If you hold a fundraising gala with an auction component invariably you encounter unique items that are difficult to value. Common examples include fine bottles of wine, a vehicle, or luxury trip. All seem like solid winners at first glance. What could go wrong? Imagine three magnums of library wine worth $5,000 being auctioned for $500. Who makes the call to the winery to share the news. Or having the winning bidder of the car contact your organization the next day and express their desire to have the car in a different color, additional features added, and delivered many states away. The luxury trip that includes airfare and a stay in a major European city suddenly consumes days of staff time as they work desperately to book the hotel and flights during the height of tourist season when the winning bidder decides travel during the blackout dates. Are you going to say ‘no’ to the donor who contributed ten thousand dollars?
A couple questions I have found helpful when evaluating an auction lot that may appeal to a limited market.
- What is the purpose of the auction?
- Will the lot help achieve the auction’s purpose?
- Will the auction item generate buzz or a marketing message that will draw significant attention? Tickets to the last taping of Oprah’s talk show might make your cause the talk of the state.
- What does the sponsor/contributor of the auction lot need in return? Marketing, seats to the auction, personal recognition, a chance to speak at the auction, future business transactions, a guaranteed reserve.
- Is there a reserve (or cost) to the item? What will the organization net from the lot? Is the lot worth having the winning bidder contribute a significant sum for the return on investment (i.e. cause pays $40,000 for a vehicle, winning bid is $55,000, net of $15,000 to the organization)? Is there a more effective way to raise the same amount of money?
- If the winning bidder of the unique lot does not participate in bidding on other lots and skips contributing to the fund-a-need, does the organization meet its revenue goal?
- Are there at least two individuals committed to bidding aggressively on a the lot? One person can tell you that they are willing to bid to a specific ceiling but without competition they are not going to bid against themselves.
- Does the organization maintain the resources to manage or leverage the requests for exchanges or refunds? Do you have the appropriate restrictions listed in the auction catalog and a person of standing who can enforce the fine print?
I had the fortune of being involved with a leading charitable auction that was generously supported by a leading luxury car manufacture. Each year we would announce that the car you see outside the auction tent is the car you get (insert Robin William’s speech about the three wishes as the Genie in Aladdin, “no exception”). Within seventy-two hours of the auction each year we would receive a call from the winning bidder asking for assistance in trading or altering the features of the vehicle they had won. We were in the car business with no automobile showroom experience.