I have just fielded a couple of calls from clients accusing me of being too blase about the decline in the returns from the Naples Wine Auction.  I agree that it reflects a significant decrease.  $16.4 million in 2007, $14 Million in 2008 and a reported $5 million in 2009.

I believe that we need more time to pass judgment.  So many factors can affect the totals, if indeed the $5 million amount is accurate.  These are some we have encountered over the years:

• Missing bidders.  At one of the early Sonoma Valley Wine Auctions we sold a package for 4 or 8 to attend the US Tennis Open.  The trouble is that it takes place on the same weekend as the Sonoma Auction.  We lost our two top bidders the following year.
• Unforeseen circumstances.  The beloved chair of an event had a heart attack the night before the auction.
• Force of Nature.  At Livermore one year, the entire West Coast power grid collapsed. Fires, Floods and earthquakes have also had their effects.
• Personal Relationships.   A couple divorced during their year as chair.  “He” inherited the auction, “Her” friends became determined that it would fail.

In other word it is too early to extrapolate from the brief news I have had from Naples concerning the trands for auctions as a whole.

My first reaction on seeing that the Naples Wine Auction raised $5,000,000 this year is that every thing is a matter of perspective.  It all depends on whether you see money as absolute or relative.

Naples raises $5 million sounds really good.

Naples auction down by two-thirds sounds really bad.

I suspect that we will hear all sort of explanations of the downturn in the next few weeks, but regardless, everyone in the fundraising business knows how hard you have to work to raise any sum of money, and $5 million  is worth celebrating!

The question always comes up as we start working with a new client;

“In the catalogue should we list value or opening bid?”

In fact the choice is broader than that.  I have used the following options over the years, each has it’s own advantages and disadvantages.

1. Value.  The advantage is that it is straight forward.  We are not trying to trick the bidders into over bidding through ignorance.  The main disadvantage is that it acts as a barrier telling the bidder to bid this high and no higher.  There is a minor secondary problem.  Sometimes the donor includes a totally unrealistic valuation.  In that case what value do you list?
2. Opening Bid.  The advantage is that there is one less decision for auctioneer, making his or her life easier. The disadvantage is that it removes one of the best tools in the auctioneers toolbox.
3. Estimate .  I use a simple formula to determine an estimate based on the value.  I list a estimate of 10% down and 50% up.  For example, if a lot is valued at $1000, I would put the estimate at $900 - $1,500.  The advantage of this method is that does set the relative value of all the lots and it also starts the bidders thinking about the higher price.  The disadvantage is that the upper price level sets an impenetrable barrier.
4. Priceless or equivalent. I understand having to list the occasional  lot as priceless.  Literally no one knows the price.  The advantage is that while the term priceless just means no known price, big or small, the tendency is to assume a high price If you list  more than a few lots this way it becomes precious.
5. Leave it blank.  The advantage is that it is really easy.  In many ways the whole purpose of auctions is to determine a price and whatever a lot sells for is the true value of the item on that day.  The disadvantage is that it can be confusing for the bidders.  The Central Coast Wine Auction has never list any prices or values and it has worked well for years. The reason is that Archie McLaren, the founder and executive director, writes the most complete, detailed and best promoting catalogue in the business.

Unfortunately there is no one correct answer to this except to stay with whatever system you are currently using, as any change may confuse your audience.  If you are hosting a first year event I would recommend choosing from options one, two or three.  If you are as lucky as a couple of our events you would label the value as “Opening Bid” and just go from there.

As a result of the downturn in the economy, many events are finding it more difficult to get auction donations. In many cases the number of donations has declined, or the quality of some of the donations has declined. Still wanting to fill their auction with good lots, many events turn to consigned auction items as a way to round out their auction.

Do your research before adding consigned auction lots to your auction. In many cases you can get better deals on your own, if you are simply willing to do the legwork. In other cases, a lot that makes sense for an East-coast auction may not be well-suited to a West-coast event. These days many hotel properties are struggling to stay at capacity, and are willing to make deals if you deal direct. But in many cases, you don’t have to look very far to find ways to do better than the consignment companies.

