, there are no differences between guesstimate and market-sizing questions which have many tips you can apply. This is an example of a guesstimate question: How many people wear red in New York on a typical Monday? You need to keep in mind that it’s the way you approach and solve the problem that matters, not the final answer that you give out.
- Step 1: Clarify the question, make sure you and the interviewer are on the same page on every assumption.
- Step 2: Break the problem into smaller pieces in a MECE way
- Step 3: Use Estimation and Judgment to solve each piece.
- Step 4: Consolidate all of those pieces into a final conclusion.
3. Illustration of the Strategy
Let’s solve the sample question above using the strategy we just introduced. Question: How many people wear red in New York on a typical Monday?
Step 1 – Clarification:
How do you define “wear red”? – If any cloth on a person is red, he or she is considered as “wearing red”.
If a person wearing red goes out more than once, do we count them again? – No!
Does “New York” here refer to New York City or the state of New York? – New York City.
Step 2 – Breaking down the problem:
OK, so here is how I would want to solve this problem. The number of people wearing red in NYC on a typical Monday will be determined by these following factors:
How many people are there in NY?
What are the chances that people would wear red?
This depends on two smaller factors: How many pieces of clothing people wear and their color preference.
Step 3 – Solving each piece:
Work with the interviewer to estimate each of those elements and come up with the answer.
Population: approximately 20 million
Probability: 5% staying at home, 70% going out once, 25% going out twice.
Those staying at home have 2 pieces of clothing, those going out once have 5 pieces, and those going out twice will, therefore, have 10 pieces.
There is no specific preference on color.
Step 4 – Consolidating:
Let’s analyze the number of people wearing red from each group.
- Staying at home: 1,000,000 * 2 * 1/10 = 200,000. 1,000,000 people have 2 pieces of clothing. Chance of having red in each piece: 1/10 (7 colors + gray + black + white)
- Going out once: 14,000,000 * 5 * 1/20 = 3,500,000. 14,000,000 people have 5 pieces of clothing. Chance of having red in each piece: 1/20 (on Monday, most of these people go to work, thus black and white will be the main colors they wear)
- Going out twice: 5,000,000 * 10 * 7.5% = 3,750,000. 5,000,000 people have 10 pieces of clothing. Chance of having red in each piece: 7.5% (the first trip is probably to work: 1/20; the second trip is the casual trip: 1/10)
So in total: there are about 7.5 million people in NYC wearing red on a typical Monday.
To follow-up on this market-sizing & guesstimate topic, here is another case example dedicated solely to market-sizing question: What’s the global market size for smartphones? You can read in detail on how to solve this question with a 4-step approach in this market sizing example article.
4. Other guides on preparation
It is a lot harder to do guesstimate questions in front of an interviewer. Thus, as you practice this question type at home, try to speak out loud as if you were presenting to an interviewer.
Practice with numbers
In addition to having a good approach, another key to succeeding at guesstimate questions is your ability to do math quickly and accurately. Make sure to visit our materials on consulting math.
Whenever you have some free time (driving, sitting on the bus, etc.), ask yourself random guesstimate questions and try to solve them. Back when I was in college, every time I had to do a boring task (e.g. laundry) I practiced guesstimating by asking, for instance, “how many people are there in this dorm”, “what is the monthly operating cost of maintaining this laundry room”, “how much water does this room use per month”, etc. You could develop that habit too!
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