Auctions are both art and science. You must impress your guests with outstanding auction items and encourage bidding on those products. How can you increase the profitability of your nonprofit's auction bids? We've broken down the science behind superior bidding. Here are four ways to make more money from your silent auction items while efficiently handling incoming bids.
1. The price is correct
The starting or opening bid is the recommended minimum bid for an auction item. Most auctions do not enable guests to bid below the beginning bid on an item. Setting the appropriate starting bid value is critical to attracting bidders and making money on your auction products. But how do you determine the opening offer for an auction item? The key is to undertake product research!
Determine its fair market value
Find similar things and compare pricing on different websites and in stores, if possible. This helps establish how much your item generally sells for. Bidders seek out discounts at auctions. Set the beginning price below fair market value to demonstrate to your guests the opportunity for a great deal. Setting the beginning offer at 40% of the fair market value or $5, whichever is greater, allows your bidders to win the item for far less than market value. As the bids pour in, your bidders will develop an emotional attachment to the products they're interested in, making them more likely to bid higher than the initial bar they established.
Exceptions to the Rule
Not all auction items are created equally. There are notable exceptions to the concept of opening offers at 40% of fair market value.
Auction items you purchased
The first exemption concerns purchased things. You would like to have auction items provided to your event for free, but this is not always possible. You may need to buy auction items at a discount on occasion to round out your auction offerings. If you're auctioning off a purchased item, remember how much you paid. Set a starting price that is close to the price you paid for the item to guarantee you break even. Because a high price may limit your bidders' interest, aim to only buy products that are significantly less than fair market worth. To avoid losing money, set a reserve price similar to what you bought and offer a "Buy Now" price for a reasonable amount that is close to fair market value and allows you to profit from the item.
2. Set sensible bid increments
With a beginning bid in place, set a bid increment to drive bids. For an item with a known fair market value, attempt to earn 70% of its retail value. Make bidding easier for you and your guests by establishing a bid increment that is low enough to entice bids but high enough to get you to 70% of the item's value in the fewest bids attainable. The typical rule of thumb for silent auctions is to set the bid increment at 10% of the fair market value or $5, whichever is greater. If you put the beginning price at 30%, you can reach 70% in as few as four more bids. Anything above those four bids results in an above-average return on the item.
A blanket 10% bid increment looks nice on paper, however depending on the fair market price, a 10% bid increment may not be a whole number. Rounding in increments of 5, 10, 25, 50, or 100 simplifies the numbers and allows you and your bidders to quickly calculate their next bid.
3. Reserve the authority to establish reserve prices:
Just because your bidders have bid on the products you're selling doesn't mean you have to lose money on an expensive item. If you or an item donor may lose money on an item that did not receive enough bids to break even, set a reserve price to avoid selling an item for considerably less than its worth. The reserve is the minimum bid that your auction item must receive before you transfer ownership to a bidder. Reserve prices are not set for all auction items. However, if your organization spent a considerable amount of money on an item or if you were given a rare piece that collectors would desire, setting a reserve price is the best approach to protect your initial investment. Even if your item doesn't sell for the price you expected, the right buyer can still pay that amount.
Keep track of your results following the deal, paying special attention to goods where the reserve is not fulfilled. While your organization can still award an item to the highest bidder if the reserve is not met, this helps determine whether the item was overpriced or simply the wrong package for your audience. This is crucial knowledge to have when arranging your next auction.
4. Use appropriate tools to manage auction bids
Paper bid papers aren't suitable for all events. Some of your attendees may be too preoccupied with other aspects of your event to notice the products they desire. Depending on your visitors and event structure, virtual or hybrid bidding may be more appropriate for your auction, although some bidders may be uncomfortable bidding on their phones or computers.
Anwar Khan Auctions management platform improves the experience of bidding on auction items for your guests while also saving your nonprofit a significant amount of time and effort in identifying winners and processing payments.
Conclusion
Learn the ins and outs of auction bidding. Gaining a grasp of an item’s fair market value makes making a reasonable starting bid and bid increment much easier. Keep a 70% return on an item's value in mind, and you can achieve that goal in as few as four bids. For high-value items, use your best judgment to determine the beginning bid and increment. Set reserve prices to avoid losing money on large-ticket items. Anwar Khan Auctions offers invaluable advice for mastering the art of bidding successfully. Their guidance encompasses crucial steps such as diligent research, establishing a budget, maintaining confidence, making decisive moves, and being mindful of time constraints.