One such example is Winspire’s “America’s Cup Stars & Stripes Experience in San Diego 4-Night Package with Airfare for Two” which they value at $5,618.00 and sell to events for $1,750.00.

The package includes round-trip coach airfare from anywhere in the U.S. on American Airlines, four nights at Hyatt Regency Mission Bay Spa & Marina, and a 150-minute sailing experience on Dennis Conner’s Stars and Stripes. The first time I encountered this lot, I thought the value must really be in the sailing experience. Not so.

Anyone can sign up to sail on the Stars and Stripes for $99 per person. You need to be willing to do your research and book your trip yourself. Given that Stars and Stripes offers gift certificates, it means you can secure the package without having to book the date for your winning bidder.

The Mission Bay Hyatt? I managed to find suites available at $239 per night at the height of the season. So far, this $5,618.00 package has an actual cost of $1,156.00 before taxes. Actual cost is probably closer to $1,260.00 after California takes its cut.

So the difference in value that Winspire brings to the table on this particular lot is in the airfare. Two round-trip tickets on American to San Diego for $500 is a bargain if you are coming from New York city. Cross-country flights on American to San Diego cost an average of $500 per person. If you are a New York school putting together an auction package, this lot makes sense for you.

However, Bay Area auctions would be remiss to purchase this lot based on airfare, for myriad reasons. Foremost is the fact that American doesn’t fly direct to San Diego from San Francisco. Any flight on American to San Diego would require a trip to Seattle, Chicago, or Dallas first - resulting in a 9-hour flight. The other major factor is Southwest, which flies non-stop between SF and San Diego multiple times a day, for an average of $120/person, round-trip.

Furthermore, a surprisingly large number of auction lot winners never actually redeem their lots. One event we asked to track the data reported that 45% of their winning bidders did not redeem their getaways purchased in the live auction.

The vast majority of consignment houses require that you purchase the certificate as soon as the auction is over. If your bidder doesn’t redeem the trip before the expiration date, the consignment company keeps the money and your event is out the cash. We discussed this with the Gavel Group at their inception, and they refuse to budge: A buyer’s lack of redemption is their pure-profit.

Over at Winspire, Jeff Cova is more understanding and will often work with winning bidders to extend the deadline. He’s not out to sell vapor, and is more interested in people actually redeeming their trips since he has to buy them from the various airlines, hotels, etc.

The major issue with this is that when one of your donors doesn’t redeem a trip the consignment houses make a profit. A profit that your bidder assumed was going straight to your cause when they made the bid and then opted not to take the trip. When you consign an item to your auction there is no viable way around this, and it is a risk you have to be willing to take. Some auctions opt to include the actual costs of the items they are paying for in the description. It certainly sheds a new light upon a lot when donors know how much of the money is actually going to the charity - I’m not 100% certain that light is favorable.

One other big package being offered at the original writing of this post was a trip to the  2009 Super Bowl XLIII in Tampa. It included a 3-Night Stay and First/Business Airfare for Two at a cost of $19,000.00 to the buyer. Included in the package were round-trip, first class airfare on American, three nights at the Ginn Reunion Resort, and two tickets to SuperBowl XLIII.

The Ginn Resort was, as of the original writing, offering villas for $279 per night, with many still available. SuperBowl Tickets had hit a 15-year low at that point, and were currently reselling for as low as $1,500.00 per ticket. The same section the consignment houses was offering were currently at $1,800.00 per ticket. Total cost to this point if you wanted to put it together yourself was: $4,437.00, not counting airfare (anyone want to hit the SuperBowl next weekend?). If you were to simply sell this package on your own, without airfare, you’d immediately save $15,000.00 off of what the consignment houses wanted to charge you.

To be ultimately fair to the consignment houses, I opted to research first-class flights, less than one week from the date of flight. American Airlines wouldn’t quote a fee, but I found unrestricted first-class on United for $1,600.00 per person. Meaning that you could put that package together for $7,637.00 on your own - at a savings of more than $11,000.00 off of the consignment house’s price.

