Sponsorship Valuation – One Powerful Formula

Sponsorship Valuation – One Powerful Formula

Do you struggle to define the amount you are going to ask a sponsor to invest in you?  It can be a tricky situation and I don’t know about you, but I’m yet to find a one size fits all approach!

Don’t underestimate how valuable direct access to your community of followers  is to the right potential partner.

The ideal scenario when trying to work out the value of your organisation to a potential partner is that you already have a strong and established relationship and can come straight out and ask them how they might value the exposure you can offer them. It’s not always that easy though is it?   One rule of thumb can be to estimate the value of your community of followers (or association, profession, industry or membership) to a potential partner.

Sponsorship Valuation - One Powerful Formula

Let’s look at a simple example to see how it might work.

Let’s say your organisation has supporters who own high rise accommodation buildings and you knew that a paint company would be a great fit as a potential partner.

In order to work out the value of this partnership the association would need to gather the following information:

  • Approximate and average cost of getting one high rise building painted (not all high rises are the same height and dimensions)
  • How many members do you have
  • How often a high rise building might need to be repainted.

Once this information has been gathered, crunching the numbers might look something like this:

Cost of painting an average building Approximately $100,000 each
Number of members that you have 1,000
Average lifespan of paint job 10 years
Value of your organisation to a paint partner each year (100% market share) ($100,000 x 1,000 / 10) = $10,000,000 each year
Value of your organisation to a paint partner each year (conservative 5% market share increase can be expected over a 3 year partnership) ($10,000,000 / 5%) = $500,000 each year

You might be thinking  – WHAT????

Now, if this partner was able to get 100% of your members to use their paint services and products, they could conceivably expect to make $10 million each year as a result of their partnership with you.  However, as we all know, 100% market share is rarely attainable and a good figure to work on over the first 1-3 years of a partnership is 5-10% market share increase. (Please note, these figures are based on an exclusive partnership arrangement – ie, that only one paint company will be allowed to partner with your organisation and that you are using best practice sponsorship principles to help the paint company build warm and strong relationships).

So, if a paint partner was considering an exclusive partnership with your organisation, then you would know that it might be possible to deliver them 5-10% market share increase (on top of what they might already have) and this amount would be approximately $500,000- $1 million per year in additional revenue.  Knowing that you have the potential to deliver $1 million a year, would you still value your proposal at between $5,000 – $8,000 per annum as many organisations do?

This formula can have very powerful ramifications in sponsorship meetings when you ‘crunch the numbers’ together with your potential partners.  Just remember that this is not the amount that you base their investment on.  Instead, you are using this formula (for your own benefit as well as theirs) to demonstrate the potential VALUE of being involved with your organisation.

Of course these figures can be very fluid, and things like a global financial crisis can change the economic climate in a heartbeat, and we haven’t spoken about profit margins (I expect that will come up in your meeting as you go through the formula) but at least from there, you have some figures to be able to negotiate what the value of accessing your membership might be to their company and from there what their investment in your organisation might be.

Sponsorship can be a very cost effective way for companies to promote their products and services to a group of people they are not yet doing business with but remember, for some companies, your membership may only represent a portion of their target market, so make sure you do your research and value the partnership accordingly.

Let's Go!

Join the conversation that's happening right now in my LinkedIn group!

We’re solving all sorts of sponsorship problems, sharing, brainstorming, and we’d love to welcome you!

The Ultimate Non-Profit and Charity Sponsorship Network

Let's Go!
2016-11-08T05:31:14+00:00By |