Disclaimer: Originally published in October 2017. It is being republished since it still remains an interesting topic till today. 


As per the definition of Wikipedia:

A guesstimate is defined as an estimate made without using adequate or complete information or an estimate based on a mixture of guesswork and calculation.

The word is a blend of guess and estimate. Guesstimate is not knowing about the accurate number but the approach that is followed.

It’s not about accuracy but logic. There is nothing such as a right or a wrong approach, what matters is a feasible and a structured approach. If a number is hard to get, you guesstimate.

A five-step approach-

  1. Clarifications- It’s always better to clarify and make assumptions regarding certain things.
  2. Breaking down the problem- Breaking down the existing unit into smaller units and then preparing a consolidated answer. Identify the mathematical factors behind the problem.
  3. Consolidating- It’s always preferable to use round figures. This provides simplicity in calculations.
  4. Sanity Check- Before submitting the final answer, it is always advisable to check that the answer isn’t a humongous one or too small which is far away from reality.
  5. Try to use variables like: the population of India, population distribution by age, average family size, population distribution by income, rural: urban population ratio, sex ratio.

In the current article, we would only look into the demand side of things rather than the supply side. By demand, I mean, we will solve the problem by thinking from a consumer point of view and not a supplier.

Let us get the ball rolling and solve some mind-boggling guesstimates:


Also read: Here Are Some Smart Investment Moves To Secure You Financially 


1. Estimate the number of Godrej air conditioners in Delhi

Solution:

Let us assume that the population of Delhi is 2 crore. Now, we will divide the population on the basis of income-

– Below Poverty Line (30%- 60 lacs)

– Lower Middle Class (20%- 40lacs)

– Upper Middle Class (30%- 60lacs)

– High Income Group (20%- 40lacs)

It is safe to assume that none of the BPL people will own an AC.

Out of the 20% in the lower middle class, we have assumed only 30% will own an AC- 12 lacs

Out of the 30% Upper Middle class, we have assumed all of them will own AC- 60lacs

Out of the 20% in the high-income group- all of them will own an AC- 40lacs.

Lower middle income- 1 AC per house – 12 lacs.

Upper middle income- 10% will have 3 ACs in each house. Remaining 90% will have 2 ACs per house. ( 18 lacs+ 1 crore)

High-Income group- 4 ACs per house. (100%)- 160 lacs.

Since Godrej is a low-end product, only 40%  from LMC, 15% from UML, 10% from the high-income groups will buy Godrej air conditioners.

4 lacs+ 45 lacs+ 16lacs= 65lacs.

Since the avg family size of a family is 4, we divide the total number of Godrej air conditioners by 4.

Hence, the final answer is 16.25 lacs.

2. Estimate the number of people traveling in UBER taxi on a weekday in Delhi

Solution:

Let us assume that the population of Delhi is 2crore.

Now, we will divide the population on the basis of daily commuters and non-daily commuters:

Daily Commuters (60%-1.2Cr)

Daily Commuters (60%-1.2Cr)

Non-Daily Commuters (40%-80Lacs)

Non-Daily Commuters (40%-80Lacs)

Let’s start with Daily Commuters first-

In Delhi, a person gets few options to travel and they are:

  • Own Vehicle (30%-36Lacs)
  • DTC buses (10%-12Lacs)
  • Metro (40%-48Lacs)
  • Taxi/Auto (20%-24Lacs)

Now, amongst 24 Lacs commuters of Taxi and autos, approximately 40% of them will be using taxis i.e. 9,60,000.

Further dividing, an individual has an option out of OLA, UBER (since they are the leading companies) and others. So,

  • OLA (40%- 3,84,000)
  • UBER (50%-4,80,000)
  • Others (10%-96,000)

TOTAL-4,80,000

Non- Daily Commuters:

  • Housewives (40%-32Lacs)
  • Up to 18 (20%-16Lacs)
  • 18-25 (10%-8Lacs)
  • 60+ (30%-24Lacs)

On that particular day, only a percentage of people will be traveling and be using Taxi. So, assuming:

  • Housewives (5%-1.6Lacs)
  • Up to 18 (10%-1.6Lacs)
  • 18-25 (5%-0.8Lacs)
  • 60+ (10%- 2.4Lacs)

Amongst them how many use UBER:

  • Housewives (60%-96,000)
  • Up to 18 (50%-80,000)
  • 18-25 (50%-20,000)
  • 60+ (50%- 1,20,000)

TOTAL-3,16,000

No.OF USERS = 7,96,000

If you want to know more about guesstimates, do let me know.­­


Image Credits: Google Images

Sources: Wikipedia


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