Demystifying Sponsorship Valuation: Common Pitfalls to Avoid When Assessing Sponsorship Opportunities
One of the most common questions I receive from sponsorship seekers is this: How much is my opportunity worth?
I’ve called this a million-dollar question on the blog before, and that descriptor is quite apt. And yes, you can sometimes take that literally.
There is only one way to find the answer to this question, and that’s through valuation.
Valuations are tricky, and first-time sponsorship seekers commonly get them wrong. Unfortunately, screwing up valuations is often the nail in the coffin for a sponsorship deal, especially if you inflate your value.
This guide will go through all the pitfalls my clients have experienced when navigating the early days of valuing sponsorship opportunities. It’s my goal that you’ll avoid these mistakes so your sponsorship properties have a higher chance of impressing a sponsors all the way through negotiations and beyond.
Valuation Mistake #1 – Not Valuing
By far the most frequent gaffe committed on the part of sponsorship seekers is failing to value their assets and activations at all.
Now, I know how this sounds, but fortunately, it’s an omission made in error a lot of the time. They don’t realize that they’re supposed to value their assets, or maybe they know but have no idea how.
Some sponsorship seekers are aware you’re supposed to value assets and activations but don’t. Maybe they’re afraid of getting it wrong, they don’t have the time, they’re not interested in the extra work, or they assume their sponsor won’t know the difference either way.
The latter certainly is not true. Sponsors are smarter than you think, and they know when you’re lying out your teeth.
Here’s the thing about valuations: they serve you most of all.
That’s right, at the end of the day, valuations aren’t for your sponsor. They’re not even really for your audience. They’re for your business or organization.
I always liken valuations to going to a pawn shop with expensive jewelry and selling it for a fraction of what it’s worth because you didn’t bother to research or request an appraisal.
A valuation is like an appraisal. It tells you exactly what your sponsorship property is worth, for better or for worse.
If you don’t value, you’ll ever know if you’re underselling yourself and losing out on thousands to tens of thousands of dollars.
Is that a chance you want to take? That’s up to you to decide, but many sponsorship seekers say no.
How to Fix It
Unfortunately, there is no magic bullet solution. The only way to fix your issue with failing to value your assets and activations is…to value your assets and activations.
I know it’s time-consuming and not exactly the most glamorous work, but it’s part of the process. The sooner you get it done, the sooner you can continue onto what’s next.
Valuation Mistake #2 – Guessing Your Value
The next big valuation error common among sponsorship seekers is guessing the value of their sponsorship opportunity.
This can again stem from a lack of knowledge about valuations or a lack of interest and time. Whatever the reason, a sponsorship in this position usually has gotten to the point where a sponsor has asked them from numbers and know from experience not to come up empty-handed.
Instead, they make a number up or take a lucky guess.
Another motivation to guess at one’s sponsorship value is in the hopes that by tacking on a few extra zeroes to the end of their value, a sponsor will willingly and gladly open their wallets.
However, that’s not how it works. A sponsor won’t know the value of your sponsorship deal any more than you will without a valuation. However, they can tell when something isn’t adding up.
For example, if you’re offering primarily logos but asking for $50,000, that doesn’t make much sense. That’s why sponsors often ask about your valuation process, as they want to see if you can replicate how you arrived to your value.
How to Fix It
There’s no real fix for this either except to stop guessing and begin valuing. You’ll come across as much more confident when you interact with sponsors, and you won’t have to worry about being caught lying.
Valuation Mistake #3 – Copying Someone Else’s Valuation
Another cardinal sin of valuations is copying a valuation you find online.
I know it can feel like striking the jackpot when you do valuation research and find someone’s valuation in PDF form. It’s just waiting for you to use, right?
No, but many sponsorship seekers can’t help themselves from copying valuations. Perhaps you don’t only take from company, but you piecemeal several valuations together.
Here’s why this is such a big mistake. Even though other companies might have assets like yours, theirs aren’t exactly the same. Your assets and activations could be worth more, and you wouldn’t even know it by copying someone else’s.
How to Fix It
Just as has been the case the entire time, you must get into the habit of valuing your own assets and activations. You can use other valuations you find online as another resource for determining the price of your sponsorship property, but you can’t out and out copy.
Valuation Mistake #4 – Not Valuing All Your Assets and Activations
Sponsorship seekers have a ball with the asset ideation phase, as it’s a lot of throwing things at the wall and seeing what might stick. Brainstorming can be fun, especially if you involve several teammates or stakeholders.
However, it’s a lot less fun to have to value 60 or 100 assets. So, what happens with some sponsorship seekers? They value a couple of assets and activations, realize how much time it will take, and then stop.
However, this won’t do. If you began valuing in chronological order or even with no rhyme or reason, how do you know that you valued the most high-priced assets? Simply put, you don’t.
As convenient as it can be to evaluate a couple of assets and call it a day, you’re doing your sponsorship property a major disservice.
How to Fix It
You must value all your assets and activations, no matter how massive the list is. That doesn’t mean you have to do it all in one day.
