Event Sponsorship - the buck stops here

Matthew Crouch says when it comes to event sponsorship you have to get it right with your contracts.

 

Story by Matt Crouch

You are managing an event. You are hoping to raise money by attracting sponsors. What do you need to consider for your sponsorship contract?

It is important to start with the proposition that there is no such thing as a “standard sponsorship contract” – as one of my colleagues likes to say “there’s no such thing as a standard salad sandwich, so why would there be a standard contract?” And he’s right, since the commercial and legal considerations will fluctuate dramatically from event to event, client to client and sponsor to sponsor.

Good contracts always begin with good communication between the parties. You need to have identified and to be able to articulate your expectations to the sponsor.

As it’s your event, you need to have thought carefully (and creatively!) about what will make it attractive to sponsors. What kind of people will attend the event? What demographics and socioeconomic characteristics might they have in common? In short, which companies might be interested in getting their names and products in front of that audience?

Events are a fantastic way of collecting a crowd with similar interests, age-brackets and spending patterns. If the meeting is likely to attract senior corporate types, the purchasing power of the group would be exponentially higher… and thus potentially more attractive to sponsors looking for corporate clients.

But the point is that you will need to initiate the discussion about what kind of benefits the sponsor’s money might buy – and what you won’t be offering. You’ll need a plan.

Exclusivity is one real trap for the players here. If you make an exclusive deal, that’s it! You can’t sell that same promotional space again, otherwise you’ll breach your contract.

At the outset, when the cupboard is bare and you haven’t yet snagged a sponsor, it might be tempting to offer exclusivity as a carrot to your first interested sponsor. But be careful that you don’t give away too much too early or too cheaply. Exclusivity should come at a premium.

And what kind of exclusivity are we talking about? If your event was, say, a car race, to give overall exclusivity to a particular car maker may well prevent you from attracting many more sponsorship dollars from other car-makers. If exclusivity is to be on the table at all, you might need to break the sponsorship packages down into levels – such as gold, silver and bronze, with each level getting a different level of promotional exposure. You might then offer ‘car-maker exclusivity’ at each sponsorship level.

Alternatively, it might be more attractive to divide the car-makers into different types – have, say, Toyota Landcruiser as the exclusive 4WD sponsor and the Saab convertible as the exclusive sponsor in that category.

These are just examples for the sake of illustration and I don’t pretend for a minute that they would necessarily work – but I’m sure you get the point. When you think of “exclusivity”, also think of how you can slice the sponsorship packages up attractively so you can ultimately sell multiple “exclusive” packages.

So you’ll need to get a deal in principle with the sponsor. I am a great believer in writing down non-binding heads of agreement (or “MOU”) and having the parties accept this document before you go to the trouble of briefing your lawyer to prepare the sponsorship agreement. In fact, it is often a good idea to get your lawyer involved at the stage of preparing the heads of agreement so that you can get input on the deal structure at an early stage. For example, you wouldn’t want to agree in principle on a deal with a sponsor which, when your lawyer looks at the heads of agreement, is found to breach the Trade Practices Act. This will help you save a lot of legal cost later.

The contract itself will of course need to accurately spell out the sponsorship benefits and the monetary sums payable by the sponsor. Don’t forget GST – after all, most sponsorship arrangements are (at their core) really a payment for a promotional service.

And don’t forget to detail when the sponsor is to make payment. If possible get some payments up front – and don’t ignore the possibility of promoting your sponsors in advance of the event, say on the event website or in the ticketing or posters, etc, as well as at the event itself.

Cancellation?
Getting money up-front begs one very important question that is so often overlooked – what happens if the event is cancelled? What if you already have the sponsor’s money and what if you have already spent it? This issue can be the friction point in sponsorship agreements. The sponsor would ideally want all its money returned; ideally you would like the sponsor to share some of the risk.

The tension here may be relieved if the event can be re-staged at a different date – but if the event is cancelled for lack of ticket sales or some other problem that goes to the heart of the event, the sponsor will have a stronger claim for a full refund. It will of course be safer not to spend a sponsor’s money in advance of the event if there is any chance that the event might not “come off” – and you may be able to obtain insurance for some event-cancelling occurrences.

There is, of course, also the possibility that a sponsor will not invest money but would be interested in a payment in kind – say by providing food, beverage or services in return for the sponsorship promotional benefits. This will double the task of accurately expressing what each party is to provide. But consider this too: if a sponsor is providing supplies to the event, you are then dependent on that sponsor to make the event happen. That can sometimes cause scary problems, especially if a dispute arises about the sponsorship deal as the event draws near.

Finally, be careful never to imply sponsorship or affiliation that hasn’t been agreed. This is a serious breach of the Trade Practices Act. Always get the prior written consent of any company whose name or logo is to appear in connection with your event.

Event managers need to take sponsorship contracts seriously. There can be a tendency to think of sponsorship as a donation, made out of the goodness of the sponsor’s heart. While that does happen in some cases, there is a definite trend that sponsors are more closely assessing the benefits of their “sponsorship spend”. They are looking for their sponsor dollars to bring a tangible return and “accountability” is the word of the moment.

A well considered sponsorship plan, addressing the issues discussed above, and a well drafted sponsorship agreement will be invaluable and will help demonstrate your organisation’s professionalism.

Lastly, on a personal note – my congratulations to the Sydney Institute TAFE students who recently staged two successful fundraising events for Youth off the Streets (my firm sponsored them) as part of their assessment in the tourism, hospitality and event management course. Well done!

For further details contact Matt Crouch on (02) 8281 7800 or email mcrouch@bartier.com.au.