The Situation: The client is a private equity firm looking to invest in an eyecare accessories company that recently acquired a company that makes prescription sports safety glasses. We are looking at whether the acquisition of this company represents a good growth opportunity.

The interviewer poses the Question: What is the size of the market for sports safety glasses in the United States and does the recent acquisition of the sports safety glass company represent a good growth opportunity for the target?
At this point the interviewee should be thinking about any clarifying questions that might help answer the question. Some potential clarifying questions to consider: What sports have the need for such a product? What sports do not need this product?

Now the interviewee needs to develop a structure to help answer the question. When possible the structure should be laid out on a piece of paper to avoid confusion/errors. Below is one structure to answer this question.

Approach: Assume 300 million people in the U.S. You could approach from a vision correction slice first or a sports participant first

• Let’s distribute the population evenly across age cohorts:
  • 0-20 = 75 million
  • 21-40= 75 million 
  • 41-60= 75 million 
  • 61-80=75 million

Note: The above are basic assumptions; you could choose a different distribution accounting for the Baby Boom generation, etc. which demonstrates a more nuanced approach. Also you are excluding a small portion of the population above the age of 80 and may want to account for this some way.

• Next you can take a view for each cohort as to how many have a vision correction need. You could further focus on those that wear glasses as opposed to contact lenses which we will assume would not need this product:
  • 0-20 – youngest cohort, would assume fairly healthy so vision correction would be a small %. Let’s assume 20% (you could draw on your own childhood experiences and think of a grade school or high school classroom to assist in your assumption) so we have 15 million people of which we will assume most would prefer contact lenses so only 33% wear glasses or ~5 million
  • 21-40 - this cohort is the heart of the workforce and vision is starting to decline during these years so we expect a higher percentage. Let’s assume 40% which equals 30 million people but many prefer contact lenses, let’s assume 40% wear glasses or 12 million
  • 41-60 – this cohort is seeing an upsurge in vision correction needs as they naturally age, so let’s assume 50% which equals 37.5 million need vision correction and these people see glasses as easier to handle so we will assume 75% wear glasses - at this point you may want to round the 37.5 million to 40 million and then take 75% or 30 million
  • 61-80 – this cohort has strong vision correction needs so let’s assume 80% or 60 million have a vision correction need and most prefer glasses. Let’s assume 90% wear glasses or 54 million (remember to try and use assumptions that make the math easy to calculate)
• So now you have a set of numbers regarding glass wearers that you can now slice by sports users. Here is where you could save a great deal of time by asking about what sports need these type of glasses. Many people miss this opportunity and start working on basketball, football and baseball when, for purposes of this case, the three largest sports users of this product are racquetball, squash and cycling
• At this point you can make an assumption that these sports have small populations of participants and can slice off the above numbers with various assumptions such as:
  • 0-20 – small percentage play these sports in this cohort so take 5% or 250,000
  • 21-40 - larger percentage that play these sports in this cohort, let’s say 15% or 1.8 million
  • 41-60 – active participants that may have more time to play but less interest so let’s say 10% or 3 million
  • 61-80 – a very low percentage of this cohort would participate in these sports so let’s say 2% or ~1 million
• Adding these numbers up you get a market size of ~6 million potential users of this product
• Now you should be adding a product lifecycle aspect and let’s assume these glasses are replaced every six years so in any given year the potential market is about 1 million

Note: You have come a long way with this approach – you can demonstrate further creativity by adding an incremental number to represent other sports to arrive at your final market size.

Remember the key question is whether this is a good growth opportunity. Here you should demonstrate your business knowledge by laying out the key drivers to adoption of this product and key threats to this company. Some issues you should highlight to your interviewer are external facing in nature such as trends in eyewear, participation in key sporting activities where this product is used, what is happening with competitors, how is market share changing. In addition, you should highlight internal, company specific issues such as product attributes that make our product superior to other in the market, what are our margins and profitability, what internal capabilities make us feel confident our growth strategy will succeed, e.g., Is the company planning to develop a dedicated salesforce? What synergies can be realized by combining the two companies e.g., better distribution channel?

Conclusion: The bottom line is this last part is the opportunity for you to bring the most relevant business applications to bear on answering the question.