Hiring An Auction Company

In general, one of the first questions an entrepreneur will ask me is "how much the assets will contribute in an auction". After taking the time to review the assets, the auctioneer should give the client a conservative estimate of the sale based on his experience and current market trends. It is important that the company provides realistic expectations so that the seller can make informed decisions according to their best interest.

Compensation and expenses:

The company that is considering working for you or against you? The agreement that you decide can determine this.

The owner of a business should carefully consider how the auction company is compensated. The most common commission structures include: direct commission, direct purchase of assets, guaranteed base with a superior division for both the auctioneer and the seller, guaranteed basis with everything that is above going to the auctioneer or a flat rate structure .

In a direct commission structure, the company is paid an agreed percentage of the total sale.

In a total purchase agreement, the auctioneer simply becomes his final buyer. The company buys its assets and relocates them. While this may be an option in some unique situations, keep in mind that you will want to buy your assets at a very low price to make a profit at a later date.

In a minimum basic guarantee, the auction company guarantees the seller that the auction will generate a minimum amount of sales. Any amount greater than that amount goes to the auction company or is divided with the seller. While a salesperson may feel more comfortable making an auction knowing that a minimum amount is guaranteed for their sale, keep in mind that it is the best interest of the auction company to ensure a minimum base price as low as possible to reduce their expenses. financial responsibility to the seller and obtain greater compensation for the sale.

In a flat rate structure, the auctioneer agrees to present himself for sale and call the auction. There is no incentive for the auctioneer to obtain the best prices for his assets. The auction company is compensated regardless of the result of its sale.

What is the best option for business owners? In my experience, a structure of direct commission agreed. This puts the responsibility in the auction company to offer the best result for all involved. There is an incentive for the auction company to work hard for both parties, establish and conduct a professional sale, obtain the highest bid and sell each item in the inventory. Successful auctions translate into a higher end result for both the seller and the auction company.

Auction expenses:

In most auction agreements the expenses to carry out an auction are passed on to the seller. If the auction company pays the expenses, it is simply absorbed at higher commission rates.

All expenses must be agreed in advance in a written contract. Typical expenses will include the costs of advertising, labor, legal fees, travel, equipment rental, security, postage and printing. A reputable auction company will be able to estimate all expenses based on its experience in previous auctions. An agreement must be actual costs charged as expenses, not an estimated amount.

Advertising is usually the highest cost in conducting an auction. The auction company needs to establish an advertising campaign that promotes the sale in the best possible way and does not spend too much to simply advertise the auction company.

Once the auction is completed, the auction company must provide a complete breakdown of all expenses to the seller, including copies of the receipts within the auction summary report.

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