Estimating your assets value:

Typically, one of the first questions a business owner will ask me is, “how much will the assets bring at an auction”. After taking the time to review the assets, the auctioneer should give the client a conservative estimate of the sale based upon his experience and the current market trends. It is important that the company give realistic expectations so the seller can make informed decisions based on their best interest.

Compensation and Expenses:

Is the company you are considering working for you or against you? The agreement you decide may determine this.

A business owner should carefully consider how the auction company is compensated. The most common commission structures include: straight commission, outright purchase of assets, guaranteed base with a split above to both auctioneer and seller, guaranteed base with anything above going to auctioneer or a flat fee structure.

In a straight commission structure, the company is paid an agreed upon percentage of the total sale.

In an outright purchase agreement, the auctioneer simply becomes your end buyer. The company purchases your assets and relocates them. While this can be an option in some unique situations, keep in mind that they will want to purchase your assets at a very reduced price to make a profit at a later date.

In a minimum base guarantee, the auction company guarantees the seller that the auction will generate a minimum amount of sales. Anything above that amount either goes to the auction company or split with the seller. While a seller might feel more comfortable doing an auction knowing that he is guaranteed a minimum amount for his sale, keep in mind that it is the best interest of the auction company to secure a minimum base price as low as possible in order reduce their financial liability to the seller and secure higher compensation for the sale.

In a flat fee structure, the auctioneer agrees to show up for the sale and call the auction. There is no incentive for the auctioneer to get the best prices for your assets. The auction company is compensated regardless of the outcome of your sale.

What is the best option for business owners? In my experience, an agreed upon straight commission structure. This puts the responsibility on the auction company to offer the best outcome for everyone involved. There is an incentive for the auction company to work hard for both parties, set up and run a professional sale, get the highest bid and sell every item on the inventory. Successful auctions translate to a higher bottom line for both the seller and the auction company.

Auction Expenses:

In most auction agreements the expenses to conduct an auction are passed to the seller. If the auction company pays for the expenses, it is simply absorbed in higher commission rates.

All expenses should be agreed upon in advance in a written contract. Typical expenses will include the costs of advertising, labor, legal fees, travel, equipment rentals, security, postage and printing. A reputable auction company will be able to estimate all expenses based upon their experience in previous auctions. An agreement should be actual costs charged as expenses, not an estimated amount.

Advertising is typically the highest cost in conducting an auction. The auction company needs to set up an advertising campaign that will promote the sale to its best advantage and not overspend to simply advertise the auction company.

Once the auction is complete, the auction company should provide a complete breakdown of all expenses to the seller, including copies of receipts within the auction summary report.

Buyer’s Premium:

What is a buyer’s premium? If you attend auctions regularly, you are very familiar with this term. The auction company charges a fee to the buyer when they buy an item at auction.

The buyer’s premium has been around since the 1980′s and is standard auction practice. It was first used by auction houses to help offset costs of running brick and mortar permanent auction facilities. Since then, it has spread to all aspects of the auction industry. It is prominent in online auctions and allows auction companies to cover added expenses incurred from online sales.

It is the responsibility of the auction company to provide clear disclosure of the buyer’s premium to both the buyers and the sellers. Those not familiar with auctions are often taken back by the buyer’s premium. They looked upon it as an under handed way for the auction company to make more money. Reputable auction companies will provide full disclosure within the auction contract, advertisement and bidder registration.

Typically, an auction company will charge online buyers a higher buyer’s premium percentage than those attending an auction in person. Extra fees are incurred with online bidding and are charged accordingly to online buyers. This provides the seller a level playing field for both online buyers and those attending the auction in person. Without the buyer’s premium, there is no way to do this.

Pre-Sales:

We’ve all been there. We’re looking forward to attending an auction only to find that some items were sold prior to the auction date.

As an auctioneer with over thirty-six years of experience, I can honestly state that pre-sales will hurt an auction. When a company decides to liquidate their assets, it is easy to sell off high-end pieces of equipment through online sources, equipment vendors or to other businesses. The seller receives instant cash and avoids paying a commission to an auction company.

