The answer to “How much do you want to make at your benefit auction?” should not be “As much as we can.”
While technically true, such a vague answer is not helpful for making decisions.
Rather, goals should be specific, achievable and measurable so you can build a plan to achieve them.
In this post, we provide general guidelines for determining realistic revenue goals for you benefit auction.
Step 1: Set a Target Number of Buying Units
A buying unit is a single bidder or a couple attending the event together. A couple will not bid against each other, but rather make spending decisions together.
Generally, an audience of 100 buying units (100-200 people) is the minimum size required for competitive bidding.
Smaller events need to be very selective about whom they invite. A room full of “eaters not bidders” in a small audience is a disaster.
You will need to factor your budget, venue, and number of local supporters to determine an appropriate target for number of buying units.
Step 2: Estimate Each Buying Unit’s Capacity to Spend
This step assumes two things:
- You have invited people who are there for your cause and can spend some discretionary funds.
- You provide enough ways for them to spend their money at the event.
Experience shows that one buying unit has the capacity to spend, on average, from $500 to $1,500.
It would be unusual – but not impossible – to realize more than $1,500 per buying unit, and many events are able to do this. However, these events tend to be mature, well-organized and highly selective about their invitees.
If this isn’t your first time running your event, look at last year’s data to see how much each buying unit spent. Then, estimate your room for improvement from procuring better items or inviting a different group of attendees.
Step 3: Calculate “Audience Capacity”
Multiply buying units by their capacity to spend to get your audience capacity. For example, if you expect 100 buying units with an average capacity of $500, your audience capacity is $50,000.
Audience Capacity = Buying Units x Capacity to Spend
Your audience capacity is the maximum you can expect to raise from your event. An audience is like a sponge – it can only absorb so much. Meaning, you could procure $300,000 worth of items to auction to 100 buying units, but you’ll never sell more than $50,000.
Step 4: Calculate the Procurement Value to Satisfy Your Audience
It would make no sense to expect an audience of 300 people (150 buying units) to spend $100,000 collectively on items that are only worth $25,000, $50,000, or even $75,000.
If fact, if the auction has $100,000 worth of items, the audience still isn’t likely to spend $100,000 since not all items will sell for their fair market value.
To maximize revenue, procure items worth enough to extract as much as the audience capacity as possible. The key to calculating procurement needed is estimating your yield (winning bid divided by retail value) on live and silent auction items.
We recommend you start with these guidelines:
- Expect 50% to 60% yield on silent auction items
- Expect 75% to 85% yield on live auction items
- 65% of your auction revenue should come from your live auction (vs. 35% from silent auction)
Using the lower end of these estimations (50% and 75% yield, respectively), we can form two equations*:
Silent Auction Procurement= (Audience Capacity x 35%) / 50%
Live Auction Procurement = (Audience Capacity x 65%) / 75%
Not into math? Reference this table:
|Audience Capacity||Live Procurement||Live Yield||Live Revenue||Silent Procurement||Silent Yield||Silent Revenue||Total Procurement|
Step 5: Iterate
If your optimal procurement levels from Step 4 are reasonable, then you’re done with your goal setting!
However, if you’ve calculated an unreasonable level of procurement (i.e., despite your best efforts, you won’t be able to procure enough valuable items), then it’s time to revisit your values from Steps 1 and 2.
Perhaps you’ve chosen to target too many “buying units” given your ability to procure items. This may be a sign that your event is too large and a more selective event is warranted.
Remember to adjust your average buying unit’s capacity upward if you are more selective in your invites. Alternatively, you could augment your procurement using a service like TravelPledge.
*The two equations for calculating procurement needed were formed with the following logic:
- Silent Auction Revenue = Total Auction Revenue x 35%
- Live Auction Revenue = Total Auction Revenue x 65%
- Silent Auction Revenue = Silent Auction Procurement x Silent Auction Yield = Silent Auction Procurement x 50%
- Live Auction Revenue = Live Auction Procurement x Live Auction Yield = Live Auction Procurement x 75%
- Silent Auction Procurement x 50% = Total Auction Revenue x 35%
- Silent Auction Procurement = (Total Auction Revenue x 35%) / 50%
- Live Auction Procurement x 75% = Total Auction Revenue x 65%
- Live Auction Procurement = (Total Auction Revenue x 65%) / 75%
Since we are trying to find the procurement needed to maximize Total Auction Revenue, and we previously established Audience Capacity as the maximum, we can substitute in Audience Capacity for Total Auction Revenue:
- Silent Auction Procurement = (Audience Capacity x 35%) / 50%
- Live Auction Procurement = (Audience Capacity x 65%) / 75%
This post is adapted from The Big Book of Benefit Auctions by Jay R. Fiske and Corinne A Fiske.