all right so why should you listen to a random guy standing in front of a whiteboard with a white T-shirt on my name is Matt I'm a current strategy associate at Google prior to that was a consultant at BCG and today I'm going to explain to you how to do Market sizing problems so first of all what even is Market sizing well Market sizing is essentially just a type of question that you might get asked in consulting or strategy case interviews where the interviewer basically asks you a very vague and oftentimes ambiguous question that to people who aren't familiar with might seem like it's impossible to do for example questions like how big is the market for dog toys or how many windows are in New York City or even what's the market for weddings in Canada and so to someone who has never seen these kinds of questions before if you get asked this in an interview you're probably going to freak out or freeze up on the spot because you're going to think to yourself what the heck I've never seen this before how am I supposed to do this why are they asking me this and you'll just have a bunch of random questions floating through your mind now before I get into explaining an actual example I want to talk about why a lot of consulting firms use Market sizing as an interview technique and it really goes back to this concept of being able to handle ambiguity SL structured problem solving okay and so you might be wondering why does this matter so much well a lot of the times in Consulting there are many situations where you're given a very vague or ambiguous question and your entire task as a junior consultant is to literally take this very vague question and get to an actual answer while also receiving not much guidance because what you have to remember is a lot lot of times your client is hiring you because they themselves have tried to figure something out and they don't know how to do it but the other and more tactical reason why consulting firms often test Market sizing is because a big part of our job especially if you are working on a strategy project is understanding how big the opportunity even is so for example if you're working on a growth strategy project where the client has hired you to help them think about potential ways to grow the business we first need to understand and how big is the market that this business is operating in and sometimes you know you'll have resources showing you oh the market is x billion dollars but other times you might be looking at a very niche market where there might not be very credible data and so you'll have to do your own Market sizing exercise in order to actually understand how big the opportunity is also in case it wasn't clear for those of you who actually don't know what I'm talking about when I say Market whenever people are talking about a market they're literally often talking about things in terms of either total dollar amount or total volume and I'm talking about transactions here so if someone asks me about what is the total market for weddings in Canada for example the dollar amount would be okay like what is the absolute highest amount of money that could theoretically be generated by people that are looking to get married in Canada but anyways this is a high level overview of why Market sizing questions show up so often in Consulting case interviews and the other thing that we have to really understand and that I want you to internalize before we dive into an actual example exle is that it's not about the numbers it's about the approach okay and the reason I say that is because when you're in an interview situation and you're asked this kind of a question what the interviewer is trying to test is not whether you can actually get to a specific number they're actually trying to test how you come up with your own methodology and structure to coming to that answer it's basically the same as coming up with your own equation to solve some sort of problem problem and in this scenario it doesn't matter what the end result is but it's more about how did you make the equation and does the equation even Mak sense for the purposes of the question so from that perspective two people could do the same Market sizing question and they could get completely different numbers like wildly different numbers but one of them could do far better because they have a more logical and structured equation that got them there versus the other person that maybe didn't have as thought out of an approach and so I'm now going to walk through an example here here and so I think we can just come up with our own question which one I think is relevant is how many students apply to consulting jobs each year and let's just say how many students in the US just to make it simple okay so I've written down the question and oftentimes if you're in a case interview scenario what I recommend is you first write down the question so that you can ground yourself and always go back to it and then I would recommend just asking for a minute or two to structure your thoughts and so you can ask the interviewer and say hey this sounds awesome can I have a minute or two to put together some ideas and they'll always say yes and you should go ahead and start thinking about like the quote unquote equation that I was talking about earlier for how you would get to the number before I walk through the example best practices when you are in a case interview and you get asked a market sizing question is you really want to First write down the question and think of potential clarifying questions that you can ask okay and so oftentimes with these Market sizing questions you want to really understand what you're actually sizing and when I say what are you actually sizing you need to understand like for example I the question is how many students in the US apply to consulting jobs each year and this is fairly specific but if you were given a question like what is the market for Consulting applications then a clarifying question you might need to ask is this dollars or is this number vaps now in this case I've made the question super specific so it's pretty clear to me here that I am going to be looking at number of students and not some dollar figure but it's really good to clarify whether you're going to be sizing in terms of dollars or units the second thing is if for example the question didn't include in the US then you might want to clarify okay are we looking at the number of applications from students in the US specifically or globally or US and Canada what