Market-sizing Questions: 5-step Guide & Detailed Approaches

“How many school buses are there in the U.S.?”

This is a market-sizing question that often appears in consulting case interviews. The question may appear difficult and even annoying at first, but once you understand which steps to take, they will become much more interesting.

This article will reveal a 5-step guide to market-sizing question, show you helpful tips and tricks, and provide some examples for practice. It don't take much time before you can crack every market-sizing question you encounter.

What are market-sizing questions?

Market-sizing questions, or guesstimate questions, ask candidates to estimate the market size (e.g: annual sales) of a specific product, often using limited information. The key objective is to find a “good-enough” number, not a correct one. The length of the case depends on whether the market-sizing question is given as a standalone question (20-25 minutes) or one part of a full-length case (5-10 minutes).

Market-sizing questions are the most popular type in consulting case interviews. There is a high chance of 70% that you see ONE market-sizing question in 1 interview. Over the course of 3-5 interviews, it’s 100% that you will see AT LEAST ONE!

Market-sizing question examples include:

“How many tow trucks have been sold in German over the last 5 years?”

“What are the annual sales of the smartphones market in Europe?

“How many Samsung devices are currently being used in Singapore?”

“What are the annual sales of KFC’s restaurants in the US?” 

Types of market-sizing questions with examples

We classify market-sizing questions based on 2 different criteria: Types of markets and Types of estimations. Now explore them one by one.

Based on types of markets

When it comes to types of markets, there are 3 types of markets: High-exposure markets, Low-exposure markets, and Fictional markets.

• High-exposure markets: These questions involve something you either see or hear frequently.

Examples:

“How many balloons can an airplane hold?” (It is a high chance that you can imagine what a balloon and an airplane should look like, although you don't see this situation many times in real life)

“How many people watch the New Year’s Eve celebration live on Time Square in New York?”

“What are the annual sales of the smartphones market in Europe?"

"What is the valuation of the machinery investment in the t-shirt factory?”

“How much would you evaluate the value of the synergies to our client?” (In an FMCG M&A case)

• Low-exposure markets: These questions involve something that you see or hear LESS frequently from your background and experience.

Examples:

“Estimate the total size of the farmland in Europe" (This question would be hard if you live in Asia and have never been to Europe)

“How many cockroaches can a truck contain?”

“What is the market size of space rockets?”

• Fictional markets: These questions involve something that doesn’t exist, in a far history or in the future that you cannot imagine. There is a high possibility that you will see trickier questions like these at second-round interviews with Partners.

Examples:

“What is the estimated price of a magic door that lets you go anywhere”

“What is the value of the returns if our client decides to invest in flying cars?”

“How much should Doraemon’s magic pouch be priced at?” 

Based on types of estimations

Now we will classify the above examples according to types of estimations -  Guesstimate a certain number, Estimate the size of a certain market, and Estimate the valuation of a business decision.

• Guesstimate a certain number: Guesstimate questions in interviews require the candidate to estimate a number using limited information (hence “guess”). These questions require a great combination of logical thinking, mental math, problem-solving skills, and background knowledge.

Examples:

“How many balloons can an airplane hold?”

“How many people watch the New Year’s Eve celebration live in Time Square in New York?”

“How many cockroaches can a truck contain?”

• Estimate the size of a certain market: Market-sizing questions requires the candidate to estimate the market size (for example: “monthly sales”) of a certain product, often based on limited data. A strong understanding of math, logic, and problem-solving abilities is a must, in addition to a background in business.

Examples:

“What is the total annual sales of the global laptop market?”

“Estimate the total size of the farmland in Europe”

“How big is the size of the Airpods market?”

“What is the market size of space rockets?”

• Estimate the valuation of a business decision: Valuation questions ask you to estimate the price and benefits regarding any product, project, company or market. This type of question requires some basic business and finance knowledge of valuation models (Eg: costs and benefits, return on investment, etc.)

Examples:

“What is the valuation of the machinery investment in the t-shirt factory?”

“How much would you evaluate the value of the synergies to our client?”

“What is the estimated price of a magic door that lets you go anywhere”

“What is the value of the returns if our client decides to invest in flying cars?”

Note: The most difficult market-sizing questions are the ones that belong to Fiction markets and Estimate the valuation of a business decision.

Why do consulting firms ask market-sizing questions?

In their case interviews, consulting firms (McKinsey, Bain&Company, BCG, etc.,) use market-sizing questions to assess candidates’ problem-solving skills, mathematical skills, and logical thinking. What the interviewers expect is how you approach market-sizing questions, not the answer. Your approach should be reasonable with the main factors that affect the market size, and your assumptions should present sound business judgment.

