How much should your company spend on sponsorships?
Budgets are number-driven; however, the process to determine that number is very much human driven. Personal feelings, biases, and goals affect that number. If supporting as many programs and events as possible is your company goal, then you might have a higher budget, and if you are more cautious with your spending, then you might have a smaller budget. Adorable’s approach to determining our initial sponsorship budget is data driven. As the year passes, we find that we alter the budget based on new data and goals that pop up unexpectedly, but we have a place to start.
Businesses that support or sponsor a program or event typically pay money in exchange for recognition (via sponsorship packages that offer certain perks for different levels of support). There is a number of different types of corporate sponsorships. We are going to touch on four:
- Financial Sponsorship — Business pays money in exchange for the benefit outlined in the package
- In-kind Sponsorship — Business donates goods or services instead of money
- Speaker Sponsor — Business covers the expense (travel/lodging) for a speaker to present at an event
- Venue or Location Sponsor — Business offers to pay the venue fee or allow use of a venue they own
It is not easy to determine a budget size. Just like personal budgets, corporate budgets are subject to bias and personal style. Many people have a hard time figuring out where to start. They don’t know if they should allocate a flat fee or a percentage of revenue. They don’t know what sponsorship packages cost. They want to allocate to cover those costs without over allocating. They are concerned with the industry norm.
For the first year that Adorable was in operations, we did not have a sponsorship budget. When we were approached about sponsoring a program or an event, we did whatever we could to help. Sometimes that meant donating our time to create a t-shirt design or a couple thousand for coffee and snack services. Since the company was new and less well-known, we were approached much less often than we are today, this worked out for a while.
When we first developed our sponsorship budget, we considered how much was spent the previous year and how many requests came in that we wanted to sponsor but declined. We have found that creating an annual budget with a plan to sponsor something each quarter works well for us. We then apply funds not fully allocated in one quarter to others. This allows us a bit of flexibility for those unexpected events that we really want to support.
We look for opportunities to provide an element of the event over just providing money. A great example, we designed and provided the shirts that volunteers wore during Madison Mini Maker Faire. A price limit was sent and the cost was not to exceed that amount. Adorable received the sponsorship package equal to that set amount.
When possible we try to do in-kind sponsorships. The nature of that sponsorship determines if it is taken out of the budget. For example, in exchange for recognition, we donated our classroom space for a conference to host a game night. That did not cost us anything extra, so it was not taken out of the sponsorship budget.
The financial health of the company is a strong deciding factor if we are going to sponsor. If an unexpected slump, happens you have to adjust your budget and cash flow to make sure the necessities are covered. With that said, even when money is tight, we can continue to help with in-kind and venue support.
Adorable encourages the Adorbs to speak at events, and we love it when they do. Adorable typically reimburses the expenses that are not covered by the event organizers. When that is the case, we work with organizers to list Adorable as a conference or speaker sponsor. It usually does not cost the event organizers anything extra to add us as a sponsor, especially if we’re covering an expense that affects their speaker line up. This can be a great return on investment for us, because not only is the Adorb who speaks recognized for sharing their knowledge, Adorable gets recognition as a sponsor as well.
Event or Program Evaluation
To help stretch our sponsorship budget, we evaluate each event or program that asks for support. Are we going to receive a return on that investment? How many people attended last year and what is the estimated attendance for this year? Event A is expecting 100 people and their sponsorship packages start at $7500. That’s a $75 per person cost. Event B is expecting 300 people and their sponsorship packages start at $7500, and that’s a $25 per person cost. You are more likely to receive a return from Event B even though you are spending the same amount.
We also like to know the demographic of the attendees. Are they mostly designers and developers, or are they company decision makers? Our marketing goals will determine who we want to connect with. At Adorable, we strive to connect with fellow designers and developers to create goodwill, mentor, or to increase our network. We also want to connect with decision makers to expand our sales network and generate new opportunities.
Adorable’s approach to budgets are number-driven with the understanding that there needs to be some wiggle room to allow for the unexpected. Often times the hardest part about creating the budget is knowing where to start.