Auction Math

Auction Math

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Auction math works for every auction size, makes your planning easier, and reduces 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 starts with this 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 guidelines, you can determine the total auction item value. For example, if your fundraising goal is $50,000, you will need to generate the following revenue from your live and silent auctions:

  • Live Auction: $50,000 x 0.66 = $33,000
  • Silent Auction: $50,000 x 0.34 = $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 ÷ 0.75 = $44,000
  • Silent Auction Item Value Needed: $17,000 ÷ 0.5 = $34,000
  • Total Item Value Needed: $78,000

Since item value is key to your auction math formula, it’s important to accurately assess the value of your auction items. Auction item value generally comes from the item donor. If you question their valuation, look online for similar items by using a comparison shopping 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 who cannot attend the event.

The next step in ensuring you meet your auction revenue goal is to gather an appropriate number of event attendees in the right spending mix. If you want your auction items to sell for high prices, you’ll need a minimum of 150 to 200 people. The larger number of bidders gives you a larger pool of people who want an auction item, resulting in more bidding, which drives the purchase price higher. Also, the higher the dollar amount for each item, the more bidders you’ll need. For example, if your items range in value from $30 to $50,000, you’ll need at least 200 attendees to create a successful auction. However, if your item value range is $75 to $100,000 you’ll 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 both 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, with plenty of available parking. The facility 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 for 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 without disrupting guests. It should also allow a good sound and lighting system set-up. And finally, while not critical, cleverly decorating the venue to align with your event theme is 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 fee specified 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. These 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, bidding at the auction is not required of attendees and at the very least your attendees will get a great evening out.

Download your PDF copy here.

6 Responses to “Auction Math”

  1. I am a newly licensed auctioneer in the state of Mississippi.I’m very interested in learning more about auction math or auction anything.I want to start up my own auction and I need to know everything that I can possibly know about how to really do it.Can you help?

    • Debby Roth-Bush

      Scott – our auction math is focused at a benefit auction. The dollar value needed to realize the financial goal of a nonprofit. All of our solutions are around helping the nonprofit and our auctioneer partners reach and exceed the fundraising goal for an event. For commercial help, being a part of your state association or the National Auctioneers Association will be really helpful. Hope you’ll stop by and say hi if you make it to Conference and Show in Texas this year.

  2. Hi,

    I am working in an auction house. Currently this auction house is new and we will have our first auction this end of this year. My boss assigned me how to make or generate an auction number? is there any standard rule to follow? because we will have different sales next year.

    I hope you could help me.


    • Debby Roth-Bush

      the National Auctioneers Association should have some resources for you – both on where you can get bid paddles, software for commercial auctions (ours is for benefit auctions) Generally for commercial auctions, an auction house scans the license of the bidder and swipes the credit card thru a reader, then assigns the bidder number within the software. Any winning bids are then recorded by bid number and it’s easy for you to generate an invoice and charge the customer. This way they cannot leave without paying you. NAA has tons of information and partners that market commercial auction software that should be available on their website. Good luck