How to Approach Guesstimates
Let’s talk on something that became integral part of Business and Analytical interviews. Guesstimates are nothing but play of assumptions with few relevant facts.
I heard about guesstimates when I started preparing for Analytics interviews. Initially it was not that easy to choose a approach or to get a solution. Eventually I looked up for easy approach and solutions in internet and I found few approaches for sorting out the guesstimates. For someone like me who loves to learn by observation and understanding which helped me a lot. Upon further practice solving guesstimates is as simple as solving basic math problem.
One important thing to remember, guesstimates never have a defined correct answer, It’s all about the approach and logical thinking which determined the final answer(Quantity).
Confusing!!! Let’s have some easy example to understand.
Question: How many burgers are sold in a McDonald’s Outlet at Chennai in a day?
Before jumping into observation on questions there are few steps to remember to solve guesstimates;
- Approach: There are plenty of approaches(Simple Math approach,Per capita approach,Supply & Demand approach) for each guesstimate but understand the requirement of the question and choose the approach that is simple and easy to explain.
- Numbers to remember: Numbers like Population, GDP, Sex ratio, Average size of a family,Land Area,Population growth rate and much more ratio distribution are to be remembered.
- Math- Numbers galore: Know Number of zeros in million, crores,billion,trillion. Always keep your values simple and rounded as even numbers to make calculation easy.
Now, observing the given question is the first step to solve a guesstimate. Never feel questions have limited data or inadequate data to solve. If interviewer permits ask as much as to understand the question clearly else make assumptions to deal.
In the example there are few parameters that we have to re-frame to get clear idea of what is asked for, so let’s making some assumptions.
•Considering dine-in sales or take away and delivery too?-Assuming both.
•Is it a weekend or weekday?- Assuming weekday
•Size of the outlet?- Assuming medium
•Location at Chennai ( Sub-urban, IT hub, Urban residential area)?- Assuming IT hub
•Similar Burger giant (Subway,Burger Man,Burger King) nearby?- Assuming Yes
•Is there offers? In this outlet or any other outlet near by? - Assume Yes (similar offer)
Here, we come to a clear understanding of the question. Let me re-frame: How many burgers are sold in a medium size McDonald’s Outlet at Chennai, IT hub in a weekday including both dine-in and delivery considering offers and nearby burger giants?
We begin by solving the guesstimate here,
Dine In: Assumption and approach to solve:
It is calculated that 540 Burgers in Peak hours and 270 Burgers in Non-Peak hours. Thus, total Burgers sold from Dine-In: 540+270= 710 Burgers.
Take Away: Assumption and approach to solve:
It is calculated that 144 Burgers in Peak hours and 60 Burgers in Non-peak hours. Thus, total Burgers sold from Takeaway: 144+60= 204 Burgers.
Finally, Total number of Burgers sold: 710+204= 914 Burgers per day. Reaching this correct final quantity is not most important. What is most important, approach we have implemented to reach this final quantity.
Let us discuss on different approaches using different questions in upcoming posts.
Liked this guide to guesstimates? Could be better? Got a guesstimate question you wanted to solve? Let me know in the comments!
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