Work Backwards from the Answer

When many casers start building out a methodology for a market sizing, one of the first things they say is "let's start with the population". Sure, in certain cases, you might have to size something up starting at the population, but that should almost never be where your thinking starts.

In a sizing, you generally have a target in mind, like a dollar value or number of customers/units. Population is about as far away from that ultimate objective as possible, and to get from population to the end, you're going to need to make a bunch of (hopefully lucky) guesses.

So what's the better way to approach it? Start at the goal, and work backwards. For example, if you're solving for total market size in dollars, step one should be "we're going to need the average price and total units sold. Do we have any of that data?" If they have both, great, you're done! If they only have price, that's fine too, because you've at least uncovered one of the major data points needed. Then you just have to figure out what to break down total units into. For example, "Let's break down total units into number of transactions per year and units per transaction."

The "start with population" method is like trying to hit a bullseye on the dart board from across a room. Sure, you might do it, but it's hard and you're probably not going to be all that accurate. Working backwards is like putting the dart right in the bullseye and then walking backwards to the line. Sure, it's a lot less of a challenge, but you hit the bullseye. Take the W.

Not only is starting at the goal and working backwards a more accurate approach, it's also easier to explain to the interviewer or client. By showing them your methodology in a step-by-step fashion, you're demonstrating clarity of thinking and a client-friendly approach. Plus, it reduces errors. When you know what you're solving for, it's much easier to keep the numbers straight and avoid mistakes.

So next time you're faced with a market sizing problem, remember: don't start with the population. Instead, start at the goal and work backwards. You'll hit the bullseye every time.

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