Moreover, as a consultant, you will often need to give “guesstimates” and figures of market size when working with clients. So if you can handle market-sizing questions successfully in the interviews, you show the interviewers you are a potential consultant for their firms. 

How to answer market-sizing questions?

Here are 5 steps to answer market-sizing questions: 

• Step 1. Clarify all unclear items within the question
• Step 2. Break the number down into 3-5 smaller, easier-to-estimate pieces 
• Step 3. Estimate each piece based on math and background knowledge 
• Step 4. Calculate the pieces to reach the final result 
• Step 5. Sense check the result 

Even if you do know the correct numbers, do not jump straight to the result. What matters is the approach – you must be clearly structured and top-down all the time!

Now let’s solve a market-sizing question together.

QUESTION: "How many school buses are there in the U.S.?"

Step 1. Clarify the problem

Clarifying at the beginning has four benefits:

• It gives you important information to solve an unclear problem.
• It makes sure you and the interviewer are on the same page, avoiding later disagreements.
• It reveals an ideal, organized approach to problem-solving as consultants do.
• It gives you more time to deal with the problem.

So what to ask?

Here is a checklist of some most common items. If any of them is not clear from the question given, that would be an automatic clarification raised.

• Definition of any terms: Vague terms (i.e.: people, need, ...) or technical terms (i.e.: surgeon tools, ...)
• Scope of coverage: The problem's time frame, geographical region, or Customers, Company, Products (2C1P) in case of Market-sizing questions
• Unit of measurement: Clarify how exactly the "size" is measured

Note: To drive the case in a favorable direction, you can force the clarification answers or assumptions so that it is easier for you to break down the issue tree and calculate.

In the case “How many school buses are there in the U.S.?”, the “forced” assumptions can be:

"What are school buses in the U.S."?

School buses in the U.S. are yellow school buses, with an average capacity is 60 students per bus.

=> "Steer" signal:

• Specific clarifications: the yellow school buses
• Easier to calculate: the bus capacity of 60 students

"What are types of school buses?"

Types of school buses account for the school buses being actively used, excluding any type of in-production, unused, transformed, and destroyed buses.

=> "Steer" signal:

• Easier to calculate: The most common type of buses

"What will levels of school be included?"

Levels of school include the 4 levels of K-12 school, which are kindergarten, primary, secondary, and high school

What are the groups of students estimated?

The groups of students estimated are those who enrolled in K-12 schools, NOT including people who get alternative education (GED or non-diploma)

=> "Steer" signal:

• Specific clarifications & Easier to calculate: more common groups of students 

Step 2. Break down the problem

"How to break it down?"

With market-sizing questions, you can start breaking down with simple algebra, either using an addition or a multiplication equation. For example, we will use a top-down method and several multiple formulas to calculate the number of school buses in the U.S.:

This graphical breakdown of the problem is called an issue tree that has to be MECE.
If you don't know about these terms, check on two articles Issue Tree and MECE Principle before continuing – these concepts are must-learns for case interviews.

• The items in each sub-branch are easier to estimate (can be benchmarked elsewhere) than those in the bigger branch
• Division and multiplication formulas were used because, in this case, they make the component numbers easier to solve
• Regarding correlating objects, school buses are a type of service -> calculate the supply size by estimating the user demand (students) size, with a reasonable assumption that the supply is supposed to meet all demand
• Here’s an example of an ineffective issue true: Break down the number of school buses into a sum of different types of buses according to sizes (type A, B, C) or a sum of different states and regions (i.e.: the west coast and the east coast etc.)

Step 3. Estimate each piece

This is where you estimate each piece independently. Start with the pieces from the most outer layer, meaning that there is no smaller layer below them. In the case of the school-bus question, the pieces that need estimations are:

Note: Try to avoid this during the “timeout” phase – it will likely change the otherwise-short timeout into an awkward silence – which is awful.

Step 4. Calculate the pieces

Now we calculate the pieces to reach the answer.

At this step, quick mental calculations come in handy since if your math is poor, you will bore the interviewer to death. Don't rush it, though; inaccurate calculations are terrible for case interviews.

Practicing your mental math is necessary for consulting case interviews. Our article on Consulting and Mental Math will be a great help.

