Sponsorship Refunds, Cancellations, and Postponed Events
Today’s post is inspired by a video I made two years ago just when the worldwide pandemic known as COVID-19 was beginning.
Here we are, some years later, and while COVID hasn’t disappeared from our lives entirely, for the most part, events have resumed.
Yet that doesn’t mean that sponsored events weren’t ever canceled before the pandemic, and it doesn’t mean that it can’t ever happen again.
Although 2020 taught us that digital events are quite acceptable, and, among some, even preferable, what do you do if you planned an in-person event that can’t go on as intended?
You promised your sponsor certain outcomes that you now can’t deliver on even though they already ponied up the cash.
You don’t want to ruin the sponsor relationship considering it never got to play out as intended, but you also have no idea where to begin when dealing with postponements, cancellations, or refunds.
That’s why I thought now is the perfect opportunity to talk about this topic.
Your Three Options During Times of Crisis: Cancel, Postpone, or Move Forward
A crisis situation has gripped your company or organization. I won’t pretend to guess what it is, but you now find yourself in a less than desirable situation.
You can’t host your event, program, or opportunity as originally intended, so what do you do?
Well, you have three options. You can either cancel the event outright, postpone it for a later date, or move forward and try to host the event in some way, shape, or form (perhaps digitally if not in person anymore).
The decision is not yours to make alone. Your choice will affect a lot of people, such as the stakeholders in your company, your sponsor, and other vendors involved with the event or opportunity.
I cannot stress enough that no matter which option you’re leaning towards–even if you do decide to carry on with the event but change the crux of it–that you cannot proceed without seeking legal and financial counsel.
I can’t tell you what to do about your event or opportunity. I’m not a lawyer, and I don’t provide legal advice on this blog (or any other blog). I’m also not an accountant or any other type of financial whiz.
All I can do is remind you that you must go through those channels as you come close to making up your mind.
You should also never, under any circumstances, leave your sponsor in the dark. As I mentioned in the intro, by the time you’re on the cusp of your event, money or promotions or in-kind goods or services have usually already exchanged hands.
You got what you wanted and what you need, but the sponsor isn’t getting anything. The people aren’t coming to your event, or they are, but not physically anymore.
What you can offer the sponsor is seriously impacted. For that reason, you might have to refund your sponsor partially if the event goes on or even fully if you have to cancel the event. I’ll talk more about refunds later, but it’s something to begin thinking about now.
You need to communicate with your sponsor more than you have in the past. Every time your event evolves or devolves as it will during some crises, your sponsor needs to know about it.
You might even communicate too much, or what you deem as too much. You’re free to ask your sponsor if the updates are getting a little extraneous, and then respect their answer when they tell you yes or no.
Some sponsors will want up-to-the-minute updates as soon as you have them. Other sponsors, once they know that your event or opportunity will have to significantly change, are fine with being briefed a few times a week on the big updates. They don’t need the second-to-second minutiae.
Canceling an Event: Sponsorship Activation and Refunds
Let’s say that to you and your company or organization, canceling the event for this year makes the most sense.
The circumstances in your situation are dire enough that you don’t think matters will resolve in the next few weeks or months. It’s better to just bow out this year and come back stronger next year.
I want to reiterate that if you do decide to cancel, then you have to be prepared to issue a full refund to your sponsor(s). You did not provide the service that you promised, and even though it might not have necessarily been your fault, that’s still the reality of it.
Can you possibly issue only a partial refund? In some instances, yes.
For example, if some of the outcomes you promised to your sponsor were delivered before the event, and the rest were to be delivered during the event or even post-event, then you did provide some sort of service.
Based on what percentage of the promised service you delivered, you’d have to decide how much to refund the sponsor. More than likely, it will be at least half and possibly more than that.
Under no circumstances should you keep the money. I know it’s a dire situation right now and that you’re going through a lot, but the thought of keeping the money shouldn’t even cross your mind.
What you’re doing in that situation is stealing. Then you’d have a whole lot more on your plate than what you’re already going through. It’s just not worth it.