Jeff Cova will point out that one of the main benefits of working with Winspire is the fact that they are experienced concierges: they will take care of your buyers, period stop. And the last thing you want are unhappy bidders, especially unhappy bidders who have spent significant amounts of money on prime auction packages.

To make matters worse, there are auction companies out there that purchase lots from consignment houses and then resell them to auctions for a significant profit. One auction house offers the Stars and Stripes package to events they work with for a cost of $3,000.00. I know because one of my clients hired them to do a silent auction, and this other firm “offered” to consign a Stars and Stripes package for $3,000.00 into the live auction. My client agreed before doing any research on the lot (or turning me loose to look it up). When I compared the write-up the firm provided me to the .pdf available on Winspire’s web site, they were exactly the same, word for word.

I understand the need to make your auction better, and encourage you to follow our guideline of 1 to 3 when spending money on an auction lot. In today’s economic environment there may be even better deals to be found out there than the above examples, which were researched solely online. A quick phone call to the Hyatt in Mission Bay, for example, may yield significant discounts, and nothing trumps interpersonal relationships.

The point being, if you have to pay for auction lots do your research. Make an honest evaluation of your crowd and the lots available. If an auction lot being offered for consignment seems over-priced or too good to be true, it probably is. But if an offering and price-point map well to your crowd and fill a much-needed gap in your auction, no-one will blame you for bringing in some professional help.

Disappointing News.

I just saw a depressing report from the Spectrem Group of Chicago. They spend their time tracking trends among the wealthy. This is the first feed-back that I have seen on the effects of the economy specifically on the wealthy. The first question answered is whether the rich have, through access to some secret club, remained unscathed by the current downturn. The Spectrem Group reports that households with assets over $1 million have lost an average of 30% of their assets and nearly 20% have lost over 40%.

Most of the wealthy (90%), expect a prolonged economic downturn. There is no reason to expect the wealthy to be any better interpreting the tea leaves than anyone else (if they were, they would not have lost 30% of their investments), but it will affect their behavior.

The statistic that I find most threatening for fundraising is that a majority of the wealthy (55%), are worried that they may not have sufficient assets to maintain their lifestyles. It is tough enough to raise money from individuals who have lost a significant part of their wealth, it’s really tough if that donation requires the donor to give up something significant.

One of the events I had the privlege of working with last year was Web 2.0 Summit, put on by O’Reilly Media and techweb in the first week of November.  2008 marked the fifth Web 2.0 Summit, and the first time that they opted to do any sort of fundraising in conjunction with the conference.

The decision to hold an auction benefiting technology-related charities was made just a few months before the event. And while the connection between the conference and philanthropy seemed straight forward, no one was sure how it would fly with attendees–especially given the economic turmoil at that time.

We held an auction on the first night of the conference, at the end of a dinner which followed the keynote address. There were a number of logistical challenges: we had to move the entire crowd from one room to another between the entree and the dessert course; we started the auction immediately after a 45-minute onstage interview of Lance Armstrong; the number of lots was limited; and the fund a need was being split amongst all three charities.

When the dust settled, we’d raised over $75,000 on just eight lots and a fund a need. Not a record-setting auction but definitely life changing for any of the individuals served by those charities. And definitely a success given the lead-time we had to plan and implement the auction.

I was surprised in our follow-up meeting when I found out that they were debating whether or not to hold the auction again. Some said that the amount of time it took to plan and implement was simply too great. Others felt like it had been a success worth doing better. I had one simple question: other than staff time, what did the auction cost the conference? In other words, did attendees spend less money elsewhere at the conference because of their involvement in the auction?

Answer: no. Other than the planning and implementation, the auction cost the conference nothing. It cost Tim O’Reilly some money because of his personal support of the fund a need, but beyond that it didn’t affect the conference.

To which my response was hold that auction! Do it! Not because I want the work, but because it is incumbent upon them to continue to make the world a better place, now that they know they can.

There are many ways that Web 2.0 Summit, O’Reilly and techweb could get better mileage out of the auction and, in turn, make the staff time expenditure on their end more worth it. They could have had Al Gore present the check from the auction to the CEO of one of the charities at his speech on Friday. They could use video-blog updates to show how Web 2.0 Summit’s auction continues to impact people’s lives throughout the year. And while all of that is important, it’s not the point.

