A Simple Strategy for Consulting Market Sizing Questions

you've probably heard one of the most famous consulting case interview market sizing questions before how many golf balls can fit in a Boeing 737 airplane at first glance this might seem like a ridiculous question why would a consulting interviewer care whether or not you can estimate the number of golf balls that can fit in an airplane what does this have anything to do with consulting business or one's intelligence at the end of the day for market sizing and estimation questions in consulting interviews interviewers don't care about the exact answer you give whether your answer is correct or off by orders of magnitude interviewers use these types of questions to assess three things interviewers want to see you structure and approach to the problem execute on the math correctly and clearly communicate and walk them through your work knowing this we can set up our strategy for tackling these pesky market sizing questions well first structure and approach then execute on calculations and in the process focus on walking the interviewer through our thinking and calculations let's use this strategy to answer a simpler market sizing question what is the market size of cell phone insurance in the u.s. remember market size is usually defined as the total dollars of sales in one year for a particular product or service let's start with structuring our approach first this is the hardest part of any market sizing or estimation question once you have the structure down you just need to make assumptions and estimates of what numbers to use that part is easy the structure is the make-or-break of the problem and will require some creative brainstorming there are an infinite number of ways to structure your approach to the problem and there is no one right answer pick whichever approach is easiest for you as long as your approach gets you to a final answer your approach should be perfectly fine here is one approach we can take let's start with the u.s. population and then estimate the percentage that have cell phones next we'll estimate the percentage of people with cell phones who would purchase insurance we'll then estimate how much cell phone insurance costs per year finally we'll multiply all of these figures together to get our market size executing on the math should be fairly straightforward there is no complex or advanced level math involved in case interviews all the math that you need to know is at a middle school level so make sure you do your calculations correctly especially paying attention to if you have misplaced a decimal point or missed a zero in your calculation these math mistakes are by far the most common let's execute on the calculations for our problem we'll start by assuming that the u.s. population is 300 million people this is a figure that most people memorize and use as a starting point we estimate that 90% of the u.s. owns a cell phone so 270 million people in a cell phone of those that own a cell phone perhaps only 30% would buy cell phone insurance that leaves us with 81 million people that would buy cell phone insurance we might estimate that cell phone insurance costs about 25 dollars a month or $300 a year so multiplying 81 million customers with $300 gives us a market size of twenty four point three billion dollars this market sizing problem was not too difficult structuring our approach made the execution of the math very simple moving on to communication it is important that you are not making calculations in silence you should be talking with the interviewer walking them through which step of the calculation you are doing what number you ended up calculating and what the next calculation step is if the interviewer had their eyes closed they should be able to follow your math and know exactly what you are doing it may be helpful to re-watch the portion of this video where I walked you through the approach and calculations that is exactly how you should be communicating and presenting to the interviewer with this problem wrapped up let's return to our original question how many golf balls can fit in a Boeing 737 this one is a bit more tedious to solve the structure to our approach is actually quite simple if we know the volume of the airplane and the volume of a golf ball we can divide these two numbers to figure out our answer estimating the volume of a golf ball is simple but the process to estimate the volume of an airplane is more tedious we might model the airplane as a long rectangular prism estimating the length height and width we can then estimate what percentage of that volume is empty so that we exclude volume that is occupied by seats and other solid furniture pieces moving on to the calculations a golf ball is about 1.5 inches in diameter so the volume is given by 4 over 3 times pi times the radius cubed roughly 1.8 cubic inches this is the formula for the volume of a sphere let's convert this to cubic feet since we'll likely be using feet as a unit to estimate the plane volume since there are 12 inches in a foot and we are using cubic feet that is 12 times 12 times 12 or 1728 cubic inches in a cubic foot so a golf ball is approximately 0.001 cubic feet the airplane length could be estimated to be about 100 feet the width could be estimated as approximately 10 feet and the height could be estimated to being about 10 feet as well this gives us 10,000 cubic feet let's also estimate that approximately 20% of the volume of the airplane is occupied by solid furniture such as seats so we actually have 8,000 cubic feet of empty space on the plane dividing 8,000 cubic feet by 0.001 cubic feet in a golf ball we get that 8 million golf balls can fit a Boeing 737 remember whether this answer is actually correct or not does not matter all that matters are that we laid out a logical structure for our approach executed on the math correctly and clearly communicated our work and answer to the interviewer with enough practice market sizing and estimation problems will become very repetitive and predictable for you even the most challenging or baffling problems can be broken down into simple steps that you can solve to learn more about consulting case interviews check out our best-selling book on Amazon or check out our one-week crash course to pass your upcoming interview

Channel: Hacking the Case Interview

Views: 109,464

Keywords: market sizing, case interview math, consulting math, consulting market sizing, market sizing questions, market sizing case, market sizing interview, market sizing example, market sizing practice, market sizing case questions, market sizing case framework, market sizing exercises, market sizing practice questions, bottom up market sizing, market sizing framework, consulting market sizing questions and answers, market sizing examples and answers, market sizing template

Id: Qz2DJ9QYYA0

Length: 7min 24sec (444 seconds)

Published: Fri Apr 12 2019