Give the sponsor their money back. If they decide they’re interested in working with you again the next time you can host an event, then you’ll perhaps get that same money back and then some.
How Much of a Refund to Offer Sponsors If You Cancel an Event?
Are you unsure whether you should offer your sponsors a full refund or only a partial refund? If you do issue a refund, do you have any idea how much it should be? I’ll help you in this section.
If You Sold a Stock Sponsorship Package
Do you read this blog regularly? If you’ve checked out even a post or several, then you’ll know my distaste for stock sponsorship packages. Perhaps you know them more commonly as gold, silver, and bronze sponsorship packages.
I don’t care what you want to call them. Either way, they’re very low-value sponsorship offerings that usually include little more than logos and other signage.
If that’s what you sold your sponsor and they miraculously agreed to buy it, then I’d say your chances of a partial refund are very low, even near zero.
Why do I say that? Most gold, silver, and bronze sponsorship packages I’ve seen are offered in the absence of valuations.
A valuation is determining the value of your assets according to market value.
If you didn’t bother to value your assets, then you have no idea what their true value is. Therefore, it’s very hard for you to gauge how much value you delivered to your sponsor already.
That is, if you even delivered anything. Most stock sponsorship assets require delivery at the event, and you canceled your event. You’d have to offer a full refund in that case.
If You Put Together a Custom Sponsorship Package
Now, what if you did take the time to pursue your sponsorship program correctly and you value your assets?
In a situation like that, you have a much clearer idea of what your assets are worth due to your valuations.
That makes it a lot easier for you to determine what percentage of the promised assets you delivered to your sponsor already versus what you would have delivered during the event as well as after the event.
The value of the sponsorship agreement might have been related to pre-event activities. In that case, the sponsor should agree to a partial refund.
Even still, no matter what kind of refund you’re negotiating with your sponsor, I want to make it crystal clear once again that you should not issue the sponsor a single solitary cent until you speak to your company accountant and lawyer.
They should both review the valuation and help you come up with a refund amount that’s suitable.
In some cases, the contract between you and the sponsor might demand a full refund, and if so, then your hands are tied.
What Options Are There Aside from a Refund?
The Risk of Keeping the Money When Legally Allowed To
What if the contract doesn’t specify a refund at all? Do you necessarily have to offer one to your sponsor?
In my opinion, considering my extensive experience in sponsorship, I would say a refund is still the right call. Even if you are legally entitled to some or all the money, it’s not the best idea to keep it.
Imagine you were shopping at your favorite clothing retailer, and you brought a huge haul of clothes up to the checkout line. The cashier takes your money but only gives you half the clothes you bought. Due to some legal loophole, they’re not in the wrong for this.
It won’t feel very good for you, right? You’re very much aware that the cashier decided to give you only half of what you bought but keep the full value of the money as though they gave you everything.
You might go home and write a disgruntled review or tell all your friends and family on social media.
Even in the absence of any of that, you wouldn’t go back to that store, right? You don’t exactly feel like you were treated very valuably.
That’s how your sponsors feel as well. So you could take the cash and funnel it into the make-up event you’ll schedule soon, but you might jeopardize your relationship with that sponsor in the process.
Think about what’s more important to you, X amount of money now or a sponsor that can offer you three or five times X amount (at least) if you work together in the future.
Other Options to Offer a Sponsor Besides a Refund
If you really want to avoid going down the refund route, you can always offer your sponsor a credit worth Y amount of money.
The credit can go towards any of your properties that serve the same target audience or for that upcoming make-up event.
Keep in mind though that if your sponsor had sales goals that were related to your event happening at a specific time, then you need to make sure you’re finding a way to achieve those sales goals for your sponsor during the make-up event even if it’s happening at a different time.
If you can, then credit is appropriate.
In most cases though, a refund is going to be your option if you’re canceling.
Canceling an event, program, or opportunity can be mightily expensive, but sometimes, it’s what you’ve got to do.
