GUESSTIMATES

WHAT ARE GUESSTIMATES?

A guesstimate is basically an estimate usually made without adequate information .

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.

WHAT THE INTERVIEWER IS LOOKING OUT FOR?

Very often in the role of Analyst and Consultant, clients expect quick initial scaling or sizing of
potential projects. This is the reason that such questions are so common in interviews for
recruitment of such roles. The interviewer is looking out for four key traits in this interview.

1. How structured is your approach?

2. How comfortable are you with numbers?

3. Are you able to make quick checks on the efficiency of different methods?

4. Can you do back of the mind calculations and validate the magnitude of numbers?

BASIC STATISTICS TO KEEP IN MIND

During interviews and competitions while solving guesstimates and case studies, it is
recommended to use and know some of the basic figures from credible sources to ensure
better accuracy and demonstrate awareness. Given below, is a list of data by UNDESA
(2015), Indian Ministry of Home Affairs (2011) and Pew Global Reports (2011) to reach
approximations and conclude the only basic figures you need to know.

1. The only population data you need to remember is the total world population and
percentages for demographics as shown in the tables. You’d note that we typically only
need 5% and 10% of the total figures to calculate the population of any demographic.

• Total World Population: 7.3 billion

• Total India Population: 1.3 billion (18% of World)

• Average Household size in India: 4.5

EXAMPLE:
To calculate the never married male population of Delhi between 35–60 years of age, use
1.3 billion (total) X 0.01 (Delhi) X 0.5 (males) X 0.25 (36–60) X 0.5 (never married) = 1.3
billion X .0025 = 3.25 million X 1/4 = 0.81 million. Easy if you know some basic math!

2. The income groups are defined as per the amount they live on per day:

• Poor: $2 or less

• Low income: $2.01–$10

• Middle income: $10.01–$20

• Upper-middle income: $20.01–$50

• High income: More than $50

FRAMEWORK
Following are the 4 key techniques which will help you in such case interviews:

1. Find the right proxy: This is by far the most important technique. The proxy is a parameter
which behaves in a similar manner as the dependent parameter. In the cigarette estimation
problem, the population of India is a good proxy for the number of cigarettes consumed
monthly in India. If the population of India increases, it can be safely said that cigarette
consumption will increase proportionally. Other proxies used is the growth in population,
growth in demand of a newly introduced technology, average number of planes parked at
major airports etc.

2. Segment till you can find differentiated clusters: Estimating parameters on a segment level
is far more accurate than making guesses on the overall population. In the cigarette
estimation problem, population below 16 years can safely be ignored for cigarette
consumption and female population is expected to have a lower average cigarette
consumption than male population. This is how segmentation helps making accurate
assumptions.

3. Do smart calculations and number round off: Speed is very critical in such problems and
one needs to maintain a balance between accuracy and time consumption. Say you need to
fin 2999/3. It is much easier to calculate 3000/3 than 2999/3. In such cases right the answer
as 1000 (-). This indicates the number is slightly lesser than 1000 and can be compensated in
further calculations.
4. Validate number magnitude: It is always a good idea to keep on validating intermediate
numbers using your experience and sense checks.

HOW TO GO ABOUT SEGMENATION?

Case 1: Estimate the number of cigarettes consumed monthly in India

Solution: A good proxy in such problem is the population of India i.e. 1.2 billion. Following is
an effective way to segment this population:

Following were the key considerations in building the segmentation and the intermediate
guesses:

1. The rural population consumes far lesser cigarettes than urban because of the purchasing
power difference.

2. Male consume more cigarettes than female in both urban and rural populations.

3. Children below 16 years consume a negligible number of cigarettes.

4. Male to Female ratio in Urban is closer to 1 than that of Rural.

5. Male to Female ratio in younger generations is closer to 1 than that of older. This is because
of the increase in awareness level.

6. Bulk of population start smoking after getting into a job and hence the average number
cigarettes are higher in older groups.

7. Total number of cigarettes from the supply side also come to around 10 Trillion, which gives
a good sense check on the final number.