are we specifically looking at here and so that will also give you a better idea of what you're even sizing in the first place and another clarifying question that I could ask for example is when we talking about students is this only undergrads or does this include grad students as well right because there's going to be a lot of mbas and phds that will be applying to these consulting jobs as well and let's just assume that in this case it's just undergrads for the purposes of simplicity so after we've asked all these clarifying questions then we can dive into the actual building out of the structure AKA creating that equation that I talked about earlier and so I'm going to walk you through it so the way I think about it is we can start with the total number of undergrads in the US and from there we can work down to the percent of those that are even interested in Consulting in the first place because not everybody is going to even be interested right and from there I think there's a few different things we can do I think that we can actually split out this bucket into the four different years so freshman sophomore juniors and seniors so what I might do is something like freshman sophomores Juniors and then obviously you have your seniors okay and so what I've actually done here is what's known as segmentation segmentation drive that word into your mind Consultants love to use it and it simply means we are breaking out a bigger group into segments that are often characterized by specific characteristics whether it be oftentimes it's demographic characteristics but it could be you know spending habits or other characteristics related to behavior and so what this is going to do is break out this percentage of people that are interested in Consulting into a little bit more of a nuanced group of four and so for example this bucket will give us the total number of freshmen in the US that are interested in Consulting okay but that's not going to get us exactly to the number of people who actually apply and so what we need to do is we need to First figure out the percent of people that are eligible to apply because not everyone can even submit an application and then we need to go down and figure out the percentage that actually apply of those that are eligible and only then will we get to the number of students who apply to Consulting roles in the US specifically and so now we need to figure out like within this bucket here for these four groups like what percentages we actually want to apply but before we put any numbers to it once you have basically put together the structure you should walk your interviewer through it and ask for feedback and so the way I would do this is I would say awesome so I put together a quick structure here would love to get your thoughts basically I'm thinking we can start with the total number of undergrads in the US per year and then we can apply a percentage haircut to account for for only those that are interested in Consulting because not everyone who is a student is obviously going to be interested in consulting or even aware of it and then from there I've segmented that group of students that are interested in Consulting into four different buckets based on their year so we have our freshman sophomore juniors and seniors and I think this is important because there are going to be different characteristics based on what year they are from there though we can apply a percent to account for those that are actually eligible to apply and then we can apply another percent to account for those that actually go through with applying which ultimately gets us down to our number of students in each year that actually apply to consulting jobs and the aggregate of those numbers is going to be our total how does that sound to you okay so invite them for feedback and they will give you their thoughts on whether you might be missing something or if the structure even makes sense and then before you actually start doing anything you also want to see if they have any numbers for you so for example after they say yeah that sounds good to me you might want to ask them something like okay awesome do we happen to have any information or data related to any of these key buckets and conveniently they might say something like oh yeah so we actually know that the total number of undergrads in the US last year was around 15 million at the very least you should hopefully at least get a population number and if they don't give you that then you can also just say all right so that's okay I'm going to reasonably assume that based on my understanding of the US they're about 300 million people in us and I would think that x amount would be students does that sound okay and just be like okay because again numbers really do not matter in this kind of a question it's more about the structure and how you think about it but for this demonstration today I know that last year there was about 15 million undergrads in the US in total but now let's walk through the other numbers so for the percentage that are interested in Consulting here we're going to have to guess but I think what might be reasonable is less than 50% probably closer to like 20% of people and I think that makes sense because from my own experience being a student in the past obviously this depends on what type of school you're at so certain schools will skew in other ways but on average I would say there's probably 20 to 30% of people that are studying business and of those there's a sizable proportion that are interested in Consulting and so I think that 20% number sounds reasonable now when we move down to the percentage eligible to apply this is where I think it gets interesting because we're thinking about either jobs like full-time jobs out of undergrad for consulting or internships nothing else and potentially the occasional like sophomore Diversity Program and so for freshmen unfortunately I think 0% are going to be eligible to apply I would say sophomores is probably only like 10% because again this is those diversity programs that mckeny ban and BCG run which from my experience they do not take that many students but then come junior year there's more opportunities for people to apply for internships and then Senior Year even more so I would say maybe we can say 100% are eligible to apply here and then 100% of seniors are also eligible to apply that sounds reasonable to me and then moving down to the percentage that actually apply again I would say like with the Freshman this