How do you answer a market sizing question?
What this question is really asking
Market sizing questions look like arithmetic and are actually about structure. How many coffee shops are there in New York, how many umbrellas are sold in London, what's the market for electric vehicle charging in 2030 — the interviewer has no more idea of the true answer than you do, and doesn't care what number you land on.
What they're watching is whether you break the problem into pieces that make sense, state your assumptions clearly enough to be challenged, do the arithmetic without losing your place, and notice when your answer is implausible.
The worked example here is coffee shops in New York City.
How to structure your answer
Clarify the scope first. Which geography exactly — the five boroughs, or Manhattan? Are we counting independent cafés only, or chains too? Counting outlets, or estimating market revenue? Thirty seconds here prevents answering a different question from the one asked.
Choose an approach and say which.
Top-down starts from a population and narrows: New York's roughly 8 million residents, plus commuters, segmented by who buys coffee out.
Bottom-up builds from a unit: cups sold per shop per day, then how many shops that implies given total demand.
For coffee shops, a demand-side estimate that resolves into supply works well. Roughly 8 million residents, plus perhaps 1.5 million daily commuters. Say half buy coffee out on a given day — call it 5 million cups. A typical shop might sell 500 cups a day. That implies around 10,000 outlets.
Build the whole structure before doing any arithmetic. Say what you're going to multiply before you multiply it. This is the part being assessed, and it also means a wrong assumption can be corrected without collapsing the whole answer.
Round aggressively and say you're doing it. Use 8 million, not 8.34 million. Nobody is checking your arithmetic against the census; they're checking whether you can keep the numbers manageable while talking.
State assumptions as you go, out loud. "I'll assume half the adult population buys coffee outside the home on a weekday — that feels high for the city overall but reasonable given commuter density." The reasoning matters more than the number.
Sanity-check at the end. Roughly 10,000 outlets across the five boroughs is about one per 850 residents. Does that feel plausible? Compare to something you know. If your answer implies one coffee shop per 50 people, say so and revisit the assumption that caused it.
Give a final number, with a range. "Around 10,000, and the figure is most sensitive to cups per shop per day — if that's 300 rather than 500, it's closer to 17,000."
What the interviewer is testing
Structure over precision. There is no correct answer. There are defensible structures and indefensible ones.
Whether you can do mental arithmetic out loud. Under mild pressure, while explaining. This is genuinely a skill, and it's practised rather than innate.
Whether you state assumptions. Unstated assumptions can't be challenged, which is the point of the exercise — the interviewer wants to push on one and see how you respond.
Whether you sanity-check. Candidates who arrive at an implausible figure and present it without comment fail the most important part of the test. Noticing and adjusting is a strong signal.
Comfort with being approximately wrong. The exercise rewards people who commit to an estimate and defend the reasoning, not people who hedge.
Frequently asked
Should I use top-down or bottom-up?
Whichever has the more reliable starting point. Top-down works when you know the population; bottom-up works when you know something about a single unit. Saying which you have chosen and why is itself part of the answer.
What if I do not know the population of the country or city?
Estimate it and say you are estimating. Learn a handful of anchors — US around 340 million, UK around 68 million, New York City around 8 million — and derive the rest. Nobody is testing recall of statistics.
How precise does the answer need to be?
Within an order of magnitude is fine. Interviewers are assessing structure and reasoning. An answer that is twice the true figure with clean logic beats a closer answer arrived at by guessing.
Can I ask the interviewer for data?
You can ask whether any figures are available, and sometimes they will give you one. Usually they will not, and the expectation is that you estimate and state the assumption. Do not stall waiting for numbers that are not coming.
What if my final number is obviously wrong?
Say so, identify which assumption is driving it, and adjust. Catching your own error is a strong signal — much better than presenting an implausible figure without comment, and often better than getting it right first time.
Common mistakes
Calculating before structuring. Numbers before a plan is how candidates get lost mid-answer.
Not stating assumptions. If the interviewer can't see where a number came from, they can't credit it.
Using awkward numbers. 8.34 million instead of 8 million makes every subsequent step harder for no benefit.
Going silent while calculating. The reasoning is the answer. Silence gives the interviewer nothing to assess.
Not sanity-checking. Presenting a figure implying one coffee shop per 50 residents without comment is the clearest possible signal that you're processing rather than thinking.
Chasing precision. Adding decimal places to an estimate built on guesses is false confidence, and interviewers read it as a misunderstanding of the exercise.
Losing track of units. Cups per day versus cups per year is the most common arithmetic error in these questions by a wide margin.
Not giving a final number. Structure without a conclusion is an incomplete answer. Commit.
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