We recently talked about 2 budgeting basics (importance of venue and types of budget outcomes), and that initiated some great conversations with our clients. For many events that we manage with clients, sponsorships are a critical component of the budget, and that adds a new layer and complexity in the budgeting process.
Before we talk about specifics of budgeting with sponsorships, let’s be clear about one thing: if you haven’t developed a comprehensive budget where you know the exact cost of every sponsor benefit, you cannot develop or price your sponsorship opportunities. The budget step MUST come BEFORE the sponsorship step.
Types of Event Sponsors
We typically see 3 different categories of sponsorships in the budgeting process:
- Required event expenses that are partially offset by sponsors.
- Optional event expenses that must be completely offset by sponsors.
- In-kind sponsors.
Each type of sponsorship is handled differently in the budget. Because the sponsor package looks different for every event, we selected an example in each category to illustrate how they are typically handled in the budgeting process:
Meal or Break Sponsor (required expense partially offset by sponsors) – meals or breaks are typically required event expenses that you build into your budget. When our clients offer meal or break sponsorships, they are usually not trying to find one sponsor to offset the entire meal, but rather provide an opportunity for one or multiple sponsors to partially offset the cost at a reasonable price point. As an example, if you are hosting a continental breakfast event for 200 people, your typical cost would likely be in the range of $5,000 - $6,000 (inclusive). To fully recoup the cost of this, your sponsorship package would need to be priced significantly higher because you will also have other costs associated with the benefits of that sponsorship (comp tickets, marketing exposure, booth or tabletop space, etc.). We typically recommend setting a meal sponsorship around 50% of the cost of the meal, as long as that still generates a net profit after including the cost of the sponsor benefits. In this example, we may recommend a meal sponsor package of $3,000, which would usually net about $1,500 once you consider the associated costs of sponsor benefits.
Other types of sponsorship that typically fall into this “partially offset” category include registration, breakout, conference bag, and lanyard sponsors.
WiFi Sponsor (optional event expense that must be completely offset) – this is a big one. We have seen a lot of sponsorship opportunities where a WiFi sponsor is available for $5,000 - $10,000 but we KNOW that, based on the venue and size of the audience, the WiFi will absolutely cost double, if not triple, that amount. When that happens, you have added a significant optional cost to your budget and you are now losing money on that sponsorship because the cost of the benefits far exceeds the revenue of the sponsorship. Charging stations and custom room keys are two other common sponsor opportunities that fall into this category – unless the amount that you charge for the sponsorship covers 100% of the expense associated with providing the service PLUS 100% of the expense of the other sponsor benefits they will receive, you should rethink your strategy on items like these.
In-kind sponsors – there are some types of sponsorships where an in-kind donation is offered, but accepting that donation creates an expense. A common one is a wine sponsor, where someone offers to donate wine for a reception. This sounds great, until you realize that you need to pay your venue a per bottle corkage fee that can often cost just as much as purchasing the wine. If you are going to spend virtually the same amount on wine that you would have spent with the venue, AND you have to provide sponsor benefits too, you’ll often be losing money on this type