What are estimation questions?

Estimation questions test your ability to approximate a value. Here are some examples one might encounter in an interview:

• What is the market size of disposable diapers in China?
• Estimate annual sales for Starbucks’ retail stores in the United States.
• Estimate summer sales of Disneyland tickets in the United States.

Some candidates refer to estimation questions by its catchier portmanteau, guesstimates.

What are the different types of estimation questions?

There are different types of estimation questions; market sizing and revenue estimations are two of the most common.

What is a market sizing question?

In the phrase “market sizing questions,” “market size” refers to a total addressable market. That is, what would be a company’s revenue if it had 100% market share of a category? For example, an interviewer may ask you the following market sizing estimation question: “What is the market size of disposable diapers in China?”

Market size is usually stated in terms of revenue, but some interviewers may define it in terms of units sold. To minimize miscommunication, clarify with the interviewer.

Examples of market sizing questions include:

• What is the market size of women’s rain boots in Seattle?
• What is the market size of toothbrushes in the United States?
• What is the market size of real Christmas trees in the United States?

What is a revenue estimation question?

For revenue estimations, a candidate is expected to calculate company, product, or service revenues.

Examples of revenue estimation questions include:

• Estimate annual sales for Subway restaurants in the United States.
• Estimate annual sales of Target’s brick-and-mortar stores in the United States.
• Estimate annual sales of Netflix online streaming subscriptions in the United States.

Why do interviewers ask these questions?

Interviewers use estimation questions to evaluate a candidate’s:

• Problem solving skills. Can a candidate take an unfamiliar problem and develop a plan to solve it confidently?
• Communication skills. Can the candidate clearly communicate his or her action plan to the interviewer? Is it easy-to-follow? Or does the interviewer have to ask an excessive number of clarifying questions to unravel the candidate’s thoughts?
• Analytical dexterity. Can the candidate confidently calculate numbers in real-time? Or is the candidate hesitant? Does the candidate rely on using a calculator or computer to crunch numbers? Or does the candidate needlessly round up numbers to oversimplify calculations?
• Judgment. Does the candidate choose reasonable assumptions, backed by logical thinking? Or is the candidate too casual and sloppy?

Some may deride estimation interview questions as not having real-world applicability. However, estimation is a skill that helps professionals do their jobs. For example, if you are store keeper, your responsibilities include figuring out how much inventory to order. If you are an equity analyst, you may estimate a firm’s future enterprise value.

Estimation can also help with decision-making. Here is an example: let us say we are evaluating a business decision; we want to open a new McDonald’s in our city. To breakeven, we need to generate $500,000 in sales. There are several McDonalds’ stores already, which means we are not going to get many customers.

Given this constraint, let us say for the sake of argument, we deduced that each visitor needs to spend $150 to breakeven. Yikes! We just identified a flaw in the investment thesis. A typical McDonald’s customer spends $8; getting customers to spend $150 per visit is a big stretch. To summarize, the estimation example showed how our calculations identified a faulty sales per visitor assumption.

What are they looking for in an ideal response?

Here is what interviewers would consider as a top notch answer to an estimation question:

• Logical plan of action that is easily understood. Interviewers want to feel confident (and you should feel confident too) that you have a clear plan when solving an ambiguous estimation problem. Good candidates communicate a plan that not only gets them to the right answer but also easy for the listener to follow along.
• Communication skills. Interviewers do not just want to hear the answer. They also want to hear the thinking too. So candidates who silently solve a problem on their own and resurface in five minutes will not do well. Communicating one’s thoughts is critical to sharing knowledge and gaining buy-in to one’s approach.
• Choose reasonable assumptions with clear explanations. Interviewers would like you to use reasonable assumptions. Silly assumptions such as “there are 100 billion people in the world” show that a candidate is out-of-touch, which minimizes the individual’s credibility with clients, executives, and co-workers. Furthermore, it would be polite to explain why you chose a particular assumption.
• Accuracy. Some estimations are the basis for decision-making. Thus, accuracy is important. But clearly, accuracy will improve if there is more time to work on it. Given an interview scenario, most interviewers would like candidates to spend at most 15 minutes and as little as 5 minutes on an estimation question. Candidates must tradeoff between accuracy and speed – and get the most accurate response possible in a 10 minute timeframe.

Do you have an example of a market sizing question?

We’ve included two examples of market sizing questions and their solutions:

1. What is the market size for smartphone cases in the United States?
2. How many TV ads are shown in the US each day?

You’ll find sample answers for each question at the top and bottom of the article, respectively.

How do I find more market sizing examples?

You can find more market sizing examples from Lewis C. Lin‘s book, Interview Math.

SEE ALSO: 60+ Killer Salary Negotiation Scripts

Performance-based interview questions are similar to behavioral interview questions.  That is, the interviewer is using your past performance to gauge your future success.  Here are 20 popular performance-based interview questions:

1. What was the most creative idea you introduced on the job? How did you persuade your superior?
2. Describe a time when voicing your opinion was uncomfortable or could have had serious consequences, but you did it because you believed so strongly in the value of your perspective.
3. Give me an example of the most complex project/assignment you have had, including your role and the outcome.
4. Describe a situation at work when you had to make a decision and were uncertain about the outcome.
5. What do you do when you are communicating with someone and it becomes apparent that they don’t understand what you’re saying or vice versa?
6. Describe a situation in which you developed a group into a strong working team.
7. Communication and leadership go hand in hand. Tell me about a time when your communication skills enabled you to influence the way others thought or acted, even in a very difficult situation.
8. What important goals have you set in the past and how you accomplished them successfully?
9. Describe how you delegate responsibility in your current job.
10. Describe a time when you had to sell an idea to your manager or another authority figure.
11. Give me an example taken from your experiences in report writing, preparation of memos, or general correspondence which illustrates the extent of your written communication skills.
12. Give me an example of a time when you built rapport with an individual or group at work, even when the situation was difficult.
13. Solving problems requires more than good plans; it means taking action. Give me an example of a time when you were able to take meaningful action to resolve a problem.
14. Sometimes it is necessary to work in unsettled or rapidly changing circumstances. When have you found yourself in this position? Tell me exactly what you did and the outcome.
15. Tell me about a time when you had to cope with strict deadlines or time demands.
16. What examples can you recall of instances in which you were responsive to your customer or successful in completing a quality job?
17. How have you improved existing processes and procedures?
18. Give me an example of how you have demonstrated technical or functional expertise?
19. Give me an example of how cooperative interaction with other members of a team has been a part of your work.
20. Give me an example of a time when others have been able to count on you “being there” time after time, project after project.