When it comes to budgeting for your organization’s various campaigns, there is one primary goal that’s consistent across all of them: for the earnings to exceed the expenses. When you start planning your nonprofit’s next charity auction, the same rule applies.
Of course, if you’re brand new to organizing nonprofit events, you might not receive a large return on your investment right off the bat. It takes time for your nonprofit to gain a positive reputation in the community, set the right KPIs for your organization, and refine your techniques to maximize your charity’s potential.
It all starts with your nonprofit’s budget. An effective budget will lay out your organization’s expected expenses as well as your anticipated revenue for your next charity auction.
You likely already create an annual budget for your organization. The Jitasa budgeting basics guide explains that nonprofits generally create both an operating budget and a capital budget for any given year—the operating budget spelling out financial activities for the year and the capital budget addressing multi-year projects. However, you should also be sure to budget your individual campaigns and fundraising initiatives to reach your full potential.
In this guide, we’ll dive deeper into the budgeting process and tips for success when creating a budget for a charity auction. We’ll cover the following tips:
- Set your budgetary timeframe.
- Consider your potential income and goals.
- Consider your predicted expenses.
- Check back in on your budget frequently.
- Communicate tax implications for donors’ budgets.
Maintaining a mindset of growth and maximizing your organization’s next campaign requires that you plan as carefully and accurately as possible. With more time and practice, you’ll refine your strategies, work with additional data, and create better budgets to guide your campaigns. But it all starts here. Let’s get started.
1. Set your budgetary timeframe.
One of the key elements of a budget is that it covers a finite period of time, which means you’ll need to determine when your charity auction will take place. Create a timeline that covers the duration of item procurement, event promotion, execution, and follow up.
This timeline should highlight the budgetary estimates for each part of the campaign and determine check-in points for your team to review your finances.
While you can lean on examples from other organizations, bear in mind that all campaigns are different and will therefore be unique in terms of timing. The type of auction you host can also heavily influence timing. For instance, consider the timelines for the following types of auctions:
- Live auctions with an auctioneer promoting items will likely only take a few hours, but they might need additional marketing and promotion time to encourage people to attend.
- Silent auctions held in person will likely last longer than live auctions. Silent auctions provide additional mingling opportunities for your attendees, so they’ll be entertained the entire time.
- Hybrid virtual and in-person auctions will typically require more time for the online portion of the auction, which you might open several days before the in-person portion.
- Online auctions can be open for days for your supporters to browse items and place bids. Be sure to advertise when the auction will close, like with a countdown timer that creates some urgency to bid.
Your timeline will also depend on the number of attendees, as larger events often require more time to promote and then follow up with attendees afterward.
While this is not necessarily true for all events, the longer you plan to devote to each part of your event, the more expensive it becomes.
A longer marketing phase means you’ll need to share more promotional materials, resulting in additional expenses. The longer the event itself, the more activities you’ll need to include to engage supporters.
This isn’t to say that hosting long events is necessarily a bad thing, but you should be careful to strike the balance of time, money, and engagement at your event.
2. Consider your potential income and goals.
Often, when people think of budgets, they focus on the expenses they anticipate incurring throughout the given time frame. However, they forget to account for the revenue they’ll receive.
Especially for fundraising events, it’s important to put just as much thought and detail into your anticipated revenue as your expenses.
This will help you ensure your revenue exceeds your expenses, provide the necessary metrics to calculate your return on investment (ROI), and determine the most successful elements of your fundraising auction.
When you consider the potential income of your organization’s charity auction, you should consider all sources of revenue, including but not limited to:
- Ticketing. Determine if you want or need to charge an entrance fee by offering paid tickets for your event. Often, organizers of exclusive galas or major donor events ask supporters to pay for tickets to ensure it remains exclusive for high-capacity donors.
- Auction items. The items that your supporters bid on will be the primary focus for your nonprofit’s revenue predictions. When you receive auction items at a discount or as a donation, this cuts down on expenses so that you can make additional revenue from this source. Be sure to choose competitive prizes that will drive donations.
- Raffle tickets. Try hosting a raffle alongside your charity auction. This may be for another competitive prize, or you may decide to do a 50/50 raffle in which half of the proceeds are donated to your organization while the other half becomes the prize for the winner.
- Merchandise sales. To commemorate your event, you may decide to sell merchandise at your auction. From t-shirts to mugs, branded merchandise can both provide additional revenue for your event and additional advertising for your cause after the event ends.
- Additional donations. Supporters who attend your event have a connection to your mission that they’ll want to fully support. Therefore, many will likely give additional gifts throughout the event. Make sure it’s easy for them to give with text-to-give options, accessible online giving pages, and other opportunities.
- Sponsors. Sponsors can help offset the price of your organization’s charity auction, helping you to increase your ROI and create the best possible event for your attendees. Be sure to maximize your use of these funds and count them as a part of your revenue in order to accurately measure return on the auction.
