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Estimationstandard
Estimate the annual revenue of a busy coffee shop in a downtown area.
How to approach it
Build it bottom-up from customers per hour and average ticket, split by time of day, because a morning rush looks nothing like 3 p.m.
How a strong answer opens
“I'll build it bottom-up from customers per hour and average ticket, split by time of day, because the morning rush looks nothing like 3 p.m.”
Outline of a strong answer
Try answering out loud for a few minutes before you open this.
- Clarify: one location, independent or chain, open hours
- Split the day into rush, steady and slow periods
- Estimate customers per hour in each period
- Estimate average spend per customer
- Daily revenue x days open per year
- Sanity-check with capacity: how many orders a barista team can make per hour
Where this question usually goes wrong
Using one flat customers-per-hour figure all day, which overstates slow hours and blurs the rush where most revenue comes from.
Learn the method
Top-down and bottom-up in Module 3, Estimation.
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