What is it?
This is one of the most popular question types you will get in a case interview. These questions ask you to estimate or to smartly guess a quantitative variable relevant to the case you are solving. With a “guesstimate” question, you to estimate the size of a market, it is called a market sizing question. In terms of approach, there are no differences between guesstimate and market sizing questions. There are many tips you can apply. An example of a guesstimate question: How many people wear red in New York on a typical Monday? Skills tested: It is the way you approach and solve the problem that matters, not the final answer that you give out.
- Step 1: Clarify the question, make sure you and the interviewer are on the same page on every assumption.
- Step 2: Break the problem into smaller pieces in a MECE way.
- Step 3: Use Estimation and Judgement to solve each piece.
- Step 4: Consolidate all of those pieces into a final conclusion.
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Illustration of the Strategy
Let’s solve the above question example using the strategy we just introduced. Question: How many people wear red in New York on a typical Monday?
Step 1 – Clarification:
How do you define “wear red”? – If any cloth on a person is red, he / she is considered as “wearing red”.
If a person wearing red goes out more than once, do we double count them? – No!
“New York” here refers to New York City or the state of New York? – New York City.
Step 2 – Breaking down the problem:
OK, so here is how I would want to solve this problem. The number of people wearing red in NYC on a typical Monday will be determined by these following factors: How many people are there in NY? What are the chances that people will wear red?
This depends on two smaller factors: How many pieces of clothing people wear and their preference in color.
Step 3 – Solving each piece:
Work with the interviewer to answer and estimate each of those elements.
Population is about 20 million
Chances: 5% staying at home, 70% going out once, 25% going out twice.
Those staying at home have 2 pieces of clothing (pants and shirt); those going out once have 5 pieces, and those going out twice will therefore have 10 pieces.
There is no specific preference on color.
Step 4 – Consolidating:
Let’s analyze the number of people wearing red from each group.
- Staying at home: 1,000,000 * 2 * 1/10 = 200,000. 1,000,000 people have 2 pieces of clothing. Chance of having red in each piece: 1/10 (7 color + gray + black + white)
- Going out once: 14,000,000 * 5 * 1/20 = 3,500,000. 14,000,000 people have 5 pieces of clothing. Chance of having red in each piece: 1/20 (on Monday, most of these people go to work, thus black and white will be the main colors they wear)
- Going out twice: 5,000,000 * 10 * 7.5% = 3,750,000. 5,000,000 people have 10 pieces of clothing. Chance of having red in each piece: 7.5% (the first trip is probably the business trip: 1/20; the second trip is the casual trip: 1/10)
So in total: there are about 7.5 million people in NYC wearing red on a typical Monday.
Other guides on preparation
It is a lot harder to do guesstimate questions in front of an interviewer. Thus, as you practice this question type at home, try to speak out loud as if you were presenting to an interviewer.
Practice with numbers
In addition to having a good approach, another key to succeeding at guesstimate questions is your ability to do math quickly and accurately. Be sure to visit our materials on consulting math
Whenever you have some free time (driving, sitting on buses, etc.), ask yourself random guesstimate questions and try to do them. Back when I was in college, every time I had to do a boring task (e.g: laundry) I practiced guesstimating: How many people are there in this dorm? What is the monthly operating cost of maintaining this laundry room? How much water does this room use per month?… You should develop that habit too!
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