Consulting Guesstimate Cases

11/12/2014
Consulting Guesstimate Cases | Street Of Walls
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CONSULTING GUESSTIMATE CASES

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The questions in this chapter are representative examples of Guesstimate Cases. In essence,
these questions involve a short case or analysis in which you must try to estimate a value you
probably had never considered estimating before. The key to these types of problems is to break
them down into logical pieces, walking the interviewer through how you are approaching the
problem, and then try to determine appropriate assumptions for the value of key figures in each
of those pieces.
Guesstimate cases are generally used as part of a first-round interview to warm a candidate up
for a full Business Situation Case later in the interview process. Guesstimate cases are also used
as a way to test quantitative ability, numerical thinking and judgment, and an to arrive at
reasonable assumptions.
With some practice, guesstimate cases are not difficult and once you get accustomed to them,
they are actually quite fun, even though at first they might seem a little scary. Guesstimate cases
will also form part of many full case interviews, so it is important to master them.
Here are some quick examples of Guesstimate Cases so you can get a better sense of what we are
dealing with:
Guesstimate Case Study Examples

What is Air Frances weekly revenue for the Paris-to-New York leg?
What volume of beer is sold at an average LA Lakers basketball game?
What is the monthly revenue of your hair salon?
How many school teachers are there in Chicago?
What is the monthly profit of your favorite restaurant?
How many flat screen televisions have been sold in Australia in the past 12 months?
How many iPhones are currently being used in China?
Are there more iPhones in operation in the U.S. or in China?
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How many trees are there in New York City?

How many avocados are used to make guacamole per day in Mexico?
What is the Revenue for the smartphone market in India?
Here are a few key points to keep in mind when answering these questions:
There is rarely, if ever, a verifiably correct answer or one way to tackle a
Guesstimate question. The goal is to make reasonable, logical assumptions and if you
are wrong on your assumptions, that is totally fineafter all, some of the figures used to
make the estimation are quite obscure and you do not have access to the data during the
interview. The interviewer is aware of that. If you can logically explain how you arrived at
your assumptions, and highlight which of your assumptions seem the most important to
research, youre doing well. (As an example, for the Chicago teachers question, you might
not know the population of Chicago to start withit is about 2.7 million. However, even if
your estimate is 1 million or 10 million, your logic in estimating the correct answer can still
be sound.)
As you progress through the case, round assumption numbers up and down so that
the calculations are less difficult (also use percentages where applicable that are easy to
calculate without a calculator). In the above example, use 3 million even if you know that
Chicago had 2.7 million people. Keep the numbers simple, as the interviewer will be quite
impressed if you get a result that is reasonably close to his or her estimate.
Importantly, as with all cases, be very structured in your approach and write out
your numbers and assumptions in a clear manner. Be sure to clearly label the
units and variables. This is also important if the interviewer follows up with the question
What if we changed that assumption? This question is not an indication that youre
bombing the Caseit might simply mean that your initial assumption was off, or the
interviewer might be testing your ability to think flexibly under pressure.
Stay composed, as these cases should not trip you up, especially with sufficient practice.
They are all quite similar after you have done a few practice questions.
Communicate your process and answer succinctly and articulately. Do not be
afraid to acknowledge mistakes during the processit shows maturity and composure.
Virtually all of these questions can be grouped into Top-Down or Bottom-Up (often
referred to as Ground-Up) questions. In some situations, they can even be both.
Top-Down Questions: Questions that involve starting with an entire population
(in other words, the top level) and then breaking it down until you arrive at an
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answer. For example, consider the question about the number of schoolteachers in
Chicago. A simple way to approach it would be to start with the population of
Chicago, then estimate what percentage of the population is of student age, and
then estimate the number of students per class. Using this, you would arrive at an
estimate of the number of school teachers, because at any given time there is
(generally) exactly one teacher per class. To show your ability to be creative and
think outside the box, you could also attempt to account for retired teachers and
substitute teachers.
Bottom-Up (Ground-Up) Questions: For these questions, rather than starting
from the top with a high-level figure such as population, the best approach is to
start from the bottomsome low-level statistic, such as Revenue per customer,
and build your way up to the answer. For example, consider the question pertaining
to the monthly revenue of a hair salon. In this case, wed recommend you work out
the revenue for a week and then multiply that by four (or if you are quick at
multiplication, 4.3). You could start with an assumption regarding the average price
per client visit, and then estimate weekly volume by assuming the number of chairs
in the salon, the number of hours it is open per week, and the average number of
clients chair per hour. To show your ability to be creative and think outside the box,
you could also add revenue for hair salon products sold. You may also want to break
the estimate into male and female clients, as male clients at hair salons tend to
spend less money per visit but also take less time on average.
Step-by-Step Approach to Guesstimate Questions