Here are the calculations for the above market-sizing question example: 

• Number of K-12 students in the U.S
  = Total U.S. population x The percentage of the total population in the K-12 age groups
  = 330 million x 25% = 82.5 million ≈ 81 million
  (Rounded down from 82.5 million to 81 million for easier calculation in the following parts)
• Number of K-12 students using school buses
  = Number of K-12 students in the U.S. x The percentage of K-12 students registering for school buses
  = 81 million x 67% = 81 million x 2/3 = 54 million ≈ 55 million
  (Rounded up from 54 million to 55 million to adjust for the rounded-down number in the previous calculation and easier calculation)
• Average number of students per bus
  = Average bus capacity x Bus utilization rate
  = 60 x 100% = 60 students per bus
• Number of school buses in the U.S.
  = Number of K-12 students using school buses / Average number of students per bus / Average number of turns per student
  = 55 million / 60 / 1.5 = 600,000 buses
  (Rounded from 611,000)

In reality, there are 480,000 buses in the U.S. taking children to and from school each day.

Getting this close is good; however, in a real case interview, do not try too hard to get the right number. Once again: A structured approach is the only thing that matters. 

Step 5. Sense check the result

In case you don't have the exact knowledge or personal experience to sense check for this question, you can start with the possible weak points in your estimations. This will show the interviewer that although your calculations might be off from the exact number, you are still aware of the weak points to double-check in real-life situations. Examples of weak points are: 

• The percentage of K-12 students registering for school buses can be much different in reported data
• The average number of turns per student can be different since we cannot measure exactly the demand of each group of students

Five practical tips to answer market-sizing questions

The five steps I have mentioned are just the theory. Now let's put it into practice; here are five instant-result tips and tricks. 

Tip 1: Raise close-ended clarification questions

When you clarify the problem, try to limit the possibilities to the ones favorable to you.

Close-ended questions (or even affirmatives) will bring in favorable definitions that benefit your estimating process. Usually, the interviewer is unsure of the specifics, so he will probably be open to your suggestions.

Open-ended questions, on the other hand, may take your control away and give it to the interviewer, making the question much less predictable.

I deliberately used open-ended questions in the previous section to present you their shortcomings: if the interviewer made me work on “How many students will take school buses to their schools, 5 years into the future”, the whole process would be much more complicated and tiring. My clarification phase should have been:

I can’t help but notice some ambiguous terms in the question, so let me define them with the following presumptions:

• In the U.S., school buses mean yellow school buses, with an average capacity is 60 students per bus
• The types of school buses account for the ones being actively used, excluding in-production, unused, transformed, and destroyed buses.
• The levels of school mean 4 levels of K-12 school: kindergarten, primary, secondary, and high school.
• The types of schools cover K-12 schools only.

So, we are on the same page, aren't we?

With this way of clarification, I expect the interviewer to say “yes”, because the wording hide the “no” option away.

Tip 2: Make defendable, fact-based estimations

"Make your estimations more defendable with facts and logic"

As consulting relies on facts, accountability is a desirable quality. Therefore, you should always be ready to defend your estimates when the interviewer asks you about them. In the estimating section, you'll see that I provide justifications and comparisons for each number rather than just stating them randomly.

For the U.S. school buses example, if you say the percentage of the total population in K-12 age groups is 50%, it would be much more difficult to defend because it’s not based on any data or observations. 25%, on the other hand, can be derived from common sense and background knowledge, as said in the step 3 example

Tip 3: Round up the numbers for easier calculations

"Now round the numbers for simpler calculations"

This is the same method I teach for Consulting Math: alternate between rounding up and rounding down so that the offsets cancel each other out and reduce your margin of error.

In the example, you notice how I rounded the number: 81,000,000 instead of 82,500,000. 

Tip 4: Perform regular sanity checks

Keep checking to make sure your numbers are sound – logically, factually, and mathematically.

It's easier to make mistakes when you deal with all the confusing data, estimation, and problem breakdown.

Your common sense should ring its alarm bell if the K-12 age groups account for 50% of the total population or if “55 million / 60 / 1.5 = 60,000”.

By all means, it’s crucial to find out those embarrassing mistakes; do sanity checks, and make them out loud so the interviewer can see how careful you are.

Tip 5: Resolve the problem with clear-cut visual aids

Literally draw the issue trees and point to them when you present to the interviewer. Without these visual aids, you and the interviewer may get lost in a web of information and assumptions. Additionally, if you don't outline your issue tree, you'll appear less unorganized, which is bad in case interviews.

In addition, you can also use tables to visualize your answers. Tables are far more compact than issue trees, so they are very helpful for complicated problems.

Let’s practice some market-sizing question examples! 

You already get the theory, now it's practice time!

