Four Auction Rock Stars Share their Industry-leading Advice for Maximizing Asset Disposition ROI

What’s the criteria when choosing between a timed online auction and an on-site auction?

Today, IR professionals have too many choices when it comes to auctions. When to sell? How to sell? Who’s the best auction company for certain surplus assets? How can I maximize my auction ROI? Timed-online or on site? A few years back, an auction was the last, perhaps desperate resort for disposition. Just haul that stuff to the auction yard, let that silver-tongued, fast-talkin’ auctioneer whip up some excitement and hope for the best. Thankfully, technology has brought us into the age of online auctions, while upgrading the on-site option as a viable and strategic choice.

Richard Ehmer: There is a steady move towards utilizing Timed On-Line only formats to dispose of surplus assets within the industry. Buyers today are increasingly more tech-savvy and prefer to minimize expenses, such as transportation or travel costs to a physical auction location.

Gary Seybold: Typically, there are three auction choices that we recommend:

Unreserved onsite auctions—When you want no-hassle, turnkey selling, combined with the excitement of a live auctioneer and certainty of sale, go with an unreserved onsite auction. Look for an auction company that offers the most pre-and post auction services with the biggest market reach —even globally.

Weekly online auctions—When you want quick access to cash without the added transport hassles—online-only auctions are probably the best way to go. With the sale and transaction all taking place online, it’s a convenient and cost-effective choice.

Reserved online marketplace—With a reserved auction, you have the choice of selling at a fixed price, negotiating offers, or setting a reserve (minimum) price, giving sellers more control over price and when you sell.

Tyler Maas: The first criteria should be: Make sure you have the right auction company for your surplus assets. The next step would be choosing to go online or on-site. That’s where your auctioneer can be invaluable because they can advise on the best market platform. Factors to be considered to go online or onsite are transportation and warehousing costs, time of year, market demand and the size and scope of the merchandise itself. The bigger the lot such as large equipment and machinery the more time your auctioneer will need to promote it. Also, if you have multiple locations with equipment then online might be a better route to go, rather than relocating all the equipment.

Does time-of-year make a difference to specific surplus to be auctioned?

Russ Wood: Certain assets perform much better in different seasons. We try to evaluate our clients’ potential surplus items each year during their budget cycles for the following year and lay out a roadmap for a maximum return.

Gary Seybold: Yes. For example, the agricultural industry is very seasonal, which is why we plan our agricultural auctions around planting and harvest seasons. Another quick example would be snow plows with a higher demand in the fall/winter months.

Tyler Maas:  Obviously, live auctions in colder months attract fewer buyers. Certainly, you wouldn’t want to sell large equipment at a live auction during the winter if your equipment is located in the Upper Peninsula of Michigan. And that goes for plant removals as well, and in our business, that means ethanol/biomass plants— which typically require up to six months for removal of larger equipment. So if that removal extends into winter, you don’t want riggers working in the snow and ice that slows down the work and doubles removal costs which the buyers will factor into their bids since they pay removal costs. Bankruptcies are always interesting because the courts are not thinking about the best time of year to sell the assets, you get the call and they want a sale date in 90 days.

How can an IR Manager maximize his/her ROI on an auction vs. liquidation?

Tyler Maas: A liquidation can be defined as ‘an orderly negotiated sale’ with an open-ended time frame. An auction has a set time frame for bidding in an energized environment that can drive the price up. A big factor to choose between the two is market demand.  At one auction, we sold new/unused centrifuges at above new cost because the backorder for new centrifuges was over six months.

Russ Wood: A well-advertised and managed auction is the best way to determine what something is worth.  The auction environment creates a bidding frenzy among buyers with an immediate need that can drive up the price. This is especially true when that same item is on back-order at the dealerships.

Gary Seybold: Whether liquidation or auction, the most important tip I would provide an IR Manager is to provide us as much time as possible to market their assets to the world through emails, brochures, media campaigns, paid advertisements, etc.

Richard Ehmer: A liquidation-based auction sale or a hybrid of both can net great results. Buyers know that everything must go on sale day and therefore attracts large crowds. They think great deals await them, but in reality, strong prices rule at liquidations.   IR surplus sales rarely take the form of a liquidation, but when they do the seller should subcontract a qualified auction company.

