Case Study: Sponsorship Valuation Best Practices
Sponsorship valuation is complicated and technical…but it is an essential piece of the sponsorship puzzle. In fact, I would argue that it is THE most important part of the technical side of sponsorship sales (with relationship building being the most important part of the soft side of sponsorship sales).
Let’s explore a case study of two properties and their experience with sponsorship valuation.
The Sponsorship Properties Defined
I want to paint the picture for you. Two identical properties, with an identical audience, in similar sized cities, with the same assets for sale working with the exact same sponsor. How’s that for a sample? Basically, these two properties are mirrors of each other and are both sports events (the same sport).
Property A currently allows their “sponsor” to give away product to their crowd. The justification is that the product is a value add to the attendees of the event. They have never charged for this asset and told me that if they tried to charge for this asset that their “sponsor” would walk, take their product with them and their event would suffer as a result.
I was brought in to do an inventory analysis and asset valuation of the property and was introduced to Property A by Property B.
Property B was my client six years prior. We went through a full inventory building process and asset valuation and flagged the giving out of samples as a highly valuable asset. Property B took my advice, began selling the opportunity immediately and made significant revenue from the opportunity ($50,000/year in fact).
Sponsorship Valuation: The $300,000 Mistake
Remember, in this case the sponsor is exactly the same company and the same contact! Why is it that when Property A works with the sponsor, they value the assets at $0 and when Property B works with the sponsor they value the same assets at 50K?
Simple: the sponsor’s sole purpose is to sell the most product to the most people for the most profit possible. Because Property A placed no value on their assets, the sponsor didn’t either!
Here’s the worst part. The sponsor knew full well that the assets were worth $50,000 but they gladly took the opportunity for free for six years. This means that Property A missed out on $300,000 in revenue purely because they didn’t do a valuation.
Making the “Sale” on the First Meeting
As sponsorship sales professionals, we sometimes forget that making the sale in the first meeting is not the goal. In fact, it can be damaging to make the sale on the first meeting! If the sponsor says yes too quickly and without any negotiations, you probably left money on the table.
Property A made the “sale” in the first meeting with the sponsor…for a net loss of 300K. Property B went through multiple rounds of negotiations and had to revisit their valuation several times before the sponsor signed on for a multi-year agreement at 50K/year.
Remember, the ONLY goal of the first meeting is to get the second meeting and not to make the sale.
Asset Valuation Basics
There are multiple styles of asset valuation out there. The one I favour is referred to as a market valuation and, as it turns out, this is the approach favoured by most brands and sponsors.
The method is simple in concept, here’s what to do:
• Make a list of every single asset you have to sell for each property
• Now double the list of assets! Talk to your staff, your colleagues, your customers and most importantly, your sponsors to build the biggest list possible
• Segment your audience. The goal is not to define your audience as the “general population” but in fact to create as niche of an audience as possible
• Identify exactly what your sponsors would pay for the equivalent exposure and access to your audience if they went elsewhere. You may want to charge 10K for logo placement on your website but if your sponsors can get the same exposure to the same group for less…they will
• Once you’ve identified all of your tangible assets identify your intangible assets and research the market value for those assets as well
• Make sure you add an increase in the value of your tangible assets based on the power that your brand has over your audience
When you meet a prospect who wants to give you free product, say a few words and supply the staff to hand out that product, look to your valuation calculator to determine exactly what to charge them.
Do you have to determine the value of your assets? Of course not! But in the absence of a real valuation, your prospects will gladly determine the value for you. In the case of Property A, that value cost them $300,000. Who would you rather be in this scenario?
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.