Auction Math

Auction math works for every auction size, will make your planning easier, and reduce auction committee stress. Once you understand what’s required for a successful auction—one that meets or exceeds its revenue goal—it’s simple to set your procurement goals and define your event budget.

The first step is to know your revenue goal. Every auction math formula comes from that number. Next, determine where your auction revenue will come from, and how much you can expect from each revenue-generating category. Keep these percentages in mind:
  • Live auctions generate 66% of the income from your event.
  • Silent auctions generate the remaining 34% of auction revenue.
How many items do you need? Use these rules of thumb:
  • Live auction items will yield 75% of the items’ actual value.
  • Silent auction items will yield 50% of the items’ actual value.
With these rules of thumb, you can determine the total auction item value. For example, if your fundraising goal is $50,000, this is what you need to realize from your live and silent auctions:
  • Live Auction Revenue Needed: $50,000 x .66 = $33,000
  • Live Auction Item Value Needed: $50,000 x .34 = $17,000
Knowing the dollar amount needed from each auction item category will enable you to determine the total value of the items you need to procure:
  • Live Auction Item Value Needed: $33,000 x 1.75 = $57,750
  • Silent Auction Item Value Needed: $17,000 x 2 = $34,000
  • Total Item Value Needed: $91,750

Since item value is key to your auction math formula, a key auction math rule is to accurately assign value to your auction items. Auction item value should come from the item donor. Question their valuation? Look online for similar items by using a comparison shipping site like Bizrate, PriceGrabber, or MySimon, among others, to get an accurate value.

By using these formulas, the additional fundraising efforts at your event, like special appeals, can be the icing on your revenue cake. You can also have an online auction before or after your event to encourage bidding from donors that cannot attend the event.

The next step in ensuring you meet your auction revenue goal is to acquire an appropriate number of event attendees in the right spending mix. Bidding that results in high purchase prices requires a minimum of 150 to 200 people. Larger numbers of bidders gives you a larger pool of people who may want an auction item, resulting in more bidding on each item, driving the purchase price higher. Also, the higher the dollar amount of items, the more bidders you will need. For example, if your items ranged in value from $30 to $50,000, you’d need 200 attendees to get a successful auction. However, if your item value range is $75-100,000 you will need at least 300 to 400 people.

The other, more sensitive issue, is the ability and willingness of attendees to purchase the items you’ve procured. It makes no sense to have an auction with $4000 cruises, $1000 golf get-away packages, and $2000 artwork if there is no one in the audience who can afford to purchase them. Matching the audience to the items is critical to reaching your revenue goal in the live and silent auctions.

Consider the date and time of the event. Avoid holiday weekends unless your auction is an integral part of a holiday celebration or activity. Also bear in mind religious holidays.

Once you pick a date, find a location immediately. The best venues go first, and a great venue will attract more guests. The location needs to be easy to find and get to, with plenty of available parking. The facility at the location needs to be large enough to comfortably accommodate the high end of your attendance estimate – a crowded event is annoying rather than fun. You’ll also need room to set up tables you’re your silent and live auction items so your guests can comfortably move around the tables as they view the items.

Your venue should also have room for the catering and serving staff to move around without bothering guests. It should provide room for your volunteer auction runners to get items from the silent and live auction tables to the auctioneer or the check-out area easily and without disrupting guests. It should also allow a good sound and lighting system set-up. And finally, while not critical, if the venue can be cleverly decorated to align with your event theme, it’s a plus and adds to the fun.

Many venues will provide the event space for free or for a nominal fee if you use their catering service and your final catering bill exceeds the minimum in your contract. Read the contract carefully so you understand the tradeoffs and contingencies as you plan your event. Be sure to understand the total cost for the event, including food and beverage charges, taxes, gratuities, room rental charges, cleaning fees, etc., that can add up fast and reduce your net revenue. Consider dividing all venue charges by the number of expected attendees and using that amount as your ticket price. Remember that bidding at the auction is not required of attendees and that at the very least your attendees will get a great evening out.