Feb 07, 2019 at 12:00 AM
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Five Simple Ways to De-Risk a Sponsorship Deal

With any new sponsorship deal comes inherent risk, not only for the companies involved in the sponsorship deal, but also the individuals (that's you!) who put reputational capital on the line to get your organization into bed with a new partner. As with any form of sales, de-risking the deal for your customer/partner is a great way to allay fears and skepticism and move closer to a "yes." Today, we're looking at a few simple ways you can de-risk a sponsorship opportunity for your potential partner.

1. Break Up The Payments

This one's pretty simple. Rather than asking for the entire sponsorship fee upfront as many do, consider staggering payments throughout the sponsorship's lifecycle. Say 1/3 when signed, 1/3 two weeks before the event and 1/3 within a week of the event for example. First, check with your accounting folks to make sure that this is feasible for cash-flow purposes..

2. Funds in Escrow

As a sponsorship seller, sometimes you want to be sure that the sponsor will have the ability to pay you even if you're not accepting payment when the deal is signed. Short of a credit check, and even that won't give you any guarantees, one more common way we're seeing properties deal with smaller sponsors is to ask that sponsorship funds go into escrow to be released at an agreed date or upon an agreed milestone. This has both the benefit of ensuring that sponsors with cute names like Spongetech have the ability to pay and conversely that the property keeps their word on the benefits to be delivered so that everyone is aligned to execute a win-win sponsorship.

3. Performance Based

This may not be the most popular one with properties and with good reason as it shifts much of the risk over to the sponsorship seller. Still, if you're confident in your sponsorship offering and its ability to drive business for the sponsor you may want to consider putting your money sponsorship fee where you mouth is. You can do this by triggering bonus payments to tangible and quantifiable metrics such as hits a certain number of attendees, tv rating or leads generated. If you can track leads generated, consider a bonus based on the leads your sponsor converted to sales.

4. A Rock-Solid Contract

A clear and transparent sponsorship contract that spells out not only the deliverables and fees, but also what specific steps will happen in the event that a sponsorship is not fulfilled (for whatever reason) is a must have to ensuring that there's a backstop if the deal falls through.

5. Product or Services

Sponsors, right or wrong, tend to associate a higher risk premium for all-cash sponsorship deals. With that in mind, a common way to de-risk a sponsorship deal on the table is to offer to accept product or services from the sponsor in lieu of cash. Since you're not likely negotiating with an accountant, there's an emotional shift that takes place when you limit the hard cost offering acceptance for product and services.

De-risking the sponsorship may not close the deal if it's not a good fit, but it is a great way to signal to your prospect that you're committed to building a true partnership. Give it a try next time you're at the negotiating table!