GUESSTIMATES

How to go about it?

 Ask your interviewers as many questions as you can to clarify the context of a
question.
 Break the question down into its key components and then rely on your knowledge to
make certain predictions.
 Provide reasoning behind your answer: present a clear and coherent line of argument
even if it isn’t always the most accurate one. Employers are basically looking to
examine your calculation and reasoning skills.

QUESTIONS:

1. Estimate the number of refrigerators sold in India every year.

2. Estimate the number of cigarettes consumed monthly in India

3. Estimate the number of WhatsApp Android applications installed.

4. What is the revenue for the board game monopoly® sold in india per year?
 SOLUTIONS:

1.

Interviewer: For this question, include only domestic refrigerators.

Interviewee: I would like to approach this question from the demand side.

Total population of India = 130 crore

Let us take a number of members in a family = 4

Total Households = 130/4 = 32.5 crore

For Metro/Tier I class households

Percentage of poor: middle class: rich = 20%:60%:20%

For Tier II/III class households

Percentage of poor: middle class: rich = 40%:50%:10%

For Village Households

Percentage of poor: middle class: rich = 60%:38%:2%

Market Penetration

Metro/ Tier I Tier II/ III Villages

Poor % 0 0 0

Middle- 50% 40% 0

class %

Rich % 100% 100% 100%

Absolute Refrigerators Numbers = Sum of Penetration * No of households in

each segment
 Metro/ Tier I Tier II/ III Villages

HouseHolds 0.2*32.5 = 6.5 Cr 0.15*32.5 = 0.65*32.5 = 21.125

4.875(Let’s
(Let's take it 21)
take it 5)

Refrigerators Penetration 0.5*0.6+0.2 = 50% 0.4*0.5+0.2 2%

= 30%

Total 0.5*6.5 = 3.25 0.3*5 = 1.5 0.02*21 = 0.42

Total number of refrigerators = 3.25+1.5+0.42 = 5.17 crore

As the question asks the number of refrigerators sold every year, we have to
take care of following points too:

1. i) People buying refrigerators due to replacement (as their old machine is

not working)

2. ii) People buying refrigerators as their first refrigerator

Let's take the average life of Refrigerators= 10 years

Assumed growth rate = 5%

Refrigerators sold in a year = refrigerators due to replacement + New Demand

due to growth

= (Total refrigerators ( i.e. market size) / Avg Life) + (Growth rate * Total
machines (i.e. market size))

= (5.17/10)+(5.17*0.05) crore

= 0.775 crores

= 77.5 lakhs

2.
The rural population consumes far lesser cigarettes than urban because of the
purchasing power difference.

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

Children below 16 years consume a negligible number of cigarettes.

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

Male to Female ratio in younger generations is closer to 1 than that of older.

This is because of the increase in awareness level.

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

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

3.
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.

4.

 Start by clarifying the question. In this case, intelligent questions might

be:

o Is there an Indian version of Monopoly®? (Interviewer: “Yes.”)

o 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 children’s 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 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 children’s 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.)