Auctioneer’s find themselves appearing to acting in a self-serving capacity when potential clients say they are planning to sell off parts of their inventory prior to an auction. It’s hard not to consider the auctioneer’s commission when they warn you not to pre-sell anything. Yes, the auctioneer wants to earn a commission on those sales but it is more important that the auctioneer protect the sale from potential negative backlash that comes from pre-selling. The buying public knows when an auction has been “cherry picked” prior to the sale and it reflects in their bidding. It becomes a sale of “leftovers” and that impacts prices.

A buyer who purchases prior to the auction usually does not attend the sale. They already bought equipment at a good price with no competition. If they do attend the auction, they tend to let others know of their great pre-sale purchases which again, impacts prices and the overall excitement of the sale.

It is important to understand that auctions work best with a complete inventory. You want competition on your higher end equipment. The easy to sell items make it possible to gain respectable prices for hard to sell items.

When a business owner decides to liquidate their equipment assets, there is only one opportunity to do it right. Hiring a reputable auction company will assist you with a professional, orderly and timely liquidation.

I believe that it’s easier to succeed with small businesses than ever before. There are more opportunities for entrepreneurs to start small businesses today than at any previous time.

Here are some good reasons for why I believe this is true.

A) With the increase in population comes an increase in opportunities for small businesses.

Generally, a sparse population requires a small business owner to provide a wide variety of goods or services to survive. With a denser population, the small businesses can still survive by providing a very narrow range of products or services.

For example, in a smaller population a small business which provides gardening services would probably need to offer many things. Services could include general garden maintenance, planning, tree felling, lawn cutting, vermin control, pond planning and maintenance, hard landscaping etc.

With a bigger population a small business could thrive perfectly well by providing just one of these services, as there are more people who will need it.

B) The costs involved in starting and running small businesses has never been so low in proportion to income.

Technology has replaced many of the things which people used to do, and technology does the job a lot more cheaply.

Today it’s possible to reach literally millions of potential customers around the world very cheaply.

For example, only a few decades ago the cost of mailing to thousands of households was prohibitively high. Unless you had a very good product or service which sold well, a small business just wouldn’t risk it.

Another example, business premises security used to involve security guards walking around checking that all was well. Now a good security system can be bought for less than 1 week’s pay for that security guard, and it will work 24 hrs per day for years, for no pay.

C) Because modern life is so complex today, small businesses and individuals are open to new ideas, products and services like never before.

This creates a huge market for training courses, information provision services, educational aids, specialised products and services, novelties, etc.

With this great diversity come great opportunities to combine different products and technologies, thus making whole new areas of business possible.

For example, you can combine a low-light camera with wireless communications and a bird box. This means a nest may be watched remotely on a television or personal computer screen.

Another example would be to combine voice-chip technology with passive infrared technology to make it sound as though you have a huge dog indoors whenever anyone approaches your house.

In our recent history, these opportunities just didn’t exist.

D) It may not feel like it, but many people today have a lot more leisure time and a higher disposable income than in any previous age.

This spare income (and with the current attitudes to loans, a little more besides) tends to get spent on sports, games, hobbies, crafts, amusements, entertainments, holidays and weekend breaks etc.

This creates many opportunities for the entrepreneur to start up small businesses to satisfy all this extra demand.

E) To thrive in a modern society you need to have a lot of different skills.

Nowadays people cope with a variety of complex tasks. They buy and use a wide range of consumer equipment, fill out many forms, and communicate with all kinds of people from all walks of life (often from different countries and cultures). They also do difficult transactions like house purchasing, and so on.

All this is a long way from the average people who were around just a few hundred years ago. Many were farm labourers who could barely read or write and never travelled more than a few miles from home.

So now, the pool of potential business people is far greater than ever before. If a person can live well in a modern society, they already have the abilities they need to start up a small business enterprise and succeed.

The good news also is that if you lack a certain skill which your small business needs, then you can probably employ someone with that skill far more easily than ever before.

F) More people have access to money than ever before.

Until the late 1960s, most people were paid weekly and spent money as they earned it.

It was normal among manual workers to run right out of money around the time of their next pay packet, which often contained notes and coins!