is not really I'm just going to put na here because I don't think if you're eligible you can even apply but for sophomores Juniors and seniors I think we can maybe say 2third of people apply so 66% and also by the way when you're explaining it to your interviewer why you want to choose a certain percentage always try to draw from your own experience and just say well you know from my own experience I've seen that X number of people actually do this thing and so that sounds reasonable to me and as long as it's not like something crazy that you're saying they'll be completely fine with with it so let's just apply 66% and assume that 2/3 of people that are eligible actually end up going through with the application you know putting the time into their resume cover letter submitting the app blah blah blah so now we have enough data to actually get to an actual number and so again we're going to start with this 15 million number we're going to apply 20% to it AKA divide by 5 so that's about 3 million students and let's assume that there's a equal distribution across all four years so divide this by four to get the number in each year which is about 750k in each ET okay and then obviously with the Freshman 750k * 0% that's a zero with sophomores we have 10% so that's 75k take 2/3 of 75k that's 50k with Juniors we're saying 100% are eligible and then 2/3 of those AKA 500k are actually applying similarly with seniors also 500k and so now when we sum up all four of these that gets us to this 1.05 Million number here which is basically 1 million let's just round and immediately what you should do after you get this number is you should be taking a step back taking a deep breath and just think about does this number even make sense we have to sanity check it and so how I would do this is I would go back up to the top and say to myself or explain to the interviewer actually based on the 15 million total number of undergrads in the US which we've paired down to 3 million that actually are interested in Consulting it looks like based on our analysis that only about a third are actually going through with the application and that's that sounds pretty reasonable to me based on my personal experience not everyone who says that they're going to apply to something actually do we all have that friend who says they're going to do something but never does and so that's how I would explain it to the interviewer and it's important to note that yes I've said that the numbers are not as important and it's more about the structure of the equation and that's true but that's specifically for the interview when you're actually on the job in Consulting the amount of thought that goes into the actual inputs is immense and it's so important because these are what are actually driving the final number and so I think just demonstrating to the interviewer that you can be a little bit more thoughtful about what numbers you're using and that you can have a perspective on what the final outcome is and whether or not it sounds or seems reasonable to you is going to go a long way now this is just one way that you could approach this problem of how many undergrad students in the US apply to consulting jobs this year but now let's think about what I could do better and so how can I make this better okay so I've just put down some ideas for how I might be able to make this better and fully recognizing that there are always ways to improve and so the first thing that I've written down here is we can refine the inputs now again I know I said that the numbers don't really matter as much but if there's any way that you can demonstrate to your interviewer that you're at least a little bit more thoughtful about the inputs that go into it those go a really long way so what's an example of that well a great example is actually right here with the percent of students that actually apply in each year now I've sort of standardized this across the board and said that 6 6% across the board actually apply minus the Freshman but even something as simple as increasing their percentage for seniors because I would imagine that seniors would be more desperate for a job than Juniors and so probably a higher proportion of them are actually going to go through with applying because the clock is ticking on them so maybe this could go up to like a 80% instead of 66% which would change your numbers but that would just demonstrate that we're being a little bit more thoughtful about the behaviors between different years now the second thing that we could do is we could add in Greater detail to the structure so I know that in the beginning I clarified that this was only asking about how many undergrad students in the US were applying to consulting jobs but theoretically if we wanted to build this out into an even more robust model we could also try to include graduate students because again consulting firms hire a ton of mbas and phds and people with Advanced degrees and so it's not really doing it justice to leave those people out of the picture similarly we could add in other countries if the question wasn't only specific to the US for example say it was asking about the US and Canada then we could factor in Canada as well and again also this number down here this 1 million is only the number of students that apply and so if we want to get to an even more granular level of say the number of applications we could even apply like a average number of applications per student who applies that way we would have an additional data point to look at and then finally the third thing that you could think about is do we want to completely restructure the way that this is set up right I have set it up so that you know we start with the total number of students and then we split it eventually into these four groups based on year and then we go down but hypothetically we could structure this a completely different way where maybe we don't split it up by year and so these are just some things to consider as you work through Market sizing questions they get a lot easier with practice and so don't worry if you're not getting it just yet but that said if you are having trouble with your casing and you think you would benefit from a little bit more help I do offer personalized one-on-one coaching where I can give you more specific feedback related to your context if that sounds interesting to you then feel free to check out the Link in the description but otherwise thanks again for being here I'll see you guys in the next one peace