Here's how you can excel at answering market sizing questions in consulting interviews.

1 Grasp Basics

Before diving into complex calculations, ensure you understand what market sizing entails. It's the process of estimating the potential of a market, usually measured in sales value or volume. Consultants use it to analyze the viability of entering a new market or the potential growth within an existing one. It involves logical reasoning and basic mathematics but, most importantly, a structured approach. Familiarize yourself with different types of market sizing questions—top-down or bottom-up approaches—and when to use them.

2 Framework First

When presented with a market sizing question, start by establishing a clear framework for your analysis. This means breaking down the problem into smaller, manageable parts. A common method is to use the Population, Penetration rate, Usage rate, and Price (PPUP) model. This helps you structure your answer and ensures that you cover all necessary aspects of the question. Communicate this framework to your interviewer to show that you have a systematic approach to problem-solving.

3 Ask Questions

Don't be afraid to ask clarifying questions if the problem statement is vague. Seeking additional information demonstrates engagement and helps refine your assumptions. It also shows that you're thorough and considerate of details which are critical traits for a consultant. However, balance this with the ability to make reasonable assumptions when necessary, as you won't always have all the information in a real-world scenario.

4 Reasonable Assumptions

Making assumptions is a key part of answering market sizing questions. Your assumptions should be logical, justifiable, and based on common sense. Explain your thought process to the interviewer as you make each assumption, which shows transparency in your reasoning. It's also a good practice to think about potential limitations of your assumptions and how they could affect your final estimate.

5 Calculate Carefully

After setting up your framework and assumptions, it's time for calculations. Use simple math and round numbers to make calculations easier and less prone to error. Walk your interviewer through each step to demonstrate your analytical thinking. Double-check your math as you go; even small mistakes can lead to significantly incorrect conclusions, which could undermine the confidence in your analysis.