My Beef With Sponsorship Brokerage

I get asked to sell sponsorship for clients in exchange for a percentage of the total sponsorship sales made (otherwise known as sponsorship brokerage). I get asked this a lot. My answer is always a polite but firm no. Do you want me at the table with you to help with negotiations? Sure! But definitely not as your hired gun…and here’s why:

The 10 Worst Reasons to Hire a Sponsorship Broker

You Are a Charity

Am I saying that no charity should engage in brokerage? That’s exactly what I’m saying. The Association of Fundraising Professionals have spoken out clearly against commission-based fundraising. If you are a member of AFP, you are offside if you engage in brokerage. If you are a charity, you are risking damaging your reputation badly with donors if you engage in this type of  fundraising.

“But wait,” you say! Isn’t sponsorship a marketing activity and not really fundraising? Yes! The problem, however, lies in the perception of the public and the spirit of the ethical code for fundraisers. And if that doesn’t convince you, then check out what the Canada Revenue Agency says (sorry readers from the rest of the world…ignore this paragraph!).

“76. If a charity provides remuneration for fundraising on the basis of results rather than effort, this may be an indicator of the delivery of a more than incidental private benefit. Such arrangements, particularly if not well-documented and/or disclosed, could also indicate that a fundraising activity is harmful to the public interest and therefore contrary to public policy and/or deceptive.”

Source: http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/fndrsng-eng.html

So not only do you risk being blacklisted by AFP and alienating your donors and supporters, but you get to have an uncomfortable conversation with CRA at audit time.

My advice? Don’t do it.

You Have No Contacts

This is the most pervasive myth of brokerage: that your brokers have a magical Rolodex of sponsors who can’t wait to give away their money but will only do it to those brokers with whom they have an agreement.

Sponsorship marketing just doesn’t work like that. Those who action sponsorship investments for their companies do not do so based on a secret underground web of brokers…they do it based on their target audience, brand goals, and measurable outcomes.

When you hire a broker, the first thing they do is engage in the activities I suggest all of my clients do and outlined for free in these articles:

• How to Get 394 Warm Sponsorship Prospects in Your Pipeline – for Free
• 5 Questions for Every Sponsorship Prospect
• Sponsorship Recruiting, the Cowboy Way
• The Ultimate Sponsorship Prospecting Formula

Ask yourself this:

Where exactly did these brokers get the contacts they do have? Why from their last client, of course. When a broker moves on from you, the only way for them to make money is to sell your sponsors (that you paid them for) to your competitors, leaving you with nothing. Giving up the relationships with your prospects to a third party is a bad idea and short-term thinking at best.

You Don’t Have the Staff or Financial Resources To Do It In-House

I think that brokerage appeals to the risk averse, which is ironic because it is actually far riskier than hiring someone to handle your relationships internally. The false belief is that the broker only gets paid if they raise money and is therefore a sure thing and reasonably priced.

First of all, if a broker is willing to take you on, it’s because you have a sure thing, golden goose property. They don’t take on risky properties that require a lot of work. Brokers charge on average 25% of all sponsorship (you don’t get to close your own sponsorship, leaving the hard stuff to them) plus expenses.

If your goal is to raise 500K in one year, then you could hire yourself a full-time sponsorship sales professional with money to spare. Or you can hire a broker and still be on the hook for activation, fulfillment and refunds if something goes wrong. If you plan to raise $1 million, you can hire a fleet of internal sales professionals!

If your goal is to raise 50K then any broker willing to work on your project should be avoided like the plague.

You Think It Will Be Easier Than Doing It In-House

Set it and forget it right? You hire the broker, they make a sponsorship package and send you sponsors. Well, not exactly. You still have to build an inventory, do a valuation, deal with demanding sponsors, account management, stewardship, activation, fulfillment, renewal, provide leads and give access to your board, customers and service providers.

“The ask” is about 5% of the total sponsorship sales process, leaving you on the hook for 95% of the process, yet your broker is getting 25% of the total value…and who knows what was promised to make the sale.

Commission is The Best Motivator

The belief is that, since brokers work on commission, the more they sell your assets for, the better for them. Therefore, they are naturally inclined to get as much money as possible. This is another one of those things that seems obvious and logical…until you dive into the psychology of the brokerage process. A brokerage is a business, designed to make money.

Which of these scenarios is more profitable for the brokerage?

Scenario one:

Go to 200 hours of meetings to find a prospect with a budget that fits the target value and then spend 500 hours negotiating with a prospect to get the highest amount for that asset.

Sponsorship sold for value of 100K, broker gets 25K or $36/hour for their work

Scenario two:

Broker undervalues your assets deliberately to move the product fast. They go after your low-hanging fruit, those likely to come on board quickly. They spend 25 hours in total and sell your sponsorship for 30K (even though it’s worth 100K).

Sponsorship sold for 30K, broker gets 7.5K or a whopping $300 an hour.

So maybe you’re right, commission IS a strong motivator after all…but it doesn’t work in your favor.

Is brokerage always wrong? I can’t say that for sure but what I can say is that most properties look to brokerage as their first choice and I have heard an incredible number of horror stories. If one of the ten reasons listed here is your motivation for brokerage, then I can say the odds are stacked against you that you will walk away happy.

Nobody cares more about your sales, your brand and your sponsors than you, and by extension, your staff.

You Won’t Know Good Brokers from Bad Ones

What makes for a good sponsorship broker? They should have experience, especially working with sponsorship properties like yours. Rather than just taking their word for it, they should have a record of excellence, including case studies and maybe a certification or two.

Here’s the issue, though. In your experience working with sponsorship brokers (which, by the way, is not the same as a sponsorship consultant), you might not know how to find the good ones from the bad ones.

