Consulting · figures from each school’s own report
Market sizing questions: the method and two estimates in full
A market sizing question asks how big something is with no data in the room: you build the answer from assumptions you state and numbers you can multiply aloud.
Market size per year
$5.1 billion
| Buyers | 102,000,000 |
| Purchases per year | 204,000,000 |
| × price | $25 |
State each assumption out loud, round to friendly numbers, then sanity-check the result against something you know. How this is calculated.
Built by Radif Partners · figures checked · Method · Editorial policy
A market sizing question asks for an estimate, such as the yearly sales of child car seats in a country or the cups of coffee sold at a station, and is scored on the method, not on the final figure. The method has four moves: choose the unit (people, households, cars, shops), cut it down to those who buy, multiply by how often and at what price, then check the result against something you know. Demand-side sizing starts from the buyers; supply-side sizing starts from what sellers can produce. The two examples here use declared assumptions. A country of 60,000,000 people with a birth rate of 1.1% buys about 1,584,000 car seats a year at $180, a market of $285.1 million. A station with 4 coffee kiosks sells about 2,976 cups a day, $3.5 million a year. The traps are double counting, mixing monthly and yearly figures, forgetting replacement, and skipping the sanity check.
The method in four moves
Choose the unit. Decide what you will count: people, households, cars, shops, flights. The unit should be the one that buys or uses the product. Child car seats are bought per child; coffee is bought per person per visit; elevators are bought per building.
Cut to the buyers. Narrow the unit to those who buy: households with a car, adults who commute, buildings over a certain height. Use shares you can defend in one sentence, rounded.
Multiply by frequency and price. How often does each buyer buy, and at what price? For durable goods, divide by the replacement cycle: a product kept for five years is bought by a fifth of its owners each year.
Check. Compare the result with something you know: the size of a related market, the revenue of a large company in the sector, the number of shops you have seen. If the answer would make every household spend more on the product than on rent, an assumption is wrong.
Two families of approach exist. Demand-side sizing starts from the buyers, as above. Supply-side sizing starts from what sellers can produce: the number of shops, their capacity and how busy they are. It suits questions about one place, such as a station, an airport or a street.
Market sizing in four steps
Market per year
$3.1 billion
| Buyers | 26,000,000 |
| Purchases | 104,000,000 |
Example 1: the yearly market for child car seats
Assumptions declared for the exercise: a country of 60,000,000 people; a birth rate of 1.1% a year; each child needs 2 seats over childhood (one for babies, one for older children); 20% of families buy a second set for a second car; an average price of $180.
Births. 60,000,000 times 1.1% is 660,000 children a year.
Seats. Each needs 2 seats, and 20% more for second cars: 660,000 times 2 times 1.2 is 1,584,000 seats a year. Using births instead of all children avoids counting the same child every year; the seat is bought once per stage.
Market. 1,584,000 seats at $180 is $285.1 million a year.
Check. That is about $432 spent on car seats per newborn, spread over several years: plausible for a product most parents with a car buy. "I estimate the market at about $285.1 million a year. The assumption I am least sure of is the second-car share; at double that share, the market grows by 16.7%."
Example 2: coffee sold at a large train station, from the supply side
Assumptions declared for the exercise: the station has 4 coffee kiosks, each with 2 baristas who can each serve 1 cup a minute; kiosks are open 16 hours, of which 4 are rush hours at 80% of capacity and 12 are quieter at 25%; a cup costs $3.20.
Capacity. 2 baristas at 1 cup a minute is 120 cups an hour per kiosk.
Use. Rush hours give 4 times 80%, quiet hours 12 times 25%: 6.2 full hours a day, so 744 cups per kiosk.
Station. 4 kiosks make 2,976 cups a day, and at $3.20 a cup, $3.5 million a year.
Check. Supply-side sizing assumes the kiosks are the bottleneck. If queues are short at rush hour, demand is lower than capacity and the estimate is too high; if queues are long, people give up and the true demand is higher than what is sold. Say which you believe.
The traps that cost points
Double counting. Counting all children every year for a product bought once, or counting both commuters and train trips for the same purchase.
Mixed periods. Multiplying a monthly frequency by a yearly population share without converting. Write the unit next to every figure.
Forgotten replacement. A phone, a mattress or a car is not bought every year; divide owners by the years they keep it.
False precision. "23.7% of households" invites the question where it comes from. Round, and say why.
No sanity check. Ending on a number without comparing it with anything is the most common reason a correct method still scores poorly.
Sizing is often the first step of a larger case: a market entry case needs the size of the market before the share and the economics, as in the scooter case of case interview examples. At schools where consulting is the main destination, such as UVA Darden and Kellogg, with 37.3% and 37.5% of the class in the industry, students drill these questions for months before interviews.