Frameworks & Approach
Each card follows the same shape: what it is, when to use it and one worked example. The “when to use” column matters most, because picking the right tool is what separates a clean answer from a messy one.
Top-down vs. bottom-up
What it is
Top-down starts from a large known total and narrows it with ratios. Bottom-up starts from the smallest countable unit (a household, a store, a seat) and builds up.
When to use it
Use top-down when a reliable big number exists (national sales, total population) and you need a quick share. Use bottom-up when the drivers are local and observable, or when the interviewer wants to see granular logic. Doing both is the strongest sanity check.
Worked example: number of private cars in Bengaluru
Top-down
India has ~30 cars per 1,000 people, so about 43 M cars. Bengaluru has ~1% of India’s people but far higher incomes, so assume ~5% of the cars.
43 M × 5% ≈ 2.2 M cars
Bottom-up
14 M people ÷ 4 per household = 3.5 M households.
High income 15% × 90% own × 1.5 cars = 0.7 M
Middle 45% × 40% own × 1 car = 0.63 M
Low 40% × 5% own × 1 car = 0.07 M
Add ~15% for cabs and fleets: ~1.6 M cars
The two answers are the same order of magnitude. Next, explain the gap: is Bengaluru’s 5% share too high, or is middle-income ownership too low?
MECE
What it is
Mutually exclusive, collectively exhaustive. Split the problem into segments that don’t overlap (so nothing is counted twice) and that together cover everything (so nothing is missed).
When to use it
Every time you build a tree. Check each level of segmentation against both tests before you put numbers on it. The easiest checks are splits that add up by construction, such as age bands, urban/rural or buyer type.
Worked example: who buys edible oil in India?
Not MECE
“Vegetarian families, restaurants, North Indian households.” Vegetarian and North Indian households overlap, and food manufacturers are missing entirely.
MECE
By buyer type: households + HoReCa (hotels, restaurants, caterers) + food processors (snacks, bakeries, sweets). Every litre is bought by exactly one of these.
Pareto principle (80/20)
What it is
A small share of units (roughly 20%) often drives most of the outcome (roughly 80%). Model that heavy minority carefully and approximate everyone else with one average.
When to use it
When usage is highly skewed: trading, airline miles, restaurant revenue, B2B customers, social-media posting. It saves time in a time-boxed interview. Say the assumption out loud, since the interviewer may want the full split.
Worked example: daily trades on a broking app with 1 M active users
| Segment | Users | Trades / day | Total |
|---|---|---|---|
| Heavy traders (top 20%) | 200 k | 10 | 2.0 M |
| Everyone else | 800 k | 0.6 | 0.48 M |
| Total | ~2.5 M |
The top 20% produce ~80% of trades, so the answer depends mostly on the “10 trades a day” assumption. That’s the one to defend.
Unit economics
What it is
Work out the economics of one unit (one order, customer, ride or seat), then multiply by volume and subtract fixed costs.
When to use it
For revenue, cost or profit questions about a single business: a café, cloud kitchen, delivery fleet or SaaS product. It also exposes whether the business makes money at all, which is often the follow-up question.
Worked example: monthly profit of a cloud kitchen
| Average order value | ₹400 |
| − Food cost (35%) | ₹140 |
| − Aggregator commission (25%) | ₹100 |
| − Packaging (5%) | ₹20 |
| Contribution per order | ₹140 |
| × 60 orders/day × 30 days | ₹2.52 L |
| − Fixed costs (rent ₹60 k, staff ₹1.2 L, utilities ₹20 k) | ₹2.0 L |
| Monthly profit | ~₹52 k |
Extrapolation
What it is
Project a known current value forward at a steady growth rate.
Y = Y′ × (1 + r)t
Y = future value, Y′ = current known value, r = annual growth rate, t = number of years.
When to use it
For “in 2030” or “in five years” questions, where today’s figure is knowable and the trend is stable. State why the rate holds (policy, falling prices, adoption curve) and note where it might flatten.
Worked example: electric two-wheeler sales in 2030
~1.1 M sold this year, growing 25% a year for 5 years:
1.1 M × 1.255 = 1.1 M × 3.05 ≈ 3.4 M units
Shortcut: with the rule of 72, something growing at 25% doubles roughly every 72 ÷ 25 ≈ 3 years.
Demand-side approach
What it is
Size the market from the buyer’s side: who the target population is, how many of them use the product, how often, and how much each time.
Population × % users × frequency × quantity
When to use it
For market size, revenue and consumption questions where supply is abundant and the limit is how many people want it. Examples: sanitary pads in India, daily Delhi Metro riders, toothpaste sales.
Parameters to consider
- Age
- Income
- Location (urban / rural, tier)
- Gender
- Occupation
- Literacy
- Mobile penetration
- Internet penetration
- Usage frequency
- Household vs individual
Worked example: pressure cookers sold in India per year
| Segment | Households | Own one | Owners | Life | Units / yr |
|---|---|---|---|---|---|
| Urban | 100 M | 90% | 90 M | 7 yrs | ~13 M |
| Rural | 200 M | 50% | 100 M | 10 yrs | 10 M |
| First-time buyers | ~1% of 110 M non-owning households buy each year | ~1 M | |||
| Total | ~24 M | ||||
Supply-side approach
What it is
Size the market from the seller’s side: production capacity, number of outlets or vehicles, throughput per unit of time, and utilisation.
Capacity × throughput × hours × utilisation
When to use it
When the business is supply-constrained: production capacity, delivery or fleet limits, seats and slots, regulation (licences, runway slots) or transport bottlenecks. Examples: Amazon parcels delivered per day, flights out of an airport, limited-edition sneakers resold.
Worked example: orders per day at a quick-commerce dark store
25 riders on shift × 16 operating hours × 3 deliveries per rider per hour (20-minute round trip) × 60% utilisation = ~720 orders a day.
Mini-framework: TAM · SAM · SOM
Example: an online-only CAT prep start-up. TAM = ~3.3 lakh CAT registrants × ₹20 k average spend on preparation = ₹660 Cr. SAM = the ~50% open to online-only coaching = ₹330 Cr. SOM = 5% share in three years = ~₹16.5 Cr.