How to approach guesstimates

How to Approach Guesstimate?

  1. There are various approaches to solve guesstimates, and none is wrong. However making assumptions in the process is the key. Problems like market sizing are based on many assumptions, and a wrong one can lead to a huge negative impact.
  2. Identification of target segment- many of the guesstimates have huge segment to begin with but when you list them down and discuss with interviewer , you will get an idea about which to include/consider for your analysis
  3. Always try to analyze both sides of coin i.e. Demand and Supply. Analyzing only one can lead to an answer but it can be an infeasible one. Considering both sides you give an holistic impression to the interviewer.
  4. Consider the type of product/service while analyzing- This is very important considering it may define on how you narrow down on the segment as well as your assumptions
  5. Finally, always try to arrive at a multiplying factor which will result in a very simple calculation on your part eg. If you can calculate something for a household or a sq. km. of area then you can easily use that to multiply and get the scaled answer for a population or a city etc.

Not to point out the obvious, but the general approach is to break a problem down into smaller problems where you can reasonably estimate the answers, and then scale up accordingly. Sometimes it helps to reframe a problem so you can answer a different (but related) question that is substantially easier, and then use the relationships to find a comparable answer for the original problem. For more challenging problems, you’ll often need to do these things multiple times before you can even venture to guess any sort of number that might lead you to a reasonable “guesstimate.”