 

Gary Seybold: Work with an auction company that has expertise in specialized assets and options to handle uncommon surplus. We often see specialty assets with smaller potential buyer audiences that would require specific platforms, including a reserved online marketplace and private treaty service.If you have a specialty such as heavy equipment, fleet, plastics, chemicals etc. what are some special considerations not well-known to the IR industry?

Richard Ehmer: Specialty equipment sales usually require approval from upper management. That means making a presentation of the asset(s) to be sold, estimated ROI, recommended auction format, marketing plan and associated facts, book value, write-off time frame etc. Can the company or plant take the hit for the gain or loss on the asset being sold? You can lose time and manpower and never sell the asset if you don’t have all the answers and approvals in place beforehand.

Tyler Maas: When making specialized equipment purchases, make sure you keep the original documentation – purchase order, repair record, manual etc. And what’s really important is this; equipment and vehicles with complete documentation sell faster with higher bids. Also, keep all hazardous waste materials labeled. With unknown materials, we have to assume the worst and get it identified…and that takes time. So that’s a huge financial obstacle, an easy $1,000 disposal fee could turn into $10,000 if you need to get every drum/tank tested. Tanks need to be empty to be moved, so make it easy for buyers and have them all empty prior to sale.

 

What are the biggest mistakes IR Managers make when utilizing an auction service?

Russ Wood:

Underpricing your equipment

Timing of the auction

Not utilizing event-based auctions that create a sense of urgency which in turn attracts more buyers. 

Not utilizing a professional to take photos and video of the assets to show both the condition and functionality to potential buyers

Not offering post-auction services to buyers such as containerizing for export buyers and getting the equipment to the ports.

Not picking the right auction companies with proven experience selling the same assets that you want to be sold. That means asking for references and making sure that they are not so busy that you get lost in the crowd.

Not having a point person at the auction company to coordinate information and logistics in a timely manner.

Tyler Maas: “…I see too many surplus assets stored outside without protective covering…”

Not nailing down exactly how the auction company will promote your sale.

Not offering open houses where the auction team can casually poll buyers for what their opening bid for items might be or what the buyer thinks something is worth. Buyers have a tremendous amount of valuable information which can be helpful to maximize sale prices.

Not pre-determining the bid increment strategy used by the auction. People like to bid in an energized, on-site auction, so smaller bid increments tend to push the purchase price.

Not disposing of ‘white elephant’ assets ASAP: The longer they sit, the more they depreciate in value while incurring warehousing costs. This is especially true for equipment with bearings; sitting idle for extended periods tends to flatten out the bearings. And most savvy buyers know that and ask how long the item has been stored.

Ehmer & Seybold: IR managers who go with the low bid auction proposal, not with the auction company that has the best experience and reputation selling the assets to be sold.

 

When choosing an auction partner—what qualities or experience should an IR Manager look for?

Industry expertise and reputation, financial strength, sales history, sound references are all key factors cited by our respondents in choosing an auction company. Additionally, they suggested:

Russ Wood: The company you choose is representing your name to the general public… Ask the auction company what other options are available to you. For instance, do they offer a price guarantee? If the equipment brings less than the guarantee, will they make up the difference?

Tyler Maas: There are many auctioneers who are generalists, and can help you dispose of more commonly used assets. But if you have niche surplus assets, go with the one who has proven experience in that market. Take ethanol plants, for example, we have sold over 75 in the last 30 years and know all the buyers in the industry.  So if you had a surplus ethanol plant, you would want to partner with an auctioneer with that specialty.

Richard Ehmer: Important questions to ask a prospective auction partner are:

What are the sale returns from previous auctions and repeat business history?

What’s the size of staff—from beginning to end—who will handle your auction?

Are they a full-service auction—or simply a listing service of assets?

Do they pay out within 14 days of the sale? (They should)

Are they properly bonded with a current state license?

Are they properly trained in operating equipment?

Gary Seybold: It’s important to look at the financial stability, reputation and other services provided by the company… So if you’re looking for a change in your disposition strategies, start here…with some of the top advice—straight from the top!