Market-sizing practice · Original worked examples
Six market-sizing questions.
With worked answers.
Estimate demand, turn an installed base into annual purchases, check capacity and decide what a business could actually serve.
Try a structure on paper first. Then compare one set of assumptions, the calculation, a sensitivity and the decision it supports.
Start the first questionEvery answer is open. No account needed for this collection.
How to approach a market-sizing question
Clarify whether you need people, annual purchases, revenue or physical capacity. A top-down approach starts with a defined population and narrows it. A bottom-up approach starts with a unit such as one store or charging point and scales up. Replacement questions need a stock-to-flow model; a commercial decision also needs reachable demand and costs.
Choose assumptions before opening each answer. The examples show one defensible model, not a uniquely correct market size. Summarize rough estimates at sensible precision; exact arithmetic is shown so you can check the reasoning. For printing, open the answers you want and use your browser’s print command.
01 / Recurring demand
How much is spent on professional dog grooming each year?
Estimate annual spending by residents of a fictional region. Include professional dog grooming from all providers; exclude home grooming, other pets and purchases by visitors.
Before revealing: choose the population unit, grooming frequency and a price. Explain why households are not the same as dogs.
Show the grooming assumptions and worked answer
- Households
- 200,000
- Households owning dogs
- 35%
- Dogs per dog-owning household
- 1.2
- Dogs using professional grooming
- 55%
- Frequency
- Once every 8 weeks
- Calendar
- 52 weeks / year
- Price
- $40 / visit
Build the annual flow
Dogs = 200,000 households × 35% × 1.2 = 84,000 dogs. Professionally groomed dogs = 84,000 × 55% = 46,200.
46,200 dogs × (52 ÷ 8) visits/dog/year = 300,300 visits/year
300,300 × $40 = $12,012,000 / year
Given the rough inputs, say approximately $12 million a year. A 6.5-visit annual average is a population rate, not a claim that an individual has half a grooming visit.
Stress an assumption
Changing only the interval to ten weeks gives $9,609,600; six weeks gives $16,016,000. These are scenarios, not a statistical confidence interval.
Check and interpret
The model implies $260 a year per professionally groomed dog. Rebuild the total from that annual spending and 46,200 dogs. Verify ownership, professional-use share, frequency and price before treating it as real market research. Total regional spending does not tell one salon how many appointments it can win or deliver.
02 / Installed stock versus annual purchases
How many new reusable delivery totes do grocers buy in a year?
Estimate first sales of new totes to grocers in a fictional region. Include replacements for existing stores and initial fleets for stores opening this year. Exclude used-tote transfers and expansion of existing stores’ fleets.
Before revealing: distinguish totes already in use from totes bought this year. Make your lifetime and age-distribution assumptions explicit.
Show the tote assumptions and worked answer
- Existing stores at start of year
- 500
- Totes per store
- 800
- Usable life
- 4 years
- New stores this year
- 5% of the starting count
- Price
- $12 / new tote
Assume the existing stock is evenly spread across its four-year life. New stores each acquire a full 800-tote fleet. Loss and damage are already reflected in usable life; do not add them again.
Starting stock = 500 × 800 = 400,000 totes
Replacements = 400,000 ÷ 4 = 100,000 / year
New-store stock = 500 × 5% × 800 = 20,000 totes
Annual purchases = 120,000 totes
Spending = 120,000 × $12 = $1,440,000 / year
Stress an assumption
With the same evenly aged starting stock and new-store count, a five-year life gives $1,200,000 annual spending; three years gives $1,840,000.
Check and interpret
Annual purchases equal 30% of the opening installed base: 25% replacements plus 5% new-store stock. That check depends on the age and fleet assumptions. A recent synchronized replacement campaign could invalidate the evenly aged model. A manufacturer still needs distribution access, winning share and production capacity; it cannot book the whole regional flow as its revenue.
03 / Demand translated into capacity
How many charging points cover a depot’s average energy requirement?
A fictional van fleet needs overnight charging. Estimate annual energy delivered at its depot and an average-energy charging-point requirement. A point means one simultaneously usable connector, not an entire charging station.
Before revealing: distinguish power (kW) from energy (kWh). An annual energy calculation alone cannot establish peak-hour service quality.
Show the charging assumptions and worked answer
- Vans
- 600
- Distance
- 60 km / van / operating day
- Delivered energy needed
- 0.25 kWh / km
- Operating days and charging nights
- 300 / year
- Fleet energy delivered at this depot
- 80%
- Power while charging
- 18 kW / point
- Nightly window
- 8 hours
- Window actually delivering power
- 60%
- Service price
- $0.30 / delivered kWh
Depot energy = 600 × 60 × 0.25 × 300 × 80%
= 2,160,000 kWh / year
Per point = 18 × 8 × 300 × 60% = 25,920 kWh / year
Points = round up (2,160,000 ÷ 25,920) = 84 points
The service-price assumption gives $648,000 a year in gross energy billings. That is not profit; energy purchasing, grid charges, maintenance and investment are not included.
Stress an assumption
A six-hour window raises the modeled requirement to 112 points. Keeping eight hours but reducing productive utilization to 50% requires 100.
Check and interpret
Daily depot demand is 7,200 kWh; one point delivers 86.4 kWh over the modeled night. Eighty-three points fall short; 84 cover that average energy. This is an energy-based lower bound under these assumptions, not a depot design or queueing guarantee. Arrival patterns, charging curves, grid limits, losses, downtime and peak utilization need separate investigation. The 80% share refers to energy, not a second reduction in the number of vans.
04 / Cross-check without hiding disagreement
Do demand and supply estimates agree for paid pottery classes?
