Market sizing is one of the most frequent drills in consulting interviews—and a fundamental skill for real-world problem solving. Whether you're estimating the number of taxis in Paris or the total revenue for online grocery in Mexico, your job is to make reasonable assumptions, structure your thinking, and land on a number that makes sense.
There are two main ways to approach a market sizing question: top-down and bottom-up. In this article, we’ll break down each method, when to use them, and how to apply them step by step.
1. What Is Market Sizing?
Market sizing means estimating the size of a market—typically in dollars, units, or users per year. You won’t have perfect data, so the goal is to use logic, structure, and reasonable assumptions to get a ballpark figure.
This tests your:
- Numerical reasoning
- Business intuition
- Communication under pressure
2. Top-Down Market Sizing
In a top-down approach, you start with a large known number (like total population or GDP) and narrow it down step by step using percentages or filters.
“Let’s assume France has 67 million people. If 70% live in cities, that’s ~47M. Let’s assume 20% use taxis regularly, and they spend $20/month…”
Use top-down when:
- You’re estimating broad consumer behavior
- You need to work fast with macro data
- You lack info about operational units or supply chain details
Example steps:
- Start with total population or households
- Filter by relevant segment
- Estimate frequency of usage or purchase
- Multiply by average spend
3. Bottom-Up Market Sizing
In a bottom-up approach, you start with individual behaviors or business units and scale them up.
“Let’s say there are 500 grocery stores in Mexico City. If each processes 200 online orders per week at $30/order…”
Use bottom-up when:
- You can estimate from the supply side (stores, machines, delivery vans)
- You have a realistic unit-level understanding
- You want a more grounded, operational estimate
Example steps:
- Start with number of business units (stores, employees, schools, devices)
- Estimate output per unit per time period
- Multiply by revenue or volume per unit
- Scale up to national or total level
4. Sample Prompt (Top-Down)
“Estimate the annual market size for pet food in the United States.”
Step-by-step:
- US population ≈ 330 million → ~110 million households
- 60% own pets → 66 million pet-owning households
- Average spend on pet food per household ≈ $400/year
- Market size = 66M × $400 = $26.4B/year
Always sense-check: Does this number feel reasonable compared to known industries?
5. Sample Prompt (Bottom-Up)
“Estimate the annual revenue of laundromats in New York City.”
Step-by-step:
- Assume 2,000 laundromats in NYC
- Each serves ~100 customers/day, 300 days/year → 30,000 visits/year
- Average ticket = $8 → Annual revenue per store = $240,000
- Market size = 2,000 × $240K = $480M/year
6. Tips to Succeed in Market Sizing Questions
- Use round numbers: Estimating is easier with 100M than 97.4M
- Say your assumptions out loud: Interviewers want to hear your logic
- Simplify math: Break down multiplication into manageable steps
- Sensitivity check: What happens if a variable is off by 20%?
- Sense-check your result: Is the number too small or too massive?
7. Combine Top-Down and Bottom-Up
In real cases, the best answer might combine both methods. You can use top-down to sanity-check your bottom-up estimate, or vice versa. If the two numbers are wildly different, explore why.
“My bottom-up estimate gives $500M and top-down gives $700M. Given the assumptions, that range feels reasonable.”
Final Thoughts
Market sizing isn’t about getting the exact number—it’s about showing how you think. A clear structure, logical assumptions, and clean math are what really matter.
With practice, you’ll be able to size any market confidently—even if you’ve never heard of it before the interview.