Frequently Asked Questions: Dutch Auctions
What is a Dutch Auction?
Dutch Auction, also known as a “clock auction”, is a unique type of auction where the seller starts with a high asking price, which gradually decreases until a buyer accepts the price and makes a bid, or until a reserve price is met.
What are the Benefits of a Dutch Auction for Buyers & Sellers?
We've decided to use the Dutch Auction format on our acquisition marketplace for a few reasons, and here’s why:
Dutch auctions create a sense of urgency and encourage buyers to submit their best offer quickly - before someone else does. This allows the seller to quickly find a buyer who is willing to pay the current market price.
Dutch auctions provide a fair way to determine the market value of an online business. Buyers have a chance to enter the market at a price point they’re willing to pay for the business.
Dutch auctions are transparent, as all buyers are able to see the price being offered and can make informed decisions about whether to participate in the auction.
Dutch auctions can help to reduce the risk of overpaying for an acquisition. This can be particularly useful in situations where the value of the business is uncertain.
How will the Dutch Auction work on Investors Club?
We’ve outlined 6 simple steps as follows:
- The seller lists their site for sale on our platform. Potential buyers can view the listing and any relevant information provided by the seller 72 hours before the auction starts.
- During this time, potential buyers may consider doing their own due diligence, or request additional information from the seller.
- Potential buyers will have the opportunity to decide what price level they’re willing to bid.
- The auction begins with the maximum price set by the seller.
- If nobody bids at the maximum price set by the seller, the price begins to decrease. On Investors Club, by default the price will decrease daily by 1%. The Seller can increase a daily drop at any time, and as many times as they like. The price reductions subsequently will continue until someone submits a bid that is equal to the current asking price. For example, if the starting price is $10,000, Investors Club will reduce the price by 1% ($100) the following day.
- Once the price reaches a buyer’s desired level, they will submit their bid on the auction listing. This will immediately end the auction, and the seller will sell the online business to that buyer. The first bidder wins.
Is there a reserve price?
Yes, there reserve price but it is kept confidential and only known to the seller.
Can I submit an offer below the current auction price?
Unfortunately, no. In a Dutch auction, buyers cannot submit an offer below the current auction price. If you submit an offer below the current auction price, it will be automatically rejected. But don't worry, the auction price will decrease each day, giving you more opportunities to bid!
How do I know if my offer has been accepted?
If your offer meets the auction price at that given point in time, it will be automatically accepted. We'll notify you via email that your offer has been accepted, so keep an eye on your inbox!
Can I retract my offer after it has been submitted?
Unfortunately, no. Once you submit your bid at the auction price set for that moment in time, it cannot be retracted. So make sure you're comfortable with your offer before submitting it!
What happens if no one submits an offer during the Dutch auction?
If no one submits an offer during the Dutch auction, the auction will end at the reserve price.
Can I negotiate the price with the seller after my offer has been accepted?
Unfortunately, no. Once your bid is submitted, the sale is considered final, and you cannot negotiate. So make sure you’re comfortable with your bid, as it will be the final price!
Can I see the bidding history of the Dutch auction?
The bidding history is not available to the public. Only the seller can access the bidding history.
How long will the Dutch auction run for?
The Dutch auction will run until an offer is submitted that meets the auction price at that point in time. If no offers are submitted, the auction will end at the reserve price but the site will remain listed for 14 days.