How to calculate sponsorship fees
Calculating the sponsorship fee you seek for an event is quite a balancing act. The fee being asked is usually best called the ‘investment,’ which sounds better to a prospect. It is a crucial factor in the success of a sponsored event and can be difficult to calculate. In simple terms, a good formula is to calculate the cost of the sponsorship event/activity and double it. This may seem a rather crude way of working out a fee, but it is practical in reaching a starting point for a suitable asking price. The 100% margin should cover all the costs of running the event additional to the costs of seeking and servicing the sponsorship. The formula worked out on this basis is:
Total investment asked = cost of providing the benefits offered
+ sponsorship admin staff costs
+ sales costs
+ servicing costs
= total cost to deliver the package
+ 100% margin
= sponsorship fee
Cost of providing benefits
You can determine the cost of providing sponsor benefits by itemizing all the items in the package offered to each category of sponsor. Include the direct and indirect costs of staff because this is a real cost to your organization before, during and after the event. Typical costs comprise:
- Analysis and research into your captive audience, eg demographics and other data on your members, event attendees, stakeholders, influencers, etc. This data is vital because it is what sponsors value most highly.
- Production of sponsorship proposal documents
- Accommodation and travel costs to sell sponsorship packages
- Sales staff time for selling sponsorship based on the number of x hours at $y per hour (include indirect costs such as superannuation/pension plan/sick benefits/insurance
- Same for support staff
- Transport – vehicles for sales staff and for senior administrators
- Tickets for sponsors and their guests
- Hospitality, food and beverages, waiters, set up and hire of corporate boxes
- VIP parking passes
- Event programs for sponsors and guests
- Other printing
- Signage and banner production and erection
- Apparel for officials, media and sponsors
- News media and social media promotion program – advertising, direct mail, social media activities
- Develop event website with sponsor area and email list for event-related promotions
- Publicity program – PR consultants, production costs, cost of celebrities, photography
- Media monitoring, and also evaluation at completion of event
- Legal costs for contract preparation and ongoing consultation
- Administration costs – stationery, equipment, telephones, faxes, taxis, couriers
- Staff time for servicing sponsorship based on x number of hours at $y per hour.
The worst way of calculating the necessary fee is to think only of yourself – to work out what you need to run the event and put that amount to the sponsor. You must understand where the sponsor is coming from and offer them value for money at a level they perceive is competitive in the marketplace. This means you have to compromise. They need to feel that what you offer is better value than other sponsorship opportunities, but also creates a better return on investment than other marketing opportunities available to them.
Once the broad fee level is established, you need to check that it is set at a realistic market rate. The cost of similar sponsorships in the marketplace can be compared to ensure the package is competitive. It is worth joining your nearest sponsorship marketing association to keep in touch with trends in sponsorship fees.
The value of the benefits can be adjusted up or down to suit the sponsor’s budget. If the margin isn’t enough, more benefits can be offered so the fee can be increased to make the event viable. At the same time, you need to ensure sponsors feel they have gained value for money.
Never allocate all your benefits up front; keep some in reserve to call on during the negotiations if you need to. Later you can offer them to the major sponsor as a bonus, which will impress them.
Wise sponsorship seekers keep a proportion of the fee aside to pay for bonus promotional activities to increase the return for the sponsor. Around 10-15% of the fee is a useful amount to keep in hand for this. Many sponsorship seekers don’t think of this, but they can get great mileage from these activities to help the sponsor get better value for their investment – and that means the sponsor will be a lot happier. This is especially important if you want the sponsor to renew for a recurring event.
Generally it is better to seek one major sponsor rather than offer several smaller sponsorship packages because the servicing commitment for several sponsors can create a heavy load and soak up too much of the sponsorship funding.
There is no problem with issuing up to about a dozen major sponsorship proposals at a time as long as they are customized to the needs of each recipient.