Pricing your silent auction items can be tricky and a big challenge for nonprofits. This process involves research and understanding your items’ value — and can be the difference between a successful auction or a bust. Let’s dive into the details!
Estimating Fair Market Value
Fair Market Value (FMV) refers to the price of an item and what it would sell for in the open market. No matter what the item is, if it is being auctioned and is expected to receive bids, it has an FMV. When bidding on items in a charitable auction, any amount paid over the FMV is tax-deductible, stressing the importance of the item’s FMV.
When it comes to auctions, knowing the FMV of an item helps you calculate the starting price and bid increment. That’s why it is so important to get the most accurate information before you start pricing items. If the FMV is unknown or not given by your item donor, enter in your best estimate.
How to Set the Right Starting Price
The starting price for any item can either deter or encourage a bidder. Let’s make sure to attract bidders to your event and leave them excited about your items by setting a reasonable starting price.
In the industry, a typical starting price would be 30-45% of the FMV. For some items, calculating the starting price might be a simple math equation, but for others, it may require more thought and research.
Starting bids can also depend on bidder demographics, the popularity of the item, and the emotional attachment of the item, so you may need to consider these elements before setting a price. If you are auctioning consignment items, make sure the starting bid covers the amount needed to be paid to the third party.
We also recommend rounding up starting prices to:
- If the FMV is under $100, round up to the nearest $5
- If the FMV up to $400, round up to the nearest $10
- If the FMV up to $600, round up to the nearest $25
- If the FMV up to $800, round up to the nearest $50
- If the FMV up over $1000, round up to the nearest $100
How to Set the Right Bid Increment
Setting the correct bid increment directly impacts how many bids each item receives. It’s crucial to choose the correct bid increment that will encourage bidders to keep bidding, rather than hindering them from re-bidding due to a pricey next bid amount.
We recommend t the following bid increments for the corresponding FMV:
- $5 bid increments for items with FMV between $50-149
- $10 bid increments for items with FMV between $150-249
- $20 bid increments for items with FMV between $250-399
- $25 bid increments for items with FMV between $400-599
- $50 bid increments for items with FMV between $600-999
- $100 bid increments for items with FMV over $1,000
If a particular item has performed well at a past event and a similar item will be available in this auction, consider increasing the bid increment to expand revenue. Try evaluating your year-to-year statistics to help you decide which items are popular with your donor base to help to raise more money by encouraging more bids.
Increasing your bid increments for popular items may raise extra money, but keep in mind — you do not want to over-price your items. Doing this could discourage bidders from placing bids and dramatically decrease your revenue.
Let’s Get Started
With all the above pricing details considered, remember that your donors come together to celebrate and raise money for your charity. It is important to continue to communicate the influence of your mission and encourage others to be passionate about your charity and create lifelong relationships.