Today most people have many bank accounts (with overdrafts) and access to credit cards, which alone have spending limits equal to a half or full year’s income.

Savings and share holdings are greater than ever before. A large proportion of the population can raise money on their house and if they don’t mind paying a high interest percentage, they can borrow with no security at all.

A great variety of people and institutions are now willing to lend money for good small businesses proposals.

With access to credit, you can buy the product, ship it to the customer and get paid before you have to pay for the goods which you sold. This just wasn’t possible until very recently.

G) Advice, courses and books about starting small businesses are within easy reach of everyone.

Researching your chosen business area has never been easier with the Internet so readily available.

Not so long ago, you would have needed to buy many books and read them all to get the specific information you required. Now you can ask a search engine very specific questions and get very specific answers, almost immediately.

This frees up small businesses and enables them to be far more productive and enterprising.

H) If you start a small business today you have an immense amount of technology available to you.

Computers, printers, copiers, audio and video recording and playback equipment, telephony and the internet are all easily available to any entrepreneur wanting to get started in a new small business enterprise.

Not long ago, the average multi-national company lacked the computing, communicating and printing power available to the ordinary person today.

You can probably think of at least 6 different ways to get a simple message to someone on the other side of the world. 5 of those messages would typically arrive less than 1 minute after you sent them.

Just 100 years ago, (and remember mankind has been around for about 3 million years) this same message would have involved horses and steam ships and would have taken months.

This massive improvement in technology (especially in communications and information) has really opened up the field to the individual who wants to go ahead with a new small business venture.

I) Small businesses starting up today have far more choices available to them.

In previous times, it was quite common for there to be only a few companies that they could go to, to buy business supplies. Whatever business you care to name, you would not find many suppliers of the materials needed to conduct that business.

Unless your business is in a very specialist area, you will now find you can source your supplies from a great many firms. This in turn drives your costs down, as you can shop around for the best deals.

For example, there used to be very few ways to get your goods delivered to your customers. Nowadays you could chose from literally hundreds of different carriers.

New companies can chose anywhere in the world to set up their small businesses, or indeed where to place any part of their business.

I know of a successful paintball company, which operates in the UK in summer. But when the business falls off due to the cold winter, they find new customers by simply moving the company to Brazil, and then return the following spring.

They also take advantage of the cheaper labour in Brazil to manufacture the paint balling equipment, and when back in the UK use the greater expertise in the UK to program their systems.

Not so long ago this flexibility of operating a small business would have been totally impractical.

Conclusion.

There are far more opportunities to start small businesses than ever before and entrepreneurs who do start new small businesses at home are more likely to succeed.

There are more potential customers, it costs less to start up and you have more choice over the kind of business to go into. Other benefits are a more skilled and educated workforce, and easy access to financial support.

Fundraising Auction Tip: You should always provide potential bidders with a printed Auction Listing of both your Live and Silent Auction items at any Fundraising Auction. A printed Auction Listing is vital for several reasons:

An Auction Listing informs bidders of the order of sale, and what is coming up next. If you keep your bidders guessing, they will simply not bid.

If bidders are not 100% certain of what they are bidding on, they will not bid. A printed Auction Listing should answer any and all questions about what is being sold in order to encourage bidders to bid as much as possible.

Bidders often need time to plan their bidding strategies, especially on multiple and/or larger value items. A printed Auction Listing helps them to do that.

Couples often need time to consult with each other about what they are willing to spend on something. A printed Auction Listing helps them to do that.

Potential bidders need to know the specifics, the benefits, and the restrictions on any item they are going to bid on, especially on travel and/or other higher value items. A printed Auction Listing should answer all of their questions, in writing.

After bidders see that they have lost an item to another bidder, a printed Auction Listing makes it easier for them to re-strategize on what else they can bid on.
Printed Auction Listings generally come in 3 forms:

Printed in the Event Program or Auction Catalog.

Printed on loose sheets of paper and hand-inserted into the Event Program or Auction Catalog.

Printed on loose sheets of paper and hand-delivered to all attendees, or left on each dinner table in the room.
Auction Listings cost practically nothing to produce and they can make the difference between the success and failure of a Live and Silent Auction. You should never conduct a Fundraising Auction without one.

