Market sizing is a labeled chain from a defined object to $ / year (or units / year). This page owns one full size. Question types sit on market-sizing questions. Fermi counts without price sit on guesstimates.
Do not memorize a US-population funnel. Build the chain for this object, write assumptions, then check with a second path.
The steps (always in this order)
- Define the object in a sentence the interviewer repeats back.
- Pick demand-side or supply-side as the main path; save the other for the check.
- Write 4–7 factors with units that cancel to $ / year.
- Table the assumptions (base, low, high) so a challenge hits one cell, not your ego.
- Compute, then sanity-check.
- So-what — size only matters if it changes a decision.
Full size: US outsourced HVAC service for warehouses
Object. Annual US spend on outsourced maintenance and repair of HVAC on warehouse / distribution buildings. Exclude new construction install, exclude owner-employed techs, exclude office HVAC, exclude refrigeration-only cold-storage specialists if the interviewer wants comfort cooling + rooftop units only. We include rooftop packaged units and gas heaters on dry warehouses.
Main path (stock × intensity × price × outsource %).
Factor 1 — warehouse buildings. US warehouse inventory is on the order of 140,000 buildings if you count larger distribution boxes, not every backyard shed. (If the interviewer has 90,000, swap it.) Use 120,000 mid-to-large warehouses as a working stock.
Factor 2 — HVAC “units” per building. A typical 200–400k sq ft DC has 8 rooftop units. Blend small (3) and huge (20): 8 RTUs / warehouse.
120,000 × 8 = 960,000 RTUs.
Factor 3 — service events / RTU / year. Filter changes and two PM visits + 0.4 repairs: ~2.5 billable visits / year (PM can be one contract visit covering the site — be careful). Cleaner: think $ / RTU / year instead of visits. Many contracts are $400–700 per RTU per year for PM + time-and-materials cap. Use $550 / RTU / year as outsourced contract equivalent.
If we use spend per RTU, we can skip visit count. That is legal if we label it.
Factor 4 — outsource share. National 3PLs outsource almost all; some manufacturers have in-house. Use 70% of spend outsourced.
Arithmetic. 960,000 RTUs × $550 / RTU / year × 0.70 = 960,000 × $385 = $370 million / year.
960 × 385: 960 × 400 = 384,000; minus 960 × 15 = 14,400; $370m.
Assumptions table (challenge one cell, not the whole model)
| Assumption | Base | Low | High | Sensitivity |
|---|---|---|---|---|
| Warehouse buildings | 120,000 | 80,000 | 160,000 | Linear |
| RTUs per building | 8 | 5 | 12 | Linear |
| Outsourced $ / RTU / year | $550 | $350 | $800 | Linear |
| Outsource % | 70% | 50% | 85% | Linear |
| Implied TAM | ~$370m | ~$140m | ~$1.0bn | Order-of-magnitude band |
The honest answer is a few hundred million dollars, not $370,000,000.00. For a “should we enter” decision, $0.4bn vs $4bn vs $40bn is what matters. We are in hundreds of millions, not tens of billions.
Top-down check (supply / contractor)
US HVAC service is a large trade. Warehouse is a slice of commercial. Commercial HVAC service (all buildings) might be tens of billions. Warehouses are a small share of commercial floor stock. If warehouse is ~5–8% of commercial HVAC service, and commercial service were ~$15bn, warehouse would be ~$0.8–1.2bn including in-house. Outsourced 70% → ~$0.6–0.8bn. Our bottom-up $0.37bn is the same order, a bit conservative (maybe RTUs/building or $/RTU low). Do not average 0.37 and 0.7 into fake precision. Say $0.4–0.8bn.
If bottom-up had said $12bn, the check would have killed it: that would be most of commercial HVAC, not warehouses.
When not to run a full size
The case gave you the TAM on page 2. Use it.
The decision is a 2% price cut. You need elasticity and contribution, not TAM. See pricing.
You cannot define the object in one sentence. Stop and define. “HVAC” without warehouse vs office is two markets.
The mistake unique to step-by-step sizing
A chain that does not cancel to $ / year. People × % × $ without “per year” is a stock of wallets. Visits without price is volume. This page’s unique fail is skipping the assumptions table, so when the interviewer changes “RTUs per building to 5,” you recompute from scratch instead of scaling $370m × 5/8.
Second unique fail: presenting the base as exact. The table is the answer.
What to say while you write
“I will size outsourced US warehouse HVAC service in dollars per year: buildings × RTUs × contract dollars per RTU × outsource share. I will table assumptions and check against a commercial HVAC slice.”
Then fill the table. Then the band. Then so-what: a $370m pond is a niche specialty, not a platform TAM — entry is a tuck-in story, not a national land grab.
Run a size with the prompt closed
Do not reuse this warehouse chain. Timed drills force a new object and a new table.