Step 1: Ask questions if the request is not totally clear. Take a minute or two to decide
how to structure your answerthis is the period in which you determine whether it is
Bottom-Up or Top-Down question, how you will break the question down into pieces, and
the assumed values you will use for each of those pieces. Though you can interact and
direct questions to your interviewer, in these cases it is not useful to ask for help on your
assumed values as often his or her guess will be an educated guess, just like your own
guess. (And even if you assumed value is off the mark, it is far less important than being
able to structure and articulate the response, correctly calculate an answer based on the
assumed values, and provide insight for which assumptions youd ideally like to research
further.)
Step 2: Mentally double-check the Guesstimated values that you will apply to the pieces
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of the calculation you developed in the first step. Note that in Guesstimate Cases, a
population figure is very commonly part of the solution process (whether it be the U.S.
population, another countrys population, a city population, or passengers on an airline).
Often you will need to segment this populationin the Chicago schoolteacher example, we
would need to estimate the number of children of student age. Keep in mind that any
population be segmented in a number of ways. In the context of using a Top-Down
approach, the key segments to use typically are:
Gender
Age
Geography
Income & assets
Step 3: Perform the calculations to arrive at an answer. Remember to use estimation to
make your math easy. Also, if you find that you are estimating multiple figures to make the
math easier, try to balance rounding up with rounding down. For example, if an
answer involves multiplying 44 by 5,300, you will get a more accurate answer with 50
5,000 = 250,000 (one rounded up, and the other rounded down) than 40 5,000 =
200,000 (both rounded down). (The exact answer is 233,200). This effect tends to get
larger if you have 3 or more numbers to round, so always be mindful of the degree and
direction to which your estimate might be off due to rounding error.
Step 4: Identify any additional creative elements that could further refine your answer, if
relevant. For example, in the hair salon case, we saw that Revenue might be boosted from
the sale of hair care products. Additionally, you should tell the interviewer which pieces of
your estimate seem most vital to research furtherthose that seem to have the highest
degree of sensitivity in determining the correct answer, or those in which you have the
most uncertainty as to whether your estimate was reasonably close. In the Chicago
schoolteacher example, if you had no sense whatsoever of the population of Chicago, you
might indicate that youd like to look up that number and that your answer depends
heavily upon the value you chose for that assumption.
Guesstimate Case Example #1

HOW MANY CUPS OF COFFEE WERE CONSUMED IN THE UNITED STATES IN THE PAST WEEK?
Start by clarifying the question, then identify the variables to apply to this problem.
Number of cups in the past week: This equals number of cups per day 7 (for 7 days
per week). Mention to the interviewer that your assumption treats each day equally,
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although you would get points for mentioning that there are likely fewer cups consumed
on the weekend, as people are not in the office and in general might feel less of a need to
drink coffee.
Percent of the population that drinks coffee: this would be an educated guess.
Assuming 300 million people in the U.S., we could further assume that 20% are children
that (we hope) do not drink coffee. We could also guess that another 20% of the
population does not drink coffee at all (perhaps they prefer tea or other beverages, or just
water).
Number of cups per day: here our guess is that of the remaining 60% of people, half
drink 2 cups per day, a quarter drink 4 cups per day, and a quarter drink 1 cup per day.
This averages out to 2 0.5 + 4 0.25 + 1 0.25 = 2.25 cups per coffee drinker per day.
Therefore the calculation is:
60% 2.25 300,000,000 = 405 million cups each day
405 million cups 7 days per week = 2.84 billion cups per week (you could
round it to approximately 2.8 billion cups)
Note: the interviewer could then ask questions around how many cups are drunk at home or the
office versus bought from a store, or other similar variations. The interviewer might also ask
your thoughts on coffee trends and also how much revenue this would mean, etc.

