Sponsorship – a deal worth doing?

Grant Bather

June 10, 2006

If you watch the World Cup you cannot fail to see signs of multi-million pound sponsorship deals.

Sponsorship is big business and it isn’t simply sporting superstars who attract big sponsorship money. Everything from orchestras to charity events – even the beards grown by the writers of this publication – have attracted sponsorship deals.

So why do companies spend money on sponsorship and should firms of mortgage brokers consider sponsorship?

Sponsorship deals vary dramatically, from global sporting brands sponsoring Tiger Woods or Wayne Rooney, to local charity events seeking support from local firms. Although sponsorship opportunities will usually be presented to potential sponsors as packaged deals, they are anything but ‘off the shelf’. For sponsorship deals to work effectively, they need to be ‘tailor made’ and that means sponsors having a very clear understanding of what they want sponsorship to achieve for their company.

Sponsorship goals

If you are considering sponsorship, you have to start by being completely honest with yourself. Ask yourself why you are contemplating sponsorship and what you hope to achieve by doing it.

At its most basic level, sponsorship may simply be a way of giving to a local charity or worthwhile cause. There’s nothing wrong with that and if you are happy to donate a few hundred pounds to a charitable cause without expecting anything back in return, then go ahead and do it. There are arrangements in place for firms or individuals who wish to do this, such as the Gift Aid scheme. Businesses donate £890 million each year to charitable causes via Gift Aid. To give via Gift Aid, you pay your chosen charity without making any tax deduction from the donation. To get tax relief, you deduct the amount of the donation from your total profits prior to calculating your company’s corporation tax.

If you are self-employed (sole trader) your Gift Aid donation is treated in the same way as Gift Aid from an individual. The donation is viewed as if it is paid out of taxed income and the charity will reclaim basic rate tax on the donation from the Inland Revenue, thereby increasing the worth of every £1 given by 28 pence.

The key difference between charitable giving and sponsorship is whether your company receives any benefit in return. If you business is expecting to make a commercial gain, i.e. increase its profile or revenue streams, then you have moved into the realms of commercial sponsorship, which is subject to a different tax regime. The tax implications of commercial sponsorship can become complicated and you should consult your accountant before making any commitments. The HM Revenue & Customs website (www.hmrc.gov.uk) contains some helpful information. Just type ‘sponsorship’ into the search box on the home page.

Before I leave the subject of tax, I’ll say one last thing. The taxman will get very interested in any sponsorship deals where there is a strong connection between a director of a firm and the event or team being sponsored. If the Inland Revenue believes you are simply using sponsorship as a way to fund your hobbies and pastimes, then be prepared to answer some searching questions.

A worthwhile venture?

But are genuine sponsorship opportunities worthwhile? Take, for example, a firm of financial advisers sponsoring a local football team, golf event or series of classic concerts.

The key issue is understanding what you want to achieve and also understanding how you will measure whether your sponsorship arrangement has been a success or not.

Your objective may simply be to create name awareness among a target audience. If your local football team is well supported and generates decent coverage in the local media, sponsorship may be an excellent way to create awareness of your firm’s name. Football sponsorship has certainly done the Nationwide no harm.

However, when considering sponsorship opportunities, you must make sure the event attracts the right profile of people. If you’re a mortgage broker dealing with a high percentage of first-time buyers, young families and even non-conforming business, then football may well be the right sport. However, if you’re an IFA and deal with older high net worth investments, then sponsoring a golf event, classic concerts, or even yacht racing may be a better way to reach your target audience. Ask the sponsor for information about the profile of the audience involved. Event organisers will have detailed statistics which they should share with you.

Once you have chosen the event, don’t be content simply to hand over your money in return for your logo being emblazoned on a football shirt or displayed prominently next to the first tee. Find out what opportunities exist to explain what your company does and even drum up business.

Making the most of it

An obvious starting point is a prominent entry in an event programme. You may also be able to generate the opportunity to have a stand or salespeople present at any after event hospitality. If you can, think about how you can make the most of the opportunity, but do be realistic. People are not going to want to listen to a half hour talk about buy-to-let mortgages after a classic concert or golf match. They may, however, be willing to be given a small pack of information and a business card from one of your sales people.

The event organisers will help put you in touch with companies that produce banners, advertising hoardings and branded clothing. If your objective is to create name awareness, don’t ruin the ship for a halfpenny of tar by skimping on prominent displays. Remember the object of the exercise.

Measuring the effect of sponsorship can be difficult, but that’s no excuse for not doing it. One way is to ask new clients how they heard about you. Another is to measure business volumes during the period of the deal. Effective deals are usually based on long-term working relationships, but this doesn’t mean you should throw good money after bad at an event that makes no discernable difference to your bottom line.

Sponsorship can be an important part of your overall marketing mix, but you need to enter into any deal with your eyes wide open. Make sure that the winners aren’t just the team sporting your company’s logo.

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