Live Auctions Provide a Way to Leverage Scarce Start-up Dollars

Starting a new business is a daunting task by any standards, but the difficulty is multiplied when one has a limited budget. Fitting out a professional office space can be costly, especially if one is expecting to meet with clients onsite; and equipping a lawn-care company or restaurant is almost impossible for the impecunious if one buys the mowers or pizza ovens at full retail prices.

For the diligent and patient entrepreneur, however, live auctions provide a way to leverage scarce start-up dollars and build the infrastructure of your business at very modest costs.

A live auction, as opposed to eBay, is one you can attend in person to inspect all the items being offered. And while the number of hedge-trimmers being offered on eBay at any given time might be huge, so is the audience; at a live auction it frequently happens that you will be the only bidder, which is the key to bargain-hunting.

Live auctions are of two types: liquidation sales, and general merchandise auctions (general merchandise auctions sometimes masquerade as "antique" sales, but much of what shows up at antique sales is not very old). Liquidation sales involve the dispersal of the assets of a company, and they frequently are devoted to a single business like a failed restaurant, machine shop, or service company. If you need a hundred cubicle partitions, or four table saws, or a dozen stainless steel mixing bowls, you will find them here--but you may also find other aspiring businesspeople who want the same things, so while bargains can be had, they are a bit more difficult to come by at liquidation sales.

General merchandise auctions gather material from a variety of sources and thus have a wider variety of items to offer. In one auction I attended recently I saw several bookcases, two lawn mowers, a man's fur coat, a nice Victorian couch, five violins, half a dozen oriental rugs, and an appealing oil painting of a pond in Boston among the several hundred lots. If you were an accountant setting up a new office, you could have bought a nice rug, one of the bookcases, the couch, and the painting for under two-hundred dollars. I purchased a large, beautiful oak desk for fifty dollars for my last office, and on another occasion I acquired a fax machine and a box full of paper for a dollar!

While liquidation sales are held on an irregular basis, general merchandise auctions tend to be held on a regular schedule, especially if you live near a larger town. And since one never knows what will be sold at a given auction, it pays to preview them frequently. If you can find time to pop into an auction on a weekly basis you will be more likely to find what you need and buy it at the best price.

All live auctions have a preview period--a time prior to the sale during which you can wander around and examine all the items to be sold. Sometimes this is only an hour, sometimes it can last several days. But you should get to the preview as early as possible for several reasons. Obviously it gives you more time to see the merchandise, to discover in a box lot that Waterman fountain pen or adding machine that you might have missed if you had to rush through. But more importantly, it gives you time to examine carefully the items you've decided to bid on. I can't emphasize this enough. Merchandise is sold "as is, where is" at auction, which means it's up to you to discover any defects or shortcomings before bidding. If you buy a conference table and discover when you load it in your truck that there is a large crack in one of the legs that will render it useless, it's your tough luck. If you don't see anything you need during the preview you don't need to stick around for the sale.

Another important thing to remember is that the sale price, often called the hammer price, is not the price you'll pay. Most auctioneers charge a buyer's premium of ten to fifteen percent; sometimes it will be twelve or thirteen percent, with a 2 or 3 percent "discount" for cash or check, which is a legal method of charging extra to cover credit card processing. If you were the high bidder for an oriental rug at seventy-five dollars, with a 10% buyer's premium you'll actually write a check to the auctioneer for $82.50.

While you can find a list of local auctioneers in the Yellow Pages, it's sometimes worthwhile to attend auctions outside your local area. Many auctioneers belong to professional associations in their respective states, and directories of members can be found by Googling "auctioneers association." If you contact the various members and ask to be on their mailing lists you will receive flyers announcing sales a week or two in advance, so you can work them into your busy schedule.
Liquidation sales are generally advertised in local newspapers, either in the classified section or in display ads. Auctions in my area are listed in the Thursday Weekend section of our paper. Auctioneers also advertise their sales in weekly tabloids such as "Antiques and The Arts Weekly," "The Maine Antiques Digest," and "The Gavel," all of which have online listings as well. Scan the listings, preview those that look promising, and spend only what you want. That way you can save your scarce dollars for critical expenses like marketing and promotion, which is where start-up businesses really need to focus.