How to answer a guesstimate question, with an example
A step-by-step method for estimating a number you cannot look up, with a worked example whose figures are assumptions, not data.
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A guesstimate question asks you to estimate something you cannot look up, such as how many cups of tea are sold in a town in a day. Students find these frightening because they feel like a test of knowledge. They are really a test of how you reason when you do not know the answer.
Guesstimates appear in some consulting, strategy and analyst interviews, and in some business-school and campus rounds. Many employers never use them. This guide gives a five-step method and a worked example. Every figure in the example is an assumption made up for practice. None of them is a statistic.
What you should come away with
- The interviewer is judging your method, not whether you hit the right number
- Clarify the question before you start: what, where, when and for whom
- Break the problem into pieces you can estimate from everyday experience
- Say every assumption aloud, and keep each one reasonable
- Use round numbers that are easy to multiply, and say you are rounding
- Check the answer by a second route or against common sense
Start with the first step, which is to clarify the question. Before you calculate anything, make sure you know what you are estimating. 'How many cups of tea are sold in a town in a day?' leaves several things open. Which town, and how big? Cups sold in shops and stalls only, or also made at home? One day, or a typical day? Ask one or two short questions, and if the interviewer says 'you decide', state your choice and move on. Interviewers like candidates who set the scope, because it shows control of the problem.
The second step is to choose an approach and say it aloud. There are two common approaches. In a top-down approach you start from a large, known figure and narrow it down. In a bottom-up approach you start from a single unit, such as one shop, and build up to the total. For a first estimate either is fine. For the best answer, use one to get the number and the other to check it.
The third step is to break the problem into pieces and attach an assumption to each. Make each assumption something you could reasonably defend from daily life. Write the structure down before you fill in figures, so the interviewer can follow your logic.
Here is a worked example for practice, using a made-up town. Assume the town has 5,00,000 people. This is an assumption chosen for convenience, not a real figure. Assume that 70 per cent of them are adults, which gives 3,50,000. Assume that one adult in four buys tea outside the home on a typical day. That gives 87,500 people. Assume each of them buys two cups on average. That gives about 1,75,000 cups a day, which we can call roughly 1.75 lakh.
The fourth step is to do the arithmetic cleanly. Keep numbers round, and narrate what you are doing: 'five lakh times seventy per cent is three and a half lakh'. If you make a slip, say so and correct it calmly. Interviewers know arithmetic under pressure goes wrong, and they care about how you recover. Practise multiplying and dividing by ten, by five and by twenty-five in your head, because a few of these shortcuts cover most guesstimates.
The fifth step is to sense-check, which is the step students most often skip. Try a different route to the same answer. For example, work bottom-up. Assume the town has 500 tea stalls and small cafes, and that each sells about 300 cups a day. That gives 1,50,000 cups. This is close to the first estimate, since both are in the region of one and a half to one and three quarter lakh. When two routes agree roughly, say so, and say that you are reasonably comfortable. If they differ greatly, say which assumption is the weakest and what you would check. You can also ask whether the answer is plausible: does it mean each adult in the town drinks half a cup a day from a shop? Does that sound right for a place where many people also make tea at home?
Notice what has not happened here. At no point did anybody need to know the real figure. The value of the answer lies in the structure: a clear scope, a sensible breakdown, assumptions stated aloud and a check. If an interviewer challenges an assumption, take it as a chance to adjust, not to defend. Say 'if only one adult in six buys tea outside, the total drops to about one lakh, so the answer is sensitive to that figure'. Showing that you know which assumption matters most is a strong signal.
A few habits will help. Start from what you know. If you are asked about the number of petrol pumps in a city, think about how far you travel before you see one, and about how many vehicles each can serve. Segment when different groups behave differently, such as office-goers and students. Avoid false precision: a final answer of 1,75,000 cups is better presented as 'about 1.5 to 2 lakh'. And finish with a short statement of the result and the biggest uncertainty, in one or two sentences.
To practise, take one everyday question each day for ten days: how many auto-rickshaws in your city, how many mobile recharges in a day, how many students in your district buy a notebook in June. Spend ten minutes on each, aloud, and write down your breakdown. Then ask a friend to play the interviewer and challenge one assumption. Within two weeks the method becomes automatic.
Finally, keep it in proportion. If the roles you want do not use guesstimates, a short amount of practice is enough. The habits behind them, which are structuring a problem, stating assumptions and checking your answer, are useful in any business job.