A Case Study

Let me share a real-life experience with you. Once I was hired to conduct a Fundraising Auction for a nationally renowned organization. The event was held in a major hotel, in one of the country’s largest cities, with several hundred “black tie” participants attending. It was an extremely professional event, with the music, singing, lighting, speeches, and awards all perfectly timed and choreographed. Everything was done to perfection… exception the Fundraising Auction.

Although I had signed an agreement to serve as their Auctioneer nearly one year in advance of the event, no one bothered to contact me for any advice or help. Approximately one week prior to the Auction date, I contacted the group to see if they had replaced me with another Auctioneer. But they said that I was still their man.

Upon arriving at the event I asked for a copy of the Auction Listing. I was told that there were none. I’m not sure whether they felt that the Auction Listing wasn’t necessary, or whether someone forgot to have them printed. This was never made clear. When I asked what I was to use at the podium, I was told to copy the list of Live Auction items from a committee member’s computer. It took me about 30 minutes to copy three pages of hand-written notes in order to prepare for my role as their Auctioneer.

I knew that they had created a PowerPoint program showing the various Live Auction items. When I asked whether the PowerPoint slide order corresponded to the order of sale I had copied from the committee member’s computer, I was met with a blank stare. The committee member left to check the slide order, and returned to let me know that the slide order did not correspond my notes, and he provided me with the correct slide order… hand-written on a paper napkin. This forced me to re-arrange my three pages of hand-written notes before taking the podium.

There was a Live Auction Table with descriptions of the Live Auction items that were to be sold, but the table was not clearly marked, and it received significantly less attention than the Silent Auction Tables, which were clearly identified. Since the Live Auction Table was located adjacent to the “Raffle Table”, it appeared that most people thought it was part of the raffle and therefore paid very little attention to it.

According to the event program (which did not include an Auction Listing), I knew approximately when I was to begin the Live Auction. At the designated time the Master of Ceremonies announced the start of the Live Auction to the several hundred people in attendance, and introduced me as Auctioneer. As I approached the podium I realized that photographs of award winners were still being taken… directly in front of the podium where I was to stand… which required me to stand aside for several minutes until the photographers were done. Can we say “awkward moment”?

As the photographers cleared, I approached the podium and began my Live Auction introduction. Approximately one minute into my introduction, the “Raffle Committee” approached the podium and stopped my Live Auction Introduction in order to pull the 8 or 9 Raffle Winners. These drawings lasted about 5 minutes. Upon it’s conclusion I was allowed to resume the start of the Live Auction.

When standing at the podium two intense and extremely bright spotlights were pointed directly at the podium. The lights were so bright that I literally could not see the center 1/3 of the room. I could see the tables on the right, and on the left, but was totally blinded when looking straight ahead. It took perhaps five minutes before the spotlights were turned off.

While at the podium and describing Lot #1, I had to ask someone to start the Lot #1 PowerPoint Slide… because apparently no one was assigned that job.

So with only the Auctioneer’s verbal description, and a PowerPoint slide, it appeared that few people in the room had any idea about what we were selling… or when we were selling it… until it was announced by the Auctioneer. As a result, bidding was extremely light and the final results fell several thousands of dollars short of where they should have been
The learning experience is this:

The Live Auction is where you place your better items, and where the real money should be made at any Fundraising Auction. Let bidders know as far in advance as possible what you will be selling, and the order of sale, so they can get excited about the Auction, and plan their bidding strategy accordingly.

Auction Listings are absolutely vital to the success of both Live & Silent Auctions. In my opinion, revenues at this Auction fell thousands of dollars short of where they should have been, because no Auction Listing was provided to the guests.

If bidders are not perfectly clear on what is being sold, including both the item’s specifics, benefits, and restrictions, they will not bid.

When you have a committee of volunteers, especially volunteers having full time jobs and/or very busy schedules, the services of a professional Fundraising Auctioneer can help to keep the committee on track.

And once you retain the services of a professional Fundraising Auctioneer… use the services that you are paying for.