If anything, I would caution against that. Information overload can make it tough to process numbers after a while, leaving you prone to making mistakes.
It’s fine if you evaluate your assets and activations over several days or weeks, provided you have the time to do that. In the future, plan for more time for valuations if you have a massive list of assets.
Valuation Mistake #5 – Assuming You’re Worth Way More Than You Are
What’s one of the fastest ways to kill a sponsorship deal? That’s simple. Over-inflate the value of your sponsorship property.
This is a lot likelier to happen if you don’t bother with valuations, guess your value, or copy somebody else’s. However, sponsorship seekers sometimes take the time to value their assets and aren’t happy with what they see.
Rather than honestly assess their asset value, go back to brainstorming, and come up with more valuable, tailored assets, sponsorship seekers sometimes increase a three or four-figure deal into five figures.
It’s only a matter of time before a sponsor will realize you’re asking for far more than what your value dictates. A sponsor usually won’t correct you. If anything, you’ll suddenly hear radio silence.
How to Fix It
S tart with audience data if you don’t already have it. This is because your audience is your most valuable asset so you need as much information about them as possible. I recommend at least 25 data points on each audience segment you already have.
This will break down large, broad segments into very small groups. However, that’s exactly what it’s supposed to do. Niche data is very alluring to sponsors, as it helps them determine if your audience fits into their target market.
Once you have that, use your audience data to prospect for sponsors based on the brands your audience mentions using. Have a discovery session, asking questions of the prospect such as their current difficulties, what they’ve tried, and goals.
You should only begin planning assets and activations after the discovery session. The best assets are customized according to the sponsors need. Next, go through and evaluate your assets and activations. You shouldn’t feel the need to add extra zeros because your sponsorship program should be worth quite a lot.
Valuation Mistake #6 – Not Valuing Assets Again When You Sign a Long-Term Sponsorship Renegotiation Deal
There’s one more sponsorship valuation mistake I see quite frequently, and it occurs when renegotiating with sponsors.
The renegotiation phase is an exciting time. The assurance of working with the sponsor again eases you into budgeting for the next event, and save you time, as you have one less sponsor to search for. You know your audience will be happy, especially if they enjoyed last year’s sponsor participation.
However, sponsorship seekers can threaten to throw the whole deal sideways by reusing assets from the prior arrangement or creating new assets and activations but not valuing them.
Even if you’re offering your sponsor an extended deal for several years, you still shouldn’t resell them all the same assets and activations from the year prior.
They have different goals and challenges now and expect you to react accordingly. You can use some assets if they still work, but the sponsor will anticipate that you’ll have another discovery session and craft new, custom assets and activations just as you had the year prior.
You must value everything, even the assets you might repackage this year must be valued again. With the rising prices of everything, you don’t know that the cost of your assets didn’t increase between last year’s event and this one.
Even if the market price didn’t jump, the value of your services should have. You’ve improved at the services through this sponsor and others, which makes your assets worth more than last year.
We’re usually not talking a great deal more money here, but it adds up. Even if each asset is only worth a couple hundred dollar more, if you have 10 assets, that’s already at least $1,000.
How to Fix It
Value everything – new assets, old assets, it doesn’t matter. You might also repackage or combine assets, which also requires a valuation.
By this point, you’ve worked hard to strike up a deal with your sponsor, learn their pain points, and create customized solutions. They’re happy enough with your services that they’re strongly considering you for another year or event. Don’t destroy all that goodwill by flubbing the assets.
Take the time to value everything from scratch. Compare last year’s numbers with this year and find a good go-between. As I mentioned, your asset prices should increase, even if not by a tremendous amount.
I see no reason why any of your assets and activation prices should go down when renegotiating with a sponsor. If you underdelivered or failed to deliver assets, I wouldn’t recommend adding those to your assets list this year.
There had to be a reason why you underperformed, and unless it was an act of God or something similar, it’s best to stick to those activations and assets you know you’re fully capable of delivering.
Conclusion
Sponsorship valuations are one of the most important parts of the entire process, yet they’re also among the most difficult. This means sponsorship seekers often find themselves between a rock and a hard place.
I hope your biggest takeaway from this guide is that there are no shortcuts. You can’t skip valuations, as your sponsor will know. You similarly can’t make up numbers or steal someone else’s asset pricing, as your sponsor will also realize that.
You must be willing to put in the work, asset by asset, to determine the market value of each. Then you must compare that value against your perceived pricing, using an internal moral compass to keep the prices fair but profitable.
Hop on a call with me today to discuss valuing your sponsorship property.
ABOUT THE AUTHOR
Chris Baylis is the President and CEO of The Sponsorship Collective and a self-confessed sponsorship geek.
After several years as a sponsor (that’s right, the one investing the money!) Chris decided to cross over to the sponsorship sales side where he has personally closed tens of millions of dollars in sponsorship deals. Chris has been on the front lines of multi-million dollar sponsorship agreements and has built and coached teams to do the same.
Chris now spends his time working with clients to value their assets and build strategies that drive sales. An accomplished speaker and international consultant, Chris has helped his clients raise millions in sponsorship dollars.