WHAT WAS THE REVENUE FOR FLAT SCREEN TELEVISIONS SOLD IN AUSTRALIA IN THE PAST 12 MONTHS?
Your first thought might be, Why Australia? I am not applying for the Sydney Office of
McKinsey! Interestingly, more and more questions have a global component as
Consulting becomes more global in nature (for example, advising firms on entering or
performance in foreign markets, or working directly with foreign clients). While you will
not be expected to know Australias population, your estimate will say something about
your ability to think and your logic.
Population of Australia: Approximately 23 million people. (Editors note: I once
received a Case Study question involving this figure and my estimate was far too high, but
I still did well on the case because my thought process was transparent and otherwise
accurate.)
Assume that the average household is 3 people. It is worth noting that families
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probably have more than 3 people, but this is balanced out by people living alone, such as
students and young professionals. Here is a good example of rounding: you can say 8
million households (which is a little more than 23 million 3).
Assume households replace their televisions every 4 years. The interviewer
might say that seems reasonable or you should try a higher/lower number. You might
also note that you believe there was nothing special about last year in terms of television
salesno major product innovations, sluggish but growing economy, etc.
Assume an average of 1 flat screen television per household. Some households
might not have any, but others may have 2 or even 3.
Therefore, (8 million households) (1 TV per household) (4 years/purchase) = 2
million televisions purchased in the past year.
Assume an average sale price of $600. Again, the interviewer might say that seems
reasonable or you should try a higher/lower number. He or she may even ask you to
break this down into groups, such as high-end flat screens and smaller flat screens with
different average prices. However, $600 seems like a reasonable average across higherend TVs, which might cost more than $1,000, and smaller flat screen TVs, which can sell
for $200 or even lower.
Therefore, 2 million $600 = $1.2 billion annual Revenue for television sales in
Australia.
To show your creativity and business thinking you could have also discussed the market
for resold used televisions and the Revenue that comes from that (this might reduce your
estimate of the market size by reducing the average sale price; if the interviewer insists
that the question should only include new televisions, then keep the average sale price
constant but reduce the number of purchasing households each year).
The interviewer might then ask you a follow-up question, such as discuss your thoughts
about trends in television sales, just to see how you think on the spot.

