Auctioneers take on a number of diverse projects — maybe contract bid calling one day, cleaning and readying farm equipment the next day, selling horses the next day and emptying a hoarder house the following day … and as such auctioneers sometimes wonder how to charge … by the hour, by the project, by the day and/or a commission?
First, how do commissions work? If I charge someone 30% commission, I get $30 for every $100 raised. What’s the possible issue with this? What if I work all day and only sell $1,000 worth of product? I spent 8 hours making $300 or about $37.50 per hour.
What can I as an auctioneer do to have a more equitable arrangement in this situation? Combine a 30% commission with a minimum per day or minimum per hour. If my minimum charge for 8 hours is $600, and I only sell $1,000 worth of property at 30%, my income is $600. However, if I sell $3,500 of product, the 30% is $1,050 so I earn that instead of only $600.
How do fees work? I might charge $1,000 to set up an auction. What’s the possible issue with this? What if I work 4 long days completing the setup? I spent almost 30 hours making $1,000 or about $35.00 per hour.
What can I as an auctioneer do to have a more equitable arrangement in this situation? Combine a $1,000 fee with a minimum fee per day or per hour. If my minimum charge for setup is $1,000 per day and it takes only 1/2 day for setup, my income is $1,000. However, the setup takes 4 days my fee is $4,000 instead of only a flat fee of $1,000.
When we first entered the auction business in Columbus, Ohio, my mentor and employer Jack B. Smith charged “10% or $500 (whichever is greater) plus expenses” for any onsite auction. We had some auctions gross only $2,500 where he earned $500 and we had some gross $25,000 where he earned $2,500.
Jack referred to this arrangement as his “tiered” auction fees. As he described it, he was protected if the auction was small as well as if it was large. This type of fee structuring (commissions, fees) helps deal with uncertainty. Many of our onsite auctions were difficult to assess when we were booking the auction, and this protected us from a less than a profitable day.
The more predictable an auction is, the less this “tiered” system would be necessary. As such, Jack and I did an auction each year for the North Broadway United Methodist Church in Columbus. The auction was always about $5,000 in proceeds and he [could have] charged them 10%. Some years it was $4,500 ($450) and other years it was $6,000 ($600) but 10% was reasonable in all cases.
Lastly, and maybe most importantly, auctioneers are not to use this “tiered” system to their unfair advantage. For example, an auctioneer charging 25% or $10 per lot (whichever is greater) and then taking an otherwise 100 lot auction valued about $10,000 (25% — $2,500 in commission) and making it a 1,000 lot auction (breaking these lots into smaller ones) valued about $10 each and thus earning 100% — $10,000 in commission.
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.