The potential of any given crowd of people has a finite lifespan: If you do not capitalize upon it at that very moment, it dissipates. Completely. The Web 2.0 Summit auction proved that they have a roomful of attendees who are capable of changing many lives, and readily willing to do so. If they forgo their auction in 2009, they effectively send all of that philanthropic potential away with no guarantee that anyone else will ever be able to make good use of it.

If the question you are wrestling with in 2009 is whether or not to hold your auction, answer me this: what lives does your event change, and who will change them if you don’t?

One of our consulting services most utilized by clients is helping put the live auction lots in order. We always strive to create a natural flow to a live auction that readily engages the audience and builds to the ultimate climax, the fund a need. Our ability to do this is based on our knowledge of the flow of auctions and an understanding of the value of the live auction lots themselves.

Value plays an important role in the flow of an auction and in the capacity to develop a structure and narrative that works. There are a few simple guidelines, such as don’t open or close with your most expensive lot, and don’t place the most expensive lots back to back. One of the greatest challenges in ordering an auction is determining where to place those “priceless” items, especially class projects for schools.

One school event we work with presents a particularly unique challenge: nearly half of the 45 lots in the live auction are school projects. When initially confronted with the challenge of ordering this auction, we asked Kelly, the event chair, to assign an arbitrary value of “A”, “B” or “C” to each project.

Kelly took the time to look at each and every project from many angles. She looked at what they had sold for last year. She looked at the bidding history of the parents who spent the most money. She utilized ticket sales to identify which classrooms would have the most or least parents in attendance the night of the event. Kelly even applied a little subjective evaluation, to determine if something had any special appeal beyond what “only a mother could love.”

Kelly’s valuation of her auction was invaluable for us, and the event. It also showed a level of knowledge and creativity that underscore a few key points any auction could benefit from:

• Know your audience, especially your highest bidders
• Utilize previous years’ results as a foundation to learn from
• Approach event planning with a creative eye
• Tackle each task within the larger focus of the goals of the event

In Kelly’s case, this knowledge, focus and creativity resulted in the highest-grossing live auction her school has had to-date, including a record-setting fund a need, in the midst of incredibly challening economic times. 2009 is going to call for extra hard work to just make the same as years past.

Odds are, your auction benefit from some simple ABC’s as well.

Who would have ever thought that I would start to think of 2007 as the good old days.

In the last year the combined loss in property values and the stock market amounts to over $9 trillion, or approximately $90,000 for every household in America.

I suspect that it is the secret hope of every director of development that their wealthy benefactors have somehow come through this unscathed and will continue to support their charity with the same vigor as they have in the past.

Unfortunately for donations, the rich have taken a double whammy. Not only have their investments taken a hit, but the percentage return they can expect over the next few years will also decrease. They may still have more money than they can spend in a lifetime, but the wealthy will feel poorer. If you once had $300 million and you now only have $200 million, I suspect that it is human nature to focus more on the missing hundred million than to celebrate the amazing quantity of money you still have left.

The pool of donations to be divided amongst all charities will shrink for the foreseeable future. This will be going on at exactly the same time as most charities face increased pressure to provide more services.

Sadly, for your charity to survive, others will be forced under. The next couple of years will be tough, and, as shocking as it may seem, we may all start looking upon 2007 as the good old days.

It is important to make the most of the money you have in the room at an event, but doing so is not always as straightforward as it might seem. Every event has a ceiling, a maximum dollar amount that is appropriate for any single bid or fund a need pledge.

This ceiling has as much to do with the biggest bidders in the room as the people who can’t afford to spend a dime. In fact, it has everything to do with the relationship between them. No big bidder wants to stand out too far from the rest of the crowd. No one wants to make a bid on a lot and hear someone in the back of the room gasp, “that’s three months’ rent!”

This is one of the reasons we recommend doing at least 10 lots before your fund a need. Not only do we need to successfully devalue money, we need to make people who are willing to spend the money heroes and not fools. It is also why we recommend working with donors to establish the lead donation for the fund a need. There is more strategy at work than simply starting at the highest point someone is willing to commit to.

