Learn how to crack the case with this guide to consulting market sizing questions. Developed by experienced recruiters from the team at Consulting School, this presentations takes you step-by-step through an example market sizing question, with helpful hints and tips.
If you have a consulting interview coming up, or want to know how you can prepare for the consulting recruitment process, make sure you check out this guide.
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What is a market sizing question?
You are asked to estimate the size of a market or company
Size will normally be defined as either the volume (units sold) or
value (units sold x price)
The actual result you come up with doesn't matter - what matters
is the way you think and the process you use to arrive at an
answer
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Begin by clarifying the terms
Play back the question to the interviewer
Make sure you understand the market - ask if in doubt
Be clear what you are being asked to estimate - is it volume,
revenue, profit, or some other metric
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Think
Take a minute to organise your thoughts (but no more than a
minute!)
Think about how you are going to break down the question into
its underlying drivers
Sketch your thoughts down on paper to stay organised
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Break the problem down
Revenue / Week
Days / Week Price / Litre Litres Sold / Day
Break Revenue / Week out into its underlying elements
You can then separately estimate each underlying component, or
break them out further until you can estimate the value
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Break the problem down more
Revenue / Week
Days / Week Price / Litre Litres Sold / Day
Hours Open / Day Number of Pumps Litres / Pump / Hour
Litres Sold / Day is still too broad to estimate straight-away, so
break down further into its underlying elements
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And some more...
Revenue / Week
Days / Week Price / Litre Litres Sold / Day
Hours Open / Day Number of Pumps Litres / Pump / Hour
Litres / Vehicle Vehicles / Pump /
Hour
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Now estimate each element
Revenue / Week
Days / Week Price / Litre Litres Sold / Day
Hours Open / Day
1
Number of Pumps Litres / Pump / Hour
250
Litres / Vehicle
50
Vehicles / Pump /
Hour
5
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Work your way back up the tree
Revenue / Week
Days / Week Price / Litre Litres Sold / Day
30k
Hours Open / Day
15
Number of Pumps
8
Litres / Pump / Hour
250
Litres / Vehicle
50
Vehicles / Pump /
Hour
5
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Until you have an answer
Revenue / Week
Days / Week
7
Price / Litre
$1.50
Litres Sold / Day
30k
Hours Open / Day
15
Number of Pumps
8
Litres / Pump / Hour
250
Litres / Vehicle
50
Vehicles / Pump /
Hour
5
$315k
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What other factors might affect the key drivers in your framework
(e.g. you could split out peak vs. off-peak times and use different
assumptions in each period for vehicles / pump / hour)
Include other sources of revenue (e.g. average ancillary retail
sales per vehicle)
Identify where key assumptions might need to be tested /
researched further (e.g. Litres / Vehicles, Price / Litre)
Improve on your answer
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Problem solving - can you break the problem down into its
underlying drivers
Commercial acumen - can you make sensible assumptions
Numeracy - can you perform calculations accurately (without a
calculator) and quickly
Communication - can you do all that whilst maintaining an
engaging dialogue with the interviewer
What does this question test
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Practice breaking down problems into underlying elements
that are MECE (mutually exclusive and collectively exhaustive)
Work on your mental arithmetic - most of us are a little rusty
and it is much harder when an interviewer is watching you!
Simulate real case interview conditions - get someone to play
the role of the interviewer (or consider signing up for our case
interview practice services)
How to prepare
Practice is key - the learning curve is very steep, and
you can improve very quickly!
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