Here’s how to avoid any hidden risks.
Article by Wael BSAIBES, Charlotte GRAY, Martin HAMMER, Jo HILL
For a sports property looking for sponsorship, finding companies that are willing and able to enter into partnerships is no mean feat. But before plunging into a deal, what are some of the considerations the sports property should consider about to ensure success? There are plenty of risks and pitfalls which could harm the property’s prosperity and brand. Taking time to assess risks before making a sponsorship agreement ensures that the property can mitigate some of these potential issues in the planning stage.
How much do you know about the strength of the potential sponsor’s business? It makes good sense to undertake some research about their financial stability and commercial acumen before making an approach. Think about whether their profits are rising or falling; whether they are a business going places or grinding to a halt; is there a good management team in place with a strong clear vision of where the company is headed? Even the most basic background information will help a sport property make informed decisions about which companies to approach.
Business Longevity and Strategy
It is fundamental to consider how long your potential sponsor has been in business and how this may impact your property. A good understanding of the business’s strategy over previous years will be helpful to predict how stable the company is for future partnerships. A well-established business that has had a clear strategy for more than five years is likely to present the lowest risk. Businesses that have a clear sponsorship strategy and are making transparent decisions about business planning allow a sport property to gain significant potential for a successful partnership.
Length and Multiplicity of Contracts
What should be taken into consideration when determining the length of a contract? A long contract is usually beneficial for a property, since it provides financial stability, a strong connection with the property and peace of mind. Short contracts can lead to difficulties with budget planning and a repeated need to find new sponsors. Often at the start, a property will need to prove it is worth the commitment and a good business plan will help. Where the sponsor has multiple sponsorship deals, there is a risk that your property may not be a good fit for their portfolio profile or other deals, which leaves you with increased uncertainty of a continued relationship over time.
Controversy and Scandals
How likely are your sponsors to be involved with controversies or scandals? Certain sponsors are significantly more prone to scandals and controversies of varying severity than others, and it is necessary to have a clear idea about how new sponsors could affect your total sponsor portfolio in terms of risk. It has been proven that if a property is involved in a controversy, sponsors’ financial return can be affected – consider whether this may be a problem in reverse. In order to mitigate the risk when signing with a new sponsor, it is recommended to thoroughly evaluate the new sponsor’s existing portfolio of celebrity endorsements, event and athlete sponsorships, and how likely it is to be prone to scandals.
Often the highest paying sponsors have no brand congruence with an event, and there is a risk that your sponsor’s type of business will have an effect on how your property is perceived.
For example, sports events may agree to alcohol or tobacco brands as major sponsors, so how best to ensure that this is still a successful strategy for both parties? As incongruent sponsorships can yield better outcomes in the long term, it is useful to think about how to build or articulate a fit. There is often ways to associate brands other than the product they are selling, so have a look at the business values too and consider ways to reinforce this with the consumer.
How much responsibility or control will your sponsor have? It is important to establish the relationship early on, clearly defining the management strategy of the two companies involved. There is a risk that a sponsor may become overzealous and try to take control of more than they have paid for. It is wise to plan account management and keep in friendly contact with them so decisions are easy to make and these situations can be avoided. This is your event, take charge of what is yours!
Planning, Planning, Planning
Don’t just be grateful that potential sponsors are willing to sign a deal – by being thorough in your research and evaluation of the pros and cons before entering into a contract, you are much more likely to achieve a positive outcome.