In your charity auction, setting the minimum starting bid at a low, fair price can help your Nonprofit raise more money per item. Here are some guidelines for setting a minimum bid that will attract and encourage more donors to participate at your next charity auction while earning plenty of profit for your cause.
1. Determine Fair Market Value
In order to set a reasonable starting bid for each of your charity auction items, you first have to determine each item's Fair Market Value, or FMV.
Some items are easy to price, like a $25 certificate to a restaurant in town; the FMV for this item is obviously $25. Similarly, a pair of Beats headphones will retail for $300, making that the FMV. Most tangible charity auction items will have a price that can be found by doing a little research online.
Even collectibles and sports memorabilia have a FMV that can be determined by doing a few online searches to find out what other people are paying. A quick search on eBay - one of the biggest online auction forums - can help you determine the fair market value of almost anything.
Sometimes there is no precedent for determining the FMV for an item. This is usually the case for intangible or unusual charity auction items like unique experiences or exclusive access. Examples include dinner with the Mayor or the opportunity to be grand marshals at the next community parade.
In these cases, you have to make an educated guess as to what you think your audience is going to be willing to pay—not what you are willing to pay. Try to judge your donors based on their demographics, income and relative interest in similar items at previous events.
If you are still struggling to come up with a number, give a few of your top donors a friendly call to ask for their input. They will appreciate you involving them and it's a good excuse to chat about the event and confirm their attendance.
2. Set the Starting Bid
According to consignment auction item provider Charity Fundraising, live auctions typically yield 75% of the item's actual value, while silent auctions yield just 50%. When setting your starting bid, you are setting a price that will hopefully allow you to yield the maximum possible profit.
Many industry experts say the best practice is to set minimum bids at 30-40% of the FMV. Others think 20-25% percent of the FMV is ideal, as the lower price could garner more interest. The logic here is that once invested in the bidding process, donors who are attracted to the lower price become emotionally attached to the item and are then willing to spend more money as the process continues.
The minimum bid price is up to the discretion of both your organization and fundraising auctioneer. Keep in mind that a high starting price can discourage bidders from participating, so it's typically better to err on the side of caution and go with a lower starting bid.
One strategy is to separate the charity auction items by value and uniqueness. For example, you could set the minimum bid for more exciting items at 40% of FMV and just 20% for other items.
Using consignment items
If you're hosting a live auction with no-risk consignment items, like Winspire's unique travel Experiences, you'll want to adopt a different approach. Consignment items come with a base price for the Nonprofit, which is the cost for your organization to sell the package. To secure a significant profit, it's recommended that you start bidding at 20% above the Nonprofit cost.
These items are your big-ticket items, ones that provide the "wow" factor at your event. Setting a higher price raises the perceived value and increases interest among those who can afford to participate in the live auction and make high bids.
Here at Winspire, it's our privilege to offer free fundraising event consultation to any nonprofit! Schedule a call with your designated Fundraising Specialist below to brainstorm strategies to maximize revenue at your next fundraiser.
3. Set Minimum Bid Increments
After you've set minimum bids where necessary, the minimum bid increment can also impact how well an auction item performs. In most cases, it is considered a good idea to set the minimum bid increment at 10% of the starting bid. For pricier items, it may be a good idea to lower the percentage so the price won't jump as drastically between each bid.
The minimum starting bid you set can make all the difference for an item's performance. Be reasonable and fair when pricing your items, and don't be afraid to set the starting bid on the low side of the spectrum.
For more tips to maximize the effectiveness of your silent auction, click below to download our FREE pocket-sized handbook all about Silent Auction (plus live auction and sponsorship) best practices.