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It’s Time to Rethink (and Ditch) Your Auction Strategy

Does your nonprofit rely heavily on auction events to raise money? Charities that run auctions as a primary means for revenue lose important opportunities to raise more money with lower costs.

They also lose opportunities to deepen relationships with their supporters and investors.

Say an auction raises $200,000. On face value, that sounds good. But what you really need to do calculate the auction’s cost per dollar raised. This calculates the revenue-generating efficiency of every dollar you spend on the auction. This example exposesthe auction’s cost-per- dollar-raised is 67 cents. You would be spending more than half the money you raise just to cover expenses.

Attendees typically depart an auction with “stuff” that doesn’t align with the organization’s mission. Moreover, the nonprofit misses opportunities to build real, long-term commitments with attendees.

Effective revenue strategies must be financially efficient and focused on building long-term relationships with your current and potential investors. One example of a financially efficient, relationship-based strategy is a major investments program. Using this strategy potentially reduces the cost per dollar raised to just 12 cents.

Furthermore, a staff partnership professional can shepherd lifelong relationships based upon the investor’s values, which are likely a far cry from the auction strategy.

Events are wonderful for recognizing and thanking current supporters, and for building new relationships. By all means, go ahead and host fun events and celebrate your nonprofit. Just don’t depend upon those events as an effective revenue strategy.

Invest in strategies that raise serious money and build up strong relationships, such as major gifts program. But don’t stay on the auction treadmill. Do the math – then ditch your auction.

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