Of course, you’ll want to amplify your fundraising revenue as much as possible. If you exceed your anticipated revenue in any of these streams, that’s a good sign, so keep pushing! For instance, you may find additional revenue in volunteer grants from your volunteers who work so hard at your auction. Re:Charity’s dollars for doers guide explains that volunteer grants are, “a type of corporate giving program in which companies award monetary grants to organizations where their employees regularly volunteer.”
When you keep an open mind and open your eyes to these types of opportunities, you can expand your revenue even more than you plan in your budget. Then, you can adjust your future budgets to take these things into account.
3. Consider your predicted expenses.
Just as you need to predict your revenue for your charity auction event, you also need to add a detailed expense element to your budget with the expected costs of hosting the event.
You’ll see some guidance out there explaining how you should be sure that your expenses are as low as possible to increase the ROI of your event. However, we’d like to amend that idea slightly: Lower your expenses as much as possible without compromising the quality of the event.
Sometimes it takes expenses to increase the revenue of your event. Be sure to cut back on unnecessary costs, but maintain those that result in higher revenue potential for your event. Estimate the cost of these and when in your timeframe that you’ll be incurring those expenses so that you can check in on your accuracy.
Some of the expenses you might encounter when planning your next charity auction include the following:
- Event venue. For in-person events, you should be sure your venue can accommodate your estimated audience and create the vibe you’re aiming for. Online and hybrid auctions may have smaller or nonexistent in-person venues, but require an online website venue on which you host the auction.
- Advertising and promotion. Get the word out about your event on multiple platforms, from social media and your website to flyers in the community. Determine the best ways to contact your prospective attendees and prioritize that promotion in your budget.
- Auction items. Impressive auction items will drive engagement and bids at your event. Therefore, look for the best deals on items, but don’t forget to allocate a substantial part of your budget to this primary focus of the event itself.
- Food and beverages. Is your event catered? The type of food you choose can help set the atmosphere for your event. Will you have a barbeque buffet? A sit-down steak dinner? Consider the impression you want to make when determining the food for the event.
- Event decorations. Decorating your event will also set the tone. Be sure to include your logo and your sponsors’ logos prominently. You might need specialized printing and bulk orders of decor to make this happen so be sure to account for it in your budget. Get quotes and prices before making your final purchases.
Remember that miscellaneous things come up in all event plans, so account for that in your auction budget. Add some cushioning so that you can cover all your bases.
4. Check back in on your budget frequently.
When you create the timeline for your budget, build in specific times when you should check in on your finances to determine where you’re on course and where you’ve strayed slightly. It’s not a bad thing for your budget to be slightly off course; it just means you need to make some adjustments.
We recommend considering the following checkpoints:
- Before the event begins, usually for the budget creation process
- Throughout the preparation and marketing process, which may occur on a monthly basis depending on the duration of your event lead-up
- Right before the event begins so that you know where you stand as you head into the execution phase
- After the event so that you can review anything that changed during the event itself
- After following up with attendees after the event to review the actual vs. anticipated budgetary elements
During this process, you can also add notes to your current budget, explaining what threw you off course. That way, you can reference these notes in the future for more accurate budgeting. These adjustments are a key aspect of accounting for nonprofit organizations— you should be constantly evolving and adjusting to be more accurate than the year before.
5. Communicate tax implications for donors’ budgets.
As you think about your organization’s budget, remember that your budget isn’t the only one affected by your auction event. Your supporters’ budgets are also impacted, so you should be sure they have the information they need for their personal finances.
There are important tax deductions that accompany the gifts contributed to your nonprofit, so you’ll need to issue receipts to your supporters. Only gifts of $250 or higher require a receipt, but it’s courteous to provide one for all gifts.
Tax implications for straightforward donations to your nonprofit are pretty easy to understand. You provide the receipt to supporters for the full amount of funding they gave to your cause, and they’ll receive a dedication for that donation.
But what about gifts made in exchange for auction items?
Because auction items are an exchange of goods in return for a donation, the tax implications change slightly. Supporters can receive tax deductions for the donation amount made exceeding the market value of the item purchased.
For example, let’s say your organization pays $250 for a weekend getaway to a mountain cabin. You received it at a discounted rate, and the market value is actually $500 for the trip. Any gift made over that $500 value is tax deductible for your supporters. If it’s sold for $750, that $250 is deductible and you’ll need to issue a receipt.
On your receipt, be sure to include the name of your organization, description of the item purchased, the fair market value of the item, and the amount contributed by the supporter for the auction item.
Budgeting is a key element to any nonprofit campaign and event planning process. It helps ensure you earn from your event rather than lose funding from it. Plus, you have the opportunity to continue growing and evolving for better and better budgets.
After you’ve analyzed your budget for your next charity auction, you can identify opportunities to make a more accurate plan for future events. You’ll be able to identify the most lucrative parts of your budget, any potential unnecessary expenses, and other opportunities to improve for the future.
If you’re not sure how your auction fits into your organization’s larger financial plan, consider talking to a nonprofit accountant. They’ll be able to help you not only refine your charity auction budget, but also create your larger organization plan and make the most of your large-scale financial health. With expert guidance on your side, you’ll be able to make the most of your events and everyday fundraising needs.