August 11, 2017 3 Reasons a Donor Might Require a Minimum Bid
A donor just offered your nonprofit a great donation for your upcoming auction and the committee is super excited. When you meet with the donor to get all of the details for the donation, the donor tells you that the bidding must begin at the fair market value of the item. As a committee member, you think nothing of this requirement and thank the donor for their contribution. When you relay the info about the minimum starting bid to your auctioneer, they are not so happy.
Let’s first examine why donors might put this type of restriction on their donation.
Protecting the value of their goods – If the donation is from an artist, many times they want to ensure their item doesn’t sell for less than retail, thus protecting the value of their works. Unfortunately, this is sometimes a self-serving donation. Because of this, you might consider putting this type of donation in your silent auction instead of the live auction. If you feel “politically” pressured to offer the item in the live auction, it’s imperative that you have bidders attending your event who are guaranteed to bid on the item at that minimum bid amount.
They want to stand out – Some donors like to have attention drawn to themselves in any way possible. In this case you simply have to learn how to deal with these personalities, especially when they are making great item donations. Explain the situation, using the scenario I outline below, and see if they’ll come around.
They want their item to raise as much money possible – The intentions of these donors are wonderful. They truly have a heart for your mission and want their donation to raise as much money possible for your nonprofit. However, they don’t understand the auction process or the psychology of bidders. A professional fundraising auctioneer should start the bidding at a point that ensures multiple people will bid on an item, because this strategy creates energy and excitement. When this happens, the bidders feel good about their purchase, the item sells well and the donor has made a great donation to the organization. It’s a win-win for everybody!
I will explain the process in detail to hopefully make it easier to understand.
Let’s say the donated item has a fair market value of $2,500 and the donor wants this item to have a starting bid of $2,500. In this scenario, the auctioneer will ask the crowd in their elegant chant, “Who will give $2,500?” for the item. The auctioneer is hoping someone will raise their hand at $2,500 – remember, at this price we are at fair market value and very likely top dollar. If there are no takers at the beginning bid of $2,5000, the energy is quickly drained out of the room; you’ll hear a low rumble among the crowd. AWKWARD. At this point, the auctioneer must make a difficult decision. Do they continue asking for the donor’s required starting bid, which can make the crowd uncomfortable if there continue to be no takers? Or does the auctioneer drop down the amount they are asking, hoping someone will bid and thereby possibly selling it for less than the donor’s instructed minimum bid amount? Or do they pass on the item and move to the next one? Yes, this is a worst-case scenario, but I’ve had this happen. When it has, I’ve felt the only ethical thing to do was to pass on the item, which means the donor has in essence made NO donation. Additionally, the effect of this on the momentum and energy of the auction can be quite negative; quite often that momentum is never recovered.
My main point is that you should have a discussion with your donor when they put a starting bid requirement on their item(s). Explain to them that it’s not where the bidding begins but rather where it ends that matters in the world of fundraising.
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