Unfortunately, pricing silent auction items isn’t glamorous. It involves math and some research, but the right pricing can be the difference between auction success and an auction bust.
After item procurement, pricing your silent auction items can be your next biggest challenge. And you thought all you needed to do was simply gather enough item donations! Never fear, use this blog as a resource to ease your pricing worries.
Here’s 6 rules to keep in mind when pricing your items:
Let’s get started!
Fair market value (FMV) is a concept that can be applied to put a monetary value to the item that a buyer and seller agree upon as representing the worth of an item.
This is important for the nonprofit industry because raffles and auctions rely on donors to value the price of items.
When it comes to auctions, knowing the FMV of an item helps you calculate the starting bid and bid increments, so it’s important to get the most accurate value before you start pricing items.
Let’s dive into the details!
Tangible items are easier to establish an FMV than intangible items. These items are typically physical items that have a standard retail price that is well-known or easy to find with a little research.
For example, if you are including AirPods or a $100 gift certificate to a popular restaurant in your silent auction, the FMV would be the retail price of AirPods and the amount on the gift certificate would be the FMV.
Some tangible items can be a little more difficult to assess the FMV. Sports memorabilia, signed items, and other items that carry unique value that don’t have a definitive retail price involve more research when estimating FMV.
Good sources to help establish FMV include:
Intangible items are great to include in your silent auction. It’s important to make sure you have the right mix of tangible and intangible items when soliciting and writing your silent auction letter requests. They are great sellers because of the one-of-a-kind value they offer.
Intangible items include things like:
It is still important to make sure you are estimating the correct FMV so you can get the most return from your intangible silent auction item.
An educated guess of what your audience will be willing to pay is what’s important here. Each item could be perceived differently by your audience, but the more time you take to estimate their inherent value, the better chance you have for a successful silent auction.
Consider these factors when trying to determine FMV for intangible items:
Fair market value is at the foundation for all things silent auction pricing. Once it is established, we are ready to tackle the next step of the process: how to set the right starting bid.
The starting bid for any item, tangible or intangible, can either deter or encourage a bidder. Let’s make sure to knock your silent auction out of the park and set a starting bid that leaves bidders excited to donate money for your cause!
Now that you have established the fair market value for all of your silent auction items, the starting bid for each item will be calculated from that value.
For some items, it could be a simple math equation, but for others, it may require a little more thought into the psychology of the bidder at your silent auction.
A starting bid can be dependent on:
The general rule of thumb is to not go above or below 30-50%. It is a balance of not starting the bidding too low and reducing the return on your auction, while also wanting bidders to be invested in the bidding process.
With a less popular or less unique item, the lower range of 30% is recommended. But if you have big ticket, one-of-a-kind items, set a higher starting bid for those silent auction items.
Because of the natural excitement of these unique items, help yourself out and set a loftier minimum bid. These items can survive with a higher starting bid, so 40-50% of FMV is ideal here.
For example, school auctions typically see crazy gamification and bidder engagement with something as simple as parking spots. You know this intangible item sells, so set a higher starting bid (and continue to raise it year-over-year)!
With these unique and popular items, it’s important to make sure all your auction rules are clearly spelled out, so when the bidding frenzy begins, every play is fair!
Gamification is an important strategy with exclusive items like this, but you need to attract bidders’ attention first—especially because the higher starting bid may be perceived as a “turn-off.”
Make sure to follow these tips to make these big-ticket items stand out and get the most proceeds for your mission:
Starting bids can be adjusted on a case-by-case basis, but the more educated your starting bid is, the better you will be able to create the right bidding momentum for your auction.
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Another “how-to” of the silent auction pricing world involves bidding increments. It could directly impact how many bids each item receives.
The general recommendation is to start by increasing bids by 10% of the items FMV. Although, there can be reasons for a little wiggle room, so we recommend 10-15% of FMV is reasonable.
To best strategize the pricing for your silent auction and bidding increments, consider these topics:
If there is a healthy ratio between guests and silent auction items, there should be a solid number of bids on each item in your silent auction. If it takes more than 5-8 bids to get to 70% of FMV, then your increments are too low.
A “Buy-It-Now” option is another great piece of the puzzle of knowing how to price a silent auction. Offering this option to buy an item immediately is a good way to ensure more items exceed their FMV when bidding closes.
From the perspective of the bidder, it’s also a great option for people that don’t want to waste their time bidding and are willing to pay top dollar for a specific item.
OneCause recommends the industry best practice of offering a “Buy-it-Now” option at 150-200% of the item’s FMV.
Selling an item fast and for top dollar helps your proceeds, and when other bidders see that a desirable item has already sold, the feeling of scarcity encourages them to bid up another item they really want.
Disclaimer: Use this option wisely—it may not make sense for your particular auction items. The natural bidding should never exceed the “Buy-It-Now” price.
You won’t want to offer this option on every item, though. Items that should not have a Buy-it-Now option include:
Nice job! You made it through all 6 rules on how to price a silent auction. Remember, the pricing questions don’t end when the silent auction countdown strikes zero, so let’s talk closing out your auction.
Frequently Asked Questions for Closing Out Your Auction:
Q: What pricing information should be included in a silent auction receipt?
A: You should include the event name, bidder number, bidder name, item number/name, total donation amount, method of payment, and a blurb that states: Tax deductible as allowed by law.
Q: Is the price paid for a silent auction item tax deductible?
A: According to the IRS, bidders who purchase items at a silent auction are able to claim a “charitable contribution deduction” for the excess amount of the price paid for the item over its fair market value.
Q: If an item is “priceless,” is it still tax-deductible?
A: No. Because FMV was not established, the final auction bid is then the fair market value, and according to the IRS, a charitable contribution deduction cannot be claimed.
With all pricing details considered—remember, your guests came to celebrate and raise money for your mission. Communicate the impact of their donations in a follow-up event thank-you note!
No matter how you price an item, never lose sight of the fact that if you communicate your mission well and have supporters that care about your mission, that energy will keep the guests bidding and feel good about their winnings.
Over the past 15 years, Melissa Merriam has helped nonprofits succeed, first in sales and business development, and now, as Senior Director of Consulting and Training. She leads a team of 35 consultants and managers to provide service and support to thousands of clients. Melissa is a creative problem solver and strategist and spends much of her time researching, connecting with customers, and coaching her team to be the foremost experts in nonprofit and event fundraising.
Nicole Taylor is a Consulting Manager at OneCause, supporting nonprofit partners during event planning with her expertise in industry best practices, as well as assisting in event execution as an event manager onsite. To fuel her passion for fundraising excellence, she has been helping nonprofits at OneCause since 2013 and has worked on over 600 fundraising events across the country.
Want to move on to the other phases of planning your silent auction? Check out our resources below to get you there.