You’ve gathered up fantastic items for your silent auction that you know will get the crowd bidding. For some items you no doubt have the Fair Market Value (FMV) assigned by the people or businesses who donated them: after all, the local vintner knows exactly how much of their product went into that amazing wine gift basket. However, for other items, you might be in the dark: perhaps you’re afraid the donor over-valued the item, or, even if you have a FMV, you might be wondering where to start the bidding. Happily, we can help you learn how to price silent auctions items for a successful fundraising auction.
There are common methods to settling upon a FMV, setting your opening bid price, and deciding upon bid increments. Generally, you want to start the bidding at a number that makes bidders feel like they might just get a deal on the item. But you also want to get your money’s worth, so to speak, out of a strong bidding war. Below are tips for finding middle ground between those numbers.
How to Decide on a Fair Market Value
The FMV of a silent auction item is generally agreed upon by both the donor and the seller. If you can’t agree, or if your donor is in the wind, it’s time to do a little research. Some items, like a Bose bluetooth speaker or a gift certificate to a local spa, are easy to set a FMV on as they have retail prices associated with them already.
Other items, like antiques or collectibles, might be more difficult to price, especially if there’s anything special about them, like a celebrity signature or unique provenance. In these instances, we suggest you research similar items up for auction: even if they’ve been sold there’s often an online record, not to mention eBay.
Sometimes the auction items that are most difficult to price are also your biggest items. Travel packages, weekend spa getaways, a kitchen reno, or other services can be a big draw to your auction, but also difficult to price out. You must rely on the help of the businesses doing the donating to determine a fair market value. This is just your first step, however.
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How to Set an Opening Bid
A number you’ll see referenced often is that the opening bid should be 30-40% of the item’s FMV. This is meant to set the bar low enough that it will encourage thriftier bidders to participate and thus drive the price up much higher in the long run. But you must know your audience.
If your event attendees are the upper crust of your town, you should include a variety of auction items at different price points, but you can definitely include big ticket items with slightly higher opening bids (closer to the 40% end of that spectrum, or beyond if you think it will bear fruit for you). If, however, your event is open to the public, you’ll want to make even the most impressive prizes’ opening bids accessible to as many people as possible. More bids will often result in a higher selling price, even if you start low: that’s the power of competition.
Be wary of setting your opening bid price too high. This is a common mistake that can turn off potential bidders who automatically think “That’s already outside my price range.” If bidding is sluggish on your most impressive auction items, this might be why. On the other hand, if you have an item that you know is in high demand and has limited quantities, you should consider a higher opening bid, perhaps even as high as 50% of its FMV.
For example, on campus parking spots might be scarce and thus extremely appealing to your audience of faculty, staff, and students. When you know your audience and their interest in your item, you’ll be able to set a winning opening bid price.
How to Set Bid Increments
In the days of paper bid sheets and silent auctions that took place during a gala dinner, folks might not have wanted to get up and check on that item they bid on more than a few times—even if they really wanted it. It made sense then to set bids at larger increments, so people could feel confident that their bid would stay top dog for a while.
Now, however, bidding is often done on smartphones or, in the case of totally virtual auctions, on their tablets or desktop at home. These days you should make your bid increments as small as possible. This encourages more timid bidders to place bids: they might get that item for just $20 or $50 dollars more instead of $100. And more bids drives the price higher which means more money goes to your cause at the close of your auction.
Broadly speaking these smaller bid increments should be about 10% of the item’s FMV, rounded to a whole number. There are some exceptions to this however. If your grand prize has a FMV of $5,000 you don’t want to keep the bid increments at 10%: that’s $500! Instead, lower it to $50 or $100 increments. Conversely, if we revisit the example of the parking spot from the previous section, you might have an opportunity to increase your bid increments, especially if you’ve auctioned off a hot item like this before. Again, this number comes down to knowing your audience and what lengths they’re willing to go to in order to win.
Consider Turning on “Buy It Now”
Buy It Now is a great option for silent auctions, especially purely virtual ones. This allows a buyer to scoop up a prize for more than its FMV, without going through the hassle of bidding. Buy It Now is a great option for fundraisers on a tight deadline: it’s possible Buy It Now items will sell long before their bidding period expires. Additionally, since you set the Buy It Now price, you can guarantee a solid profit from the item. But you need to, again, know your audience and how much they’ll desire this item.
A good rule to follow is setting your Buy It Now price at 150-200% higher than the item’s FMV. It should be high enough that regular bids would never hit it. That means that you should not use Buy It Now on items you’ve seen start bidding wars in the past. Similarly, don’t set a Buy It Now price on sentimental items, one-of-a-kind items, or unique experiences. Buy It Now is great for those gift certificates to local favorite restaurants, gift baskets of swag, and items that are fairly easy to get but that people will still be pleased to nab in the name of a great cause.
Ready, Set, Bid
Now that you have a handle on how to set opening bids and bid increments you can go forth and start your own charity auction. Don’t be nervous: it’s okay if you don’t get each price or increment exactly right, especially if this is your first time pricing silent auction items. You’ll get valuable data about how well or not so well things sell and you’ll have an even better handle on things at the next fundraising auction you help organize. Make it a yearly tradition and soon you’ll be a pro at knowing your audience and pricing your auction items perfectly to make the most money for your cause.