Training · CO-2 · Lesson 03 of 06
Market sizing
The rule
Guesstimates test whether you can build a defensible number from nothing. The interviewer tracks your assumptions, not your arithmetic.
Why market sizing
Market sizing questions test structured estimation: building a reasonable number from assumptions. Answers within a sensible range with clear logic score well.
Top-down vs bottom-up
Top-down starts from population and narrows by segments. Bottom-up builds from units — stores, customers, usage. Choose the approach with the most reliable assumptions, and cross-check if time allows.
Worked example
Estimate annual US coffee shop revenue.
- US adults
- 260m
- Share buying café coffee
- 50% → 130m
- Visits per week
- 2
- Annual visits
- 130m × 104 ≈ 13.5bn
- Average spend
- $5
- Market size
- ≈ $68bn
Making assumptions
Round numbers, state assumptions clearly and segment where behaviour differs. Ask the interviewer whether assumptions are reasonable.
- ·Segment by age or usage frequency.
- ·Use round numbers for speed.
- ·Sanity-check against known benchmarks.
Closing the estimate
Summarise the answer and its implications — 'the market is about $70bn, large enough to justify entry' — and note which assumption is most sensitive.
Hold onto this
- ·Choose a top-down or bottom-up route and say which you are using.
- ·Round to numbers you can multiply in your head, and state each assumption aloud.
- ·Sanity-check the answer against a known figure before you commit to it.
Progress saved on this device
Education, not financial advice. Figures may be simplified for illustration.