Case 2: Estimate the number of WhatsApp Android application installed

Solution: A good proxy in this problem is the world population i.e. ~7.2 Billion. Following is a
possible approach to this problem :

The actual number of Whatsapp installed on Android phone is slightly more than 100 Million.
As can be seen from this example that guess estimates can be fairly accurate if we choose
good segments and approximations.

Case 3: Estimate the number of tennis balls bough in India per month

Solution: A good proxy in this problem is the number of cities in India i.e. ~1700. The catch in
this problem is to analyze where all can we use tennis balls. Once we have the number of
tennis balls used monthly, we can easily find the number of tennis ball bought in a month
using the lifetime of tennis balls.

Following is an effective way to segment this population:

Following were the key considerations in building the segmentation and the intermediate
guesses:

1. Rural areas have negligible number of tennis courts.

2. Metro cities have the highest number of sectors.

3. For each sectors in metro cities, the number of grounds for both tennis and cricket is higher.
This is both because of the bigger area and the higher buying capacity in metros.
 4.Number of balls consumed in metros per ground is higher because of the higher
engagement in metros.

TIPS
Here are 12 tips to help you nail the guesstimate question:

1. Practice: We live in a world where most of us use a calculator or computer every day and it
can be easy to forget how to do basic arithmetic in your head. Practice doing some
guesstimate questions before the interview so that you are prepared. It is a good idea to
bring a pen and paper to the interview to keep track of your calculations. The Vault.com has
also suggested bringing graph paper to the interview so that you can graph your results.
2. Know some basic facts: It will help to know a few basic facts to give you a starting point
from which to make reasonable assumptions. It is a good idea to know some key country
and city population estimates. For example, estimates for the population of the world (7
billion), America (300 million), Australia (20 million), New York (20 million), Sydney (4
million) and Melbourne (4 million).
3. Use round numbers: You are responsible for doing the calculations so pick numbers that are
easy to work with. For example, estimate the population of America as 300 million not 309.3
million.
4. Get into character: An easy way to calm your nerves and improve your performance is to
role play. You are not a university graduate desperate for a consulting job, you are a
professional consultant. Game on!
5. Take a moment: It is important to maintain your composure so before starting to answer
the guesstimate question take a moment to consider your approach. You can buy yourself
some time by saying, “That’s an interesting question” and then pausing to think.
6. Have a clear approach: It is important to have a clear approach to help you answer the
question.
7. Ask questions: Your interviewer may be able to provide you with direction. If the question is
“How many ping-pong balls will fit inside a 747?” the first question you might want to ask
your interviewer is “What is the volume of a ping-pong ball?”
8. State your assumptions: The interviewer may not know the answer or may not want to give
you direction so you’ll have to make assumptions. It is a good idea to clearly state your
assumptions. For example, “let’s assume that the diameter of a ping-pong ball is 4cm. The
formula for the volume of a sphere is ⁴⁄₃πr³. The volume of a ping-pong ball would therefore
be about 11-pi centimetres cubed.
9. Think out loud: The interviewer is trying to assess your thought process in getting to the
answer, not the answer itself. If you don’t think out loud, you make it difficult for the
interviewer to give you points.
10. Explain your logic: As you make your way through the problem it is helpful to explain the
logic behind each of your assumptions. Instead of saying “a 747 is about 100 metres long”
 you could say “I know that an average car is about 5 metres long and based on my
experience I would say that 20 cars lined up end to end would be about the same length as
a 747. So, I will assume that a 747 is 100 metres long”.
11. Answer the question: After doing all of the calculation remember to answer the question
that has been asked.
12. Be prepared for the follow-up question: After you answer the guesstimate question, you
may be asked “If you had to find the real answer to the question, how would you do it?”
This is a test of your creativity and resourcefulness.

SOURCES
1. https://soumyagupta.in/how-to-approach-guesstimates-76344ad1fafe
2. http://www.vault.com/blog/interviewing/5-guesstimates-wall-street-
firms-ask-and-how-to-answer-them
3. https://mconsultingprep.com/case-interview-market-sizing-
guesstimate/
4. https://www.spencertom.com/2010/05/17/12-tips-for-nailing-the-
guesstimate-question/#.W2ceqfZuLqw
5. https://www.analyticsvidhya.com/blog/2014/07/definitive-guide-
prepare-analytics-interview/