Sponsorship valuation is about achieving fair market value. It sounds simple when I put it that way, but with so many pratfalls awaiting sponsorship seekers unsure of their approach, valuations can go wrong more often than not.
Knowing your value is critical to moving your sponsorship program forward, and a fair value is integral to sponsors being amenable to your offer. Lowballing the sponsor means undercutting yourself, a prospect no sponsorship seeker is pleased with.
Highballing an offer will leave you empty-handed as every sponsor you speak to ghosts or flat-out refuses you.
The following strategies will augment your sponsorship valuation steps, helping you reach fair market value reliably time and again.
Brand Equity Analysis
You’ve done your market research, but you can take your valuations further, beginning with a brand equity analysis.
Brand equity is the value your branded product (i.e., your company, organization, event, program, or opportunity) provides. “Product,” in this case, doesn’t necessarily mean tangible items like a blender or a smartwatch. It can refer to intangibles.
Calculating brand equity requires you to measure the difference between branded product sales and unbranded product sales. In other words, how many sales does your product achieve because it’s associated with your brand versus being a generic product?
Here’s an example for you. How much money does an iPhone make because it’s an iPhone? It’s billions of dollars. You could buy any phone, but you want an iPhone because it’s a status symbol.
A brand equity analysis allows your company or organization to hone in on what makes your products and services unique. And yes, you can perform a brand equity analysis on a service.
For instance, how many people flock to your music festival because it’s that specific festival versus attending any other music fest in town?
It’s not necessarily easy to calculate brand equity, but the leverage it provides is huge. You can showcase your value to the sponsor down to the dollar sign, proving that working with your brand specifically drives results and that other competitors just won’t do.
Bang for Buck Analysis
A bang-for-buck analysis is recommended if you have several sponsorship properties under one umbrella, such as a racing company sponsoring individual racers or teams.
I recommend creating a spreadsheet when doing a bang-for-buck analysis, outlining each of your properties. Go one by one and input values, such as the annual sponsorship fee, then the values for their brand, reach, media partnerships, and social media.
Calculate those numbers as a weighted average. The property with the highest weighted average is your most valuable, and so on and so forth.
Alternatively, you can calculate the same values but as percentages. I suggest doing both. This way, you can put together a pie chart of the most valuable properties as percentages, then break down that information by dollars elsewhere in your audience data.
The next means of boosting your sponsorship valuation is through a financial analysis.
At its most basic, a financial analysis requires determining the cost of customer retention or acquisition plus stakeholder/sponsor impacts, such as staff retention. Alternatively, you can measure increases in financial performance.
Do you want to dig even deeper? Of course you do. You can do one of several types of financial analyses, so let’s explain.
A vertical analysis will review the same dataset as a horizontal analysis, explaining why they often get lumped together. However, they’re disparate enough that I want to cover them separately.
On a vertical analysis, you should put every value on each line as a percentage of the statement’s base figure. For example, a vertical analysis can include a gross sales percentage while the rest of the financial analysis reviews total liabilities.
Doing a vertical analysis makes it easier to extrapolate the value of a specific item on your balance sheet versus the entire value. You can use a vertical analysis to spotlight the value of an asset or activation.
Going hand-in-hand with that is a horizontal analysis. This financial analysis focuses more on historical information in a specific accounting period, including line items and ratios. You can compare values by percentage or through absolute comparisons.
If you use a percentage comparison, the numbers for each prior period should be a percent of the baseline year amount, with that amount 100 percent. Another name for this is a base-year analysis.
You can rely on a horizontal analysis to show a sponsorship prospect how your event, program, or opportunity has grown over the years.
The third type of analysis is of the technical variety. Less applicable to sponsorship, a technical analysis uses trading activity trends to determine the marketing sentiment behind the latest trends.
Technical analyses divulge financial patterns that can help plan for future money decisions.
A fundamental analysis tracks all financial statement data and creates ratios to measure the overall company or organization’s value. This is known as the intrinsic value, which determines the worth of an asset.
Return on Investment Analysis
Sponsors will certainly pay attention to a return on investment or ROI analysis, as they want to know what value their hard-earned money will get when they pay you for services.
An ROI analysis requires you to compare the spending the sponsor has done since they started working with you against the cash flow advantage you’re providing.
Let’s say the sponsor has already spent $10,000 on marketing and advertising campaigns but still can’t meaningfully connect with their audience. They decide to work with a business or organization to assist in marketing. That’s you.
You charge the sponsor $20,000 but do everything their marketing campaigns couldn’t. Although the sponsor spent $10k more to use your services, if they generate $40,000 from lead conversions and sales, they more than made a profit. They earned $20,000, making it worthwhile to work with you again.
I always recommend compiling sponsorship fulfillment reports or wrap-up reports with all the valuable data from the event, program, or opportunity therein. Time passes, the data gets fuzzy, and you will forget.
Having this data handy allows you to put together ROI analyses to present to your sponsor, showcasing how efficiently you’ve assisted other sponsors. An ROI analysis augments case study data.
Another scenario in which you must use ROI analysis to unlock your full value is renegotiating with a sponsor. Show them how much ROI they generated by working with you, and they should be eager to do so again.
Stakeholder Behavioral Analysis
Sponsorship is all about helping companies, and the stakeholders in those companies are eager to know how working together is going to impact their bottom line. The contact in the sponsorship division has others over their head who must approve the sponsorship, so doing a stakeholder behavioral analysis is a must.
You might be able to streamline the process of acceptance faster.
A stakeholder behavioral analysis measures how brand awareness for the sponsor affects their brand image and familiarity. This analysis, also known as stakeholder mapping, also determines which stakeholders will negatively or positively influence the sponsorship and who will benefit the most.
This requires at least a rudimentary understanding of the stakeholders within the sponsor company. The primary stakeholders will be the most impacted by the sponsorship decisions, whether good or bad.
Secondary stakeholders will experience the decisions less, but the trickle-down effect will carry over to them. Key stakeholders may be directly involved in the sponsor company as employees or partners, donors, or other related businesses. They can also play a role, as can their constituents.
Understanding stakeholder interests will go a long way toward helping you map your stakeholder behavioral analysis. Most stakeholder interests boil down to mental health, security, safety, physical health, environment, time, work, social change, or economics.
Knowing their interests helps you appeal to the right stakeholders, minimizing negative impacts from your sponsored involvement.
Business Valuation Analysis
Finally, I recommend a business valuation analysis as part of your sponsorship valuation efforts. This analysis reviews customer behavior changes, sponsorship costs, and top-line revenue and how they affect your sponsorship valuation.
It sounds rather straightforward, but there’s nothing wrong with that. Pointing out the obvious impacts sponsorship will have on both parties allows your sponsor and their higher-ups to make an educated decision with all the facts in front of them.
This is among the quickest augmentative analyses you can do for your sponsorship valuation, so I don’t recommend skipping out on it.
Take Your Sponsorship Valuations to the Next Level
We’re valuation experts at the Sponsorship Collective. We can take your valuations further, using the above analyses to unlock your value and help you prove it to sponsors. Schedule a free call today to discuss your sponsorship plans and what we can do for you.
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Chris Baylis is the Founder and Editor-in-Chief of The Sponsorship Collective.
After spending several years in the field as a sponsorship professional and consultant, Chris now spends his time working with clients to help them understand their audiences, build activations that sponsors want, apply market values to their assets and build strategies that drive sales.
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