HOW MANY IPHONES ARE CURRENTLY BEING USED IN CHINA?
Start by clarifying the question. In this case you might want to confirm whether the
question is how many iPhones are in operation, or how many are being used at that this
current moment. (The interviewer would probably explain that he or she means in
operation.) Once the question is clarified, identify the variables to apply to this problem.
Population of China: Approximately 1.4 billion people.
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There are several different approaches from this point; one approach is to make
assumptions around the number of people that can afford iPhones rather than
considering the number of households.
Based on very basic knowledge of China, even though the country is experiencing
extraordinary economic growth, you might assume that the majority of the population is
still very low-income and cannot afford an iPhone. Thus, you might estimate that 20% of
the population could afford an iPhone.
Therefore, the total potential market size is 20% 1.4 billion = 280 million iPhones.
What percent of this total market size is penetrated? There are many competing products
that are cheaper, but perhaps youve read that the Chinese are very brand-focused and
that Apple has an extremely trusted and desirable brand in China. Therefore you
estimate that 20% of this segment is currently using an iPhone.
Using these estimates, 20% 280 million = 56 million iPhones are currently being
used in China.
A follow-up question might be something along the lines of Are there are more iPhones in
operation in the U.S. or in China? Well leave you to try and figure that one out yourself.
Another follow-up question might be how you would check the accuracy of your
assumptions and response (in this case, perhaps by reviewing the Apple annual report or
telecom industry reports).
Guesstimate Example #4
WHAT IS THE REVENUE OF PEUGEOTS SOLD IN FRANCE PER YEAR?
Population of France: Approximately 60 million people.
Assume an average household is 3 people. This leads to 20 million households (60
million 3).
Assume 20% of households have no car, as they are in urban cities such as Paris or
Lyon.
Of the remaining households, assume an average of 1.5 cars per household.
Therefore, there are approximately 80% 1.5 20 million households = 24 million cars in
France.
Assuming a replacement rate of every 6 years, there will be (24 6) = 4 million
cars replaced per year.
Of these 4 million, how many are Peugeot brand? You could suggest that the French are
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quite patriotic, so perhaps 20% of the 4 million cars purchased each year are
Peugeot.
Therefore, you estimate that (20 4 million) = 800,000 Peugeot cars are purchased in
France per year.
Of the 800,000, assume 70% are new cars and 30% are used cars.
Assume that the average price is $30,000 for new cars, and used is $10,000
for used cars (this is assuming similar pricing, currency-adjusted, to that of U.S. cars).
Using these assumptions, (560,000 $30,000) + (240,000 $10,000) = $16.8 Billion +
$2.4 Billion = $19.2 Billion.
Therefore, total Revenue of Peugeot cars sold in France per year is approximately $20
Billion.

WHAT IS THE REVENUE FOR THE BOARD GAME MONOPOLY SOLD IN INDIA PER YEAR?
Start by clarifying the question. In this case, intelligent questions might be:
Is there an Indian version of Monopoly? (Interviewer: Yes.)
If yes, how long has it been on the market in India? (Interviewer: The Indian
version has been on the market since 2006. Prior to that, the British version was
sold in India.)
From this, perhaps the interviewer might further explain that in India there is
a childrens version and the regular version, and she would like you to
estimate the revenue of the children version, which targets 8-15 year old
children.
Once the question is clarified, identify the variables to apply to this problem.
Population of India: Approximately 1.2 billion people.
Percent of population that is aged 8-15 in India: Assume 15%.
Total population of 8-15 year old children: 180 million.
Assumed percent living in areas where the board game is available for sale:
50%
Assumed percent of such children playing board games: 20%
Assumed number of board games purchased per child in this age range per
year: 2
A potential question at this point for the interviewer: How popular is Monopoly compared
to other games? (Interviewer: It is gaining a lot of interest and is a popular board game
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with an estimated 10% share.)

Average price for Monopoly: Assume Rs 600 (The interviewer will probably
provide the number; otherwise, you might need to estimate based on U.S. prices and
dollar-rupee exchange rates)
Using these estimates, the annual Monopoly sales in India are as follows: 180 million
50% 20% 2 10% Rs 600 = Rs 2.16 billion annual Revenue.
Interviewer: If the exchange rate is U.S. $1 to 60 Rupees, how many dollars is that?
2.16 billion 60 = $36 million.
Total Revenue for the childrens version of Monopoly in India per year appears to be
approximately $36 million. Note that because of the large chain of assumptions
made, this estimate could be off significantly; in particular, the estimate is highly sensitive
to the percentage breakdown assumptions for the relevant demographic (percent of 8-15
year olds living where the game is available; percent of those individuals who play board
games; number of board games purchased by those customers annually; etc.)
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Update: STREET OF WALLS JOBS HAVE MOVED TO VETTERY

Guesstimate Case Study Examples

Consulting Guesstimate Cases | Street Of Walls

How many trees are there in New York City?

Consulting Guesstimate Cases | Street Of Walls

Step-by-Step Approach to Guesstimate Questions

Consulting Guesstimate Cases | Street Of Walls

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Consulting Guesstimate Cases | Street Of Walls

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Consulting Guesstimate Cases | Street Of Walls

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