I was discussing with a 50-year veteran auctioneer various topics the other day, and near the end of our conversation, he proclaimed, “Auctioneers can’t afford to sell items for $1.00 — the clerk ticket costs more than their commission.”
This made me wonder what the minimum cost an auctioneer would incur to sell an item for $1.00 (or for any amount) at a live auction. Here’s my analysis.
Let’s assume it takes 30 seconds to sell this item for $1.00. If the auctioneer has a clerk, cashier, and ringman working at $10.00 per hour, that cost alone would be $0.25. A 3-part clerk ticket on a sheet of twelve, costs about $0.02. The ink in the pen might cost $0.01, depending upon the pen being used. That total alone comes to $0.28, so far.
Of course, auctioneers incur other expenses including inventory, setup, marketing, bid cards, signs, clean-up, utilities … the list goes on. Plus, of course, auctioneers wish to make a profit.
Possibly we could conclude that the cost to run a live auction for 30 seconds, selling one item, might be as much as $0.50. If this is fair, then for auctioneers to profit at all, the commission on this item would have to be any amount earned over $0.50.
Can Auctioneers afford to sell items for $1.00?” Maybe. If their commission on this $1.00 item exceeds 50% then they do indeed make money. However, if their commission is 50% or less, then they probably lose money on this item.
Yet, our analysis here is not comprehensive in at least two regards:
Auctioneers don’t regularly accept multiple $1.00 item consignments, but rather these $1.00 items are consigned along with other more valuable items.
Auctioneers don’t regularly sell items separately which are likely to demand only $1.00 — these items are typically grouped with other like items and sold as lots, in excess of $1.00.
Nonetheless, this veteran auctioneer did make a good point. Auctioneers must be conscious of their expenses in selling personal or real property in order to ensure they make a profit. Auctioneers must make a profit in order to stay in business.
And, minding expenses is not unique to $1.00 items. Some years ago, a somewhat famous real property auction resulted in a final sale price of $8,000 — and the auctioneer had spent over $20,000 in marketing expenses. Of course, there are numerous other examples of similar circumstances as well.
Maybe our question here could just as well be, “Can Auctioneers afford to sell items for $10.00?” or “Can Auctioneers afford to sell items for $100.00?” Given expenses which outweigh the commission on a $10.00 or $100.00 item, those transactions become similarly precarious.
Successful auctioneers mind their expenses, and as well mind their commissions and other charges to ensure they profit from their endeavors.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
Comments