Analysis Structure Overall

#5 – Sheep Auction
Bain & Co. Medium Medium Medium

Case Tracker Case Stem

It is early 2006. Your client is looking at investing a significant amount of money to create an
Industry Other
online auction company that facilitates sheep sales from producers to large customers.

They will only do this if they could make roughly $10M annual profit in 5 years, and they have
Type Opportunity Assessment
enlisted your help in determining their go/no-go decision.

Leader Interviewee

Market sizing,
Concepts
profitability

Fit/Behavioural Question Interviewer Guidance

What did you like most about your last This is an exhibit heavy case. Candidate should recognize that they need to size the market to
job? determine if the profitability objective can be met

What did you like least about your last
job?
What is an important issue facing your
previous industry?
Interviewer should push the candidate to think about what data they need to drive the case
forward, and should show an exhibit only after candidate asks for the information (show
exhibits one at a time as opposed to all at once)
When candidate calculates the profitability in 5 years time, they should recognize that they
have not taken into account our client’s estimated market share (assumes 100% penetration).
As the total profits calculated ($6.6M) already falls short on the $10M target, an insightful
candidate can note that in actuality that the gap between estimated profits and target profits
may be larger than calculated.
 #5 – Sheep Auction (II of VII)

Guidance for interviewer and information provided upon request

Only provide each piece of information after being asked for it specifically by the candidate.

Exhibits:
1. Overall market size (in lbs. of sheep)
2. Sheep prices (in $/lb.)
3. Sheep sold at auction vs. contract
Interviewer guidance: Contract is a different type of selling than Auction. Auction component includes both online and traditional
selling models as described in Exhibit 2.
4. Farmers (producers) who use computers

Additional detail:
• All large processors (buyers) use computers
• Sales via auction and contract will not migrate – there is no way to steal share between channels

Follow up questions for candidate upon completion of the calculation (which should in total fall short of $10M)

• What would you do to achieve the $10M level?

• If launched, how would you market this product?

#5 – Sheep Auction (III of VII)

Exhibit 1
#5 – Sheep Auction (IV of VII)

Exhibit 2
#5 – Sheep Auction (V of VII)

Exhibit 3
#5 – Sheep Auction (VI of VII)

Exhibit 4
 #5 – Sheep Auction (VII of VII)

Expected calculation (approximate)

**Use 2010 numbers to show 5-year ‘maturity’ and steady-state for profitability. This model assumes a 100% penetration. Candidate
should recognize that penetration is irrelevant given overall profitability**

400M x 50% x 33% x $10 = $6.66M Profit

lbs sheep auctioned online farmers Profit per 100lbs sold Less than $10M

Based on the 2010 figures, I would not recommend that the client move forward with the investment as it
would not provide the required $10M annual profit return 5 years from now. Excellent candidate will
recognize that at least 50% of farmers must be online in order to obtain $10M profit.

Additional questions for the candidate, time permitting:

1. If they’re really determined to make this investment work, what would you do to reach the $10M profit?
2. If this product were already launched, how would you choose to market it?

Sample answers:
Recommendation 1.
• Train farmers and sheep producers on computer use
• Provide central computer locations near farm sites to facilitate farmer interactions
• Expand the auction tool to other animals
2.
• Trade magazine advertisements
• Door to door sales & training reps
• Commission farmers as representatives
• Relationships with sheep processors