Or maybe you’re in a rush and just want any sponsorship broker, so you’re less discerning about who you choose.

Either way, when you end up selecting the wrong broker for you—which happens more often than not—you could end up in trouble. I’m talking about your organization or business getting scammed, as that’s how these relationships with bad brokers usually end.

If your broker doesn’t have much of a media presence in your industry and they’re a ghost on social media, those are already red flags. You should also be wary if they promise you the moon and stars, such as million-dollar sponsorship deals when you have no sponsorship experience.

Some other signs to watch out for? If they ask for a retainer upfront before delivering results, you’re going to get scammed. They’ll take the money and run.

It’s also worth noting who contacts who. After all, you’re the one in need of a broker’s services. They should be busy enough that they don’t have to solicit random sponsorship seekers, hoping to get a bite. If you don’t reach out to them first, you should strongly reconsider working together.

You’ll Struggle to Find Good Brokers

I’ll admit that there are good brokers out there, as there are good eggs in every basket. However, discerning between them and the bad brokers can be difficult at first, at least until a bad broker burns you badly.

Good brokers usually have a waiting list a mile long. Everyone wants to work with a quality broker who doesn’t overpromise, won’t ask for a retainer upfront, and is otherwise not fishy.

Since these brokers are in such demand, they are usually extremely choosy about which sponsorship properties they accept. After all, each property is a form of marketing to them, as they can advertise that they worked with so-and-so and helped them achieve sponsorship results. That helps them attract more high-profile clients.

Therefore, if you’re not already a well-established brand with name recognition, it will be hard to get a good broker’s attention. You’ll only see a swarm of the sketchy ones.

You Know Your Audience Best

You have your audience’s best interests at heart when making business decisions (or at least, I hope you do). However, a sponsorship broker doesn’t. All they care about is pushing a deal forward so they can get a cut of your money.

They don’t care if your audience is red, white, blue, green, or purple. Thus, while working together, you’ll have to advocate extra loud for your audience. If the broker makes wild assumptions about your customers, donors, or attendees because they didn’t bother to learn about them or don’t care to, you need to set them straight.

This can get exhausting, and goodness forbid you make a mistake. You could proceed with a sponsorship deal that doesn’t have your audience’s needs front and center, alienating them and affecting future attendance.

You Won’t Get Your Full Sponsorship Sum

If you’re budgeting for $10,000 in sponsorship funds but hire a broker to assist you, let me tell you some bad news. You’re not getting all $10,000. The broker has to get their share.

Sponsorship brokers have different payment structures. Some may charge you a flat fee, which means that for each month you work together, you pay the broker the same amount. For example, if you select a flat fee of $500 and team with a broker for six months, you’ll owe them $3,000.

A flat fee is beneficial in that no matter how much or how little work the sponsorship broker does, your fees don’t change. However, the costs can end up being astronomical the longer you’re associated with them.

The other payment structure is a commission split. Brokers will take a split of the sponsorship sales, such as a 70-30 split. In other words, you would receive only 70 percent of the sponsorship income and the broker would get the remaining 30 percent.

You’re going to have to budget for a little extra if you have a specific sum you’re seeking from sponsors. That may mean relying on the broker to find you more sponsors, which further digs you deeper into the hole of owing brokers more money and always being short of your sponsorship funding needs.

You Lose Out on Valuable Time

Planning a sponsorship, especially if you have a time-sensitive event on the calendar, is a task you need to take care of immediately, as it’s almost impossible to secure a sponsor with only a few weeks to go until your event.

Considering that you’re already under a time crunch, do you really want to deviate from your schedule further to spend several weeks seeking sponsorship brokerage? You have to go through the processes of finding a broker, then learn how they work, and then you can get a sponsor through the broker.

Well, if you’re lucky. Remember, they can always take the money and run, leaving you broke, without a sponsor, and with less time to work with.

I don’t know about you, but it seems too risky!

You Won’t Learn the Ropes of Sponsorship 

Here’s the biggest and most important reason to forego hiring a sponsorship broker. When you constantly rely on someone else to figure out how sponsorship works, who to speak to, and how to secure deals, you don’t learn anything yourself.

You can’t rely on brokers for your entire sponsorship career. That would be very expensive. However, the more sponsorship relationships you have on your resume without any idea of how you achieved them, the harder it’s going to be to learn how it’s done.

Do yourself a favor and learn how to do sponsorship properly now, today. We have plenty of amazing resources here on the blog, in my private Facebook group, and on YouTube. You can also contact our team for a free call.

Once you understand how sponsorship works, you’ll wonder why you ever considered hiring a broker.

FAQs

Should I Be Wary If a Broker Offers Me a Guarantee?

Yes, you should. Most will ask for a retainer while saying you’ll make some grandiose sum. If, by chance, you don’t make that amount, they say they’ll give you the retainer back, but how many do you think actually do that? Not many!

Can Working with a Sponsorship Broker Hurt My Reputation?

It won’t make you look good, but it’s probably not the end of the world. The far bigger issue is how you won’t learn to do sponsorship yourself, as that can hinder you down the road.

How Long Does It Take to Find a Sponsorship Broker?

A bad one? Immediately. A good one? It can take a while, and even then, since they have so many requests to sift through, it could be a while before you hear back, if you hear anything at all.

Wrapping Up 

Brokers may seem like the saviors of sponsorship. They’ll fill in your knowledge gaps, helping you find sponsors and earn high-dollar deals. Well, that’s what they want you to believe.

In reality, a sponsorship broker is often a scam. Even if they aren’t, they hold you back from learning how to navigate sponsorship yourself, which is your biggest loss when you put your sponsorship opportunities in a broker’s hands.