Estimate paid adult group-class seat visits per week in a fictional region. Exclude online classes and private events. Build a demand model and a studio-throughput model separately.
Before revealing: say whether you are counting unique people or seat visits. Explain what you would do if two estimates disagree.
Show both class-market estimates
- Adults
- 160,000
- Assumed weekly paying participation
- 2%
- Classes per participating adult / week
- 1.25
- Studios
- 20
- Group classes per studio / week
- 20
- Seats per class
- 10
- Paid occupancy
- 75%
- Price
- $35 / seat visit
Demand hypothesis = 160,000 × 2% × 1.25 = 4,000 seat visits/week
Supply hypothesis = 20 × 20 × 10 × 75% = 3,000 seat visits/week
At $35 per seat visit these imply $140,000 versus $105,000 a week. The difference is 1,000 seat visits. Neither is observed market data; these are deliberately conflicting assumptions.
Stress an assumption
Changing weekly paying participation from 2% to 1.5% reduces the demand model to 3,000 seat visits, matching the supply model. That illustrates sensitivity; it does not prove 1.5% is correct.
Check and interpret
Do not quietly average the two outputs. Check provider coverage, geographic scope, attendance frequency, price and willingness to pay. Students might use classes outside the region, or the studio list could be incomplete. The apparent gap is not evidence that another studio would be profitable. Keep both estimates visible until evidence resolves the disagreement.
05 / Different customers, different adoption and prices
What is the annual subscription run rate for scheduling software?
Size recurring software subscriptions among repair businesses in a fictional region. Each business belongs to exactly one employee-size group. Exclude setup fees, hardware, transaction fees and tax.
Before revealing: weight prices by paying accounts. State the difference between a current annualized run rate and revenue earned during a changing year.
Show the segmented software estimate
| Business group | Businesses | Adoption | Monthly price | Paying accounts |
|---|---|---|---|---|
| Owner only | 1,800 | 20% | $15 | 360 |
| 2–9 employees | 500 | 60% | $60 | 300 |
| 10+ employees | 100 | 80% | $200 | 80 |
Monthly revenue = 360 × $15 + 300 × $60 + 80 × $200
= $39,400 / month
Annualized run rate = $39,400 × 12 = $472,800 / year
There are 740 paying accounts. Average monthly revenue per paying account is about $53.24. Simply averaging the three prices and applying that to every paying account would produce $814,000 a year—an overestimate because the customer mix is not equal.
Stress an assumption
If adoption among 2–9 employee firms is 40% instead of 60%, the annualized run rate falls to $400,800. Other assumptions stay fixed.
Check and interpret
The groups total 2,400 businesses, and 740 adopt. Revenue per paying account must fall between the lowest and highest prices. Annualizing a snapshot assumes a stable run rate; churn, new customers, discounts and changes during the year would affect actual recognized revenue. A vendor also needs evidence that it can acquire and retain these accounts.
06 / Total market versus an achievable business
Can a cartridge-refill service reach its profit target?
A fictional service sees a large market for printer-cartridge refills. Estimate total spend, reachable demand, target sales and what its capacity can actually support. Assume the same average purchase frequency across the office groups.
Before revealing: keep total market, reach, winning share, capacity and profit separate. A large market is not a revenue forecast.
Show the reachable-market and profit checks
- Offices
- 10,000
- Purchases
- 6 cartridges / office / month
- Period
- 12 months
- Price
- $25 / cartridge
- Offices reachable
- 30%
- Target share of reachable offices
- 10%
- Annual service capacity
- 18,000 cartridges
- Variable cost
- $15 / cartridge
- Annual fixed operating cost
- $120,000
- Annual operating-profit target
- $100,000
Total spend = 10,000 × 6 × 12 × $25 = $18,000,000 / year
Reachable spend = $18,000,000 × 30% = $5,400,000
Target sales = $5,400,000 × 10% = $540,000
Target volume = 21,600 cartridges; capacity = 18,000
Capacity-limited revenue = $450,000 / year
Connect it to the decision
At the served volume, operating profit = 18,000 × ($25 − $15) − $120,000 = $60,000 / year, below the $100,000 objective. The target needs 22,000 cartridges at the stated contribution, above both capacity and the target-share volume.
Stress an assumption
At $28 per cartridge, with unchanged demand, capacity and costs, modeled operating profit is $114,000. That is a sensitivity, not evidence customers accept the price. Investigate realized price, access to offices, supplier commitments, service throughput and acquisition cost before recommending entry.
Check and interpret
The target is 10% of the reachable 30%, or 3% of total offices—not 10% of the total market. Capacity limits service to the equivalent of 250 average offices rather than the 300-office target. Profit excludes tax, financing, investment and unlisted costs. The estimate is useful because it identifies a constraint, not because $18 million sounds attractive.
Review the reasoning, then try a full case.
- Could another person follow the formula without guessing the units?
- Did you distinguish people, purchases, installed stock and capacity?
- Which uncertain assumption changes the answer most?
- What evidence would you request before making the business decision?
The open coffee-chain case adds exhibits, channel switching and a recommendation. For calculations, use the case-math questions and drill. For building a structure, use the frameworks workshop.
Create a Caselane accountAccount required for practice in the app. These worked examples remain open.
Before you compare answers
Are these real interview questions or market statistics?
No. These are original fictional teaching examples. Every number is an assumption for practicing the method. They are not employer questions, current market research, endorsed materials or readiness assessments.
Should my estimate match the worked answer exactly?
No. Different coherent assumptions can produce different estimates. Compare scope, formulas, units and sensitivity. Exact arithmetic is shown for checking; summarize outputs at a precision that fits the uncertainty. Finishing these examples does not establish interview readiness.