Just because one donor is willing to give you $10,000 doesn’t mean it is appropriate to open your fund a need there, especially if the high water mark for any other auction item has been $4,000 or less. We had $10,000 lead donors in each of the fund-a-needs for the past two events I’ve done. One raised $70,000 and the other less than $30,000.

At the former event, $10,000 was a completely sensible place to start the fund a need. We’d opened at $10,000 last year, and items have historically sold for close to that amount. When we opened the fund a need and started collecting pledges, three people raised their paddles: the same three people who had been bidding each other up on some of the big lots all night long.

The other event, however, was a different story, and a reminder of why bigger, higher, more is not always the best motto for fundraising. The ceiling in that room was around $4,000 - it was a highly corporate event with a few committed board members comprising the majority of the bidders. One exceptionally committed board member told me that he wanted to open the fund a need at $10,000 and get everyone else to come along with him.

He came up onstage during the ask, and challenged the crowd to match him at $10,000. Crickets. Nothing but the sound of crickets in a roomful of silent paddles. He quickly dropped to $5,000 then $1,000, put up another $10,000 of his own money, and threatened to pick people up and shake the money out of their pockets. All told, we made an additional $17,000 in the fund a need, on top of his $20,000. He showed great passion, but we did not make the most of his money.

If we had been able to work with him during the planning process and come up with a strategy, we could have given ourselves a better chance of getting more participation from other bidders.  For example, if we used his money as a challenge grant at the $1,000 level, we could have pushed for more participation from the crowd as a whole. There was no-one else in that room with $10,000 to spare, and they all knew it.

We could have then opened at a level commiserate with the expectations of the room, and not blown everyone out of the water. He could have been the hero for making such a grand commitment, and the rest of the crowd could have been made into heroes as well for rising to his challenge. As it was, he seemed pushy and everyone else felt inadequate.

Asking for money is hard. Asking for it at the appropriate level, firing up the room and getting everyone to join together to make something positive happen is a minor miracle. A miracle that requires months of planning, clear communication with donors, and an intimate understanding of the capacity of your crowd.

Every event walks the tightrope between good party and successful fundraiser. If you don’t throw a fun party, no-one will want to come back next year. And if you don’t raise enough money to support the cause and justify the party, it isn’t worth doing next year.

A truly successful event has a unified vision from beginning to end that makes it fun to raise money for a cause the crowd is pre-disposed towards passionately supporting. Attendees should be invited to support a fundraising event that will be fun, not invited to a party and hit upside the head with an unexpected call for cash.

Everyone on your team’s vision of success should include maximizing the philanthropic potential of your attendees. There are always compromises, and I’m not suggesting that every event should have the same length auction start at the same time and feature the same lots. But I am wishing that event planners and event management companies would get on board with making auctions successful, and think about some of their decisions from an auctioneer’s perspective.

Case in point: at an event I did two weeks ago, the event planner put together a stunning room. Monarch butterflies were the main thematic element, and they were everywhere; projected on the ceiling, sitting on each place-setting’s napkin, and covering the three-foot high metal “tree” centerpieces at each table. From the standpoint of an event designer, it was gorgeous.

Guests at each table could readily see their mates across from them without the centerpiece blocking their view. And when you looked around you saw a forest of butterfly-covered trees. And that was the problem.

From the back of the room you couldn’t see the video screens through all of the trees, rendering the much worked-on video about the organization and its great work invisible to all but a few up front tables.

And when I was on stage, I was probably more voice than visible presence as well. Meaning guests couldn’t see me, and I couldn’t see them, or their paddles. I am most effective when I can look a bidder in the eyes and ask them to spend more money. That night, I was happy just to figure out where the bidders were. Establishing any sort of intimacy died on the branches of fifty-something Monarch encrusted trees.

I know the event planner and his team very well. I’m already carefully wording my follow-up conversation with them. Seeing as how this isn’t the first time they’ve done something like this at an event I was working on, I want to at least get them to acknowledge I have a perspective, if not see things from it now and again.