Below are 2 example questions for you to practice, with suggested answers. You can also customize each example by “twisting” the definitions, then generating new questions to practice.

QUESTION: "What is the market size of decorative Christmas trees in Seoul?"

Step 1. Clarify

• “Decorative” means artificial trees
• Type of trees would be the real-life sized ones that look similar to a real Christmas tree
• The market size is measured in US dollars

Step 2. Break down the problem

The answer depends on three determinants: 

• The price of a tree
• The number of trees sold
• The percentage of it being used each year (or 1 / the number of years before being thrown away)

Step 3. Estimate each piece

The basis of each estimation is in brackets:

• The price of a tree is about $100 (I benchmarked this number with the average price of high Christmas trees in where I live, Hanoi, and double the price since it is more expensive in Korea)
• The number of trees sold equals to the number of people able and willing to buy in Seoul (there are 10 million people in Seoul, 80% of those is able to buy one tree, which is below 5% of their monthly income, and assume that only half of 80% people are willing to buy Christmas trees)
• Each year 50% of the tree is being used (Since artificial trees have a much longer use time than real trees, therefore, it would be around 2 years (or 2 uses) before a tree is being thrown away)

Step 4. Calculate the pieces

• The number of trees sold woud be 4 million trees (10 million x 80% x 50%)

=> Answer: market size for decorative Christmas trees in Seoul is $200 million ($100 x 4 million x 0.5)

Step 5. Sense check

Possible weak points:

• The percentage of a tree being used might be lower if the trees are maintained carefully
• The percentage of people willing to buy has not considered the stores, malls, etc. that are also in high demand for decorative Christmas trees.

QUESTION: "What is the market size of drinks sold at Coachella?"

Step 1. Clarify 

• “Drinks” mean all kinds of alcoholic or non-alcoholic drinks 
• “Sold at Coachella” means they are sold in cup units by vendors inside the scope of Coachella festival (they have a policy to limit drinks brought from outside)
• The market size is measured in US dollars

Step 2. Break down the problem

The answer depends on three determinants: 

• The price of a drink
• The number of people buying drinks
• The number of drinks per person

Step 3. Estimate each piece

The basis of each estimation is in brackets:

• The price of a tree is about $12 (Averaging from a range of $8 to $14 drinks)
• The number of people buying drinks is 250 thousand (equals to 100% of the attendance since everyone goes to Coachella would buy at least a drink)
• Each person would buy an average of 5 drinks for one evening or afternoon camping there

Step 4. Calculate the pieces

=> Answer: market size for drinks sold at Coachella is $15 million ($12 x 250 thousand x 5)

Step 5. Sense check

Possible weak points:

• The number of drinks per person can vary over a wide range

Finally, presenting the answer - Interview script

You know the steps and the techniques, and you already have your cheat sheet in mind. However, case interviews are not only about the content but also about presentation!

How do you give an answer to a market-sizing question in a consulting-like way and impress your interviewer?

In the Prospective Candidate Starter Pack, I’ve written an interview script using different tips and techniques tailored for market-sizing questions, along with a lot of free materials to prepare for a consulting career!

Frequently asked questions 

1. What is market sizing?

Market-sizing means estimating the total of potential buyers of a product or service in a specific market, and the total revenue from these sales.

However, market-sizing questions in case interviews can be much more diversified. They may require you to estimate something that you are familiar with or don’t see regularly, or even unreal things.

2. How long should a market-sizing question take?

A market-sizing question may take 20-25 minutes as a standalone question, or 5-10 minutes as one part of a full case. The time is strict, so you need to practice market-sizing questions to face any brain-cracking cases in the interview.

3. How do I prepare for a market-sizing case?

Our 5-step guide will help you solve market-sizing cases without hassle. Make sure you complete each step before moving to the next one. 

• Step 1. Clarify all unclear items in the question 
• Step 2. Break the number down into 3-5 small, easy-to-estimate pieces 
• Step 3. Estimate each piece using math and background knowledge 
• Step 4. Calculate the pieces to reach the final result 
• Step 5. Sense check the result 

4. When sizing a market, what should be the first question to ask? 

As mentioned above, clarifying the problem is the first question to raise to your interviewer. This is essential because it supports you in the process to the answer of your market-sizing case.

5. Does McKinsey do market-sizing?

Yes, McKinsey does have market-sizing questions in their case interviews.

6. Does BCG ask market-sizing questions?

In addition to McKinsey, BCG and Bain are among the prestigious consulting firms that include market-sizing questions in their case interviews. The purpose is to evaluate candidates’ quantitative abilities.