What Happens If You Choose to Move Forward?
What if you decide that you’d like to move forward with your event despite the ongoing circumstances you’re facing? Your event might be a little different, but at least it will still happen.
If the event is not going to happen as planned and that’s going to affect your sponsor, then as I said earlier, they need to know about it.
For example, if you have to change a venue, the superstar speaker or entertainer isn’t going to show up, or you have to move the event from outside to inside (or vice-versa), every single one of these decisions is going to affect attendance.
Your sponsor is expecting Z amount of people, and if half of Z show up, that’s going to affect their outcomes.
Thus, you’re going to have to think about issuing at least a partial refund.
If you’re only considering pushing ahead because you feel like you have to, or you’re afraid of disappointing people by canceling, you might want to think about whether you’re choosing to go on for the right reasons.
I’m not here to tell you what to do. I’m simply here to help you envision your decisions from every possible angle.
If you want to cancel or reschedule but push forward because you feel like you have to, then you might not have a choice down the line.
Other events that decided to reschedule will have the first crack at everything because they preemptively made the choice a lot earlier than you did.
These events will have their pick of dates, locations, vendors, entertainers, speakers, you name it. You’ll be left collecting the scraps if you cancel too late.
The Risks of Proceeding with an Event That’s Not at 100 Percent
Perhaps you’re not worried so much about disappointing people, but you just genuinely think your event does not have to be canceled.
To you, an event that goes on at 65 percent of what it could have been is better than an event with zero percent of what it could have been.
In other words, it’s better to have some form of the event than none at all.
Or so you think. Here are some of the risks you can face by putting on a half-baked event just to have something on the calendar.
Media Partners Won’t Cover Your Event
You promised an extravaganza, but nothing about your event is extra. It’s all just very one-note.
As you strip back your event more and more, media partners who had agreed to cover the event might start backing out as well. The event has become too lackluster and not worth their station’s coverage.
Attendance Will Be Poor
Once your audience catches wind of what your new event will be, they too will not be that excited.
Although they would have shown up in droves otherwise, now you’re lucky if you get half the expected attendance. Some might demand refunds while others will eat the money and just not go.
Your event is going to look incredibly empty. If you were hoping to take overhead shots to impress future sponsors next year, this is not going to be the year to showcase your event.
You’ll Have a Lot of Empty Hotel Rooms
Did you reserve large hotel room blocks hoping your attendees will take up the rooms? Well, the problem is now that far fewer people are showing up.
That leads to a lot of empty hotel rooms. Now you’re on the hook to pay for the cost of 10, 20, maybe 30 or more rooms completely out of pocket.
Your Website Traffic Will Take a Hit
You’ll also notice that your website and even social media traffic will be lackluster in the leadup and time after the event. It can take several months for your rocky reputation to stabilize again.
No company or organization ever wants to cancel or postpone an event, but sometimes, it simply cannot be helped. Even though the pandemic times are graciously behind us, personal or professional circumstances can still cause you to have to cancel your event suddenly and prematurely.
Even if you decide to push forward, please don’t do so because it seems like the path of least resistance. It’s still a choice, and it can have serious ramifications, impacting your company or organization from a customer service standpoint.
Here are several takeaways as we wrap up:
- Even if a sponsor doesn’t obligate you to refund their money, it’s still the right thing to do.
- No matter what you choose, be it a postponement, a cancellation, or continuing with the event in a lesser state, it’s going to cost you money, nonetheless. Take money out of the equation and see how that changes your decision-making.
- You must always keep your sponsor in the loop as these changes are underfoot.
- Never make a choice pertaining to the future of your event, program, or opportunity without consulting with your lawyer and accountant.
- Know the value of your assets to make the refund process smooth, fair, and almost painless.
Finding yourself on the cusp of having to cancel an event is not an easy place to be in. I hope that the information in this guide helps you see through an immensely stressful situation.
People will be upset and disappointed no matter your decision, but if you treat your sponsors and your customers right above all else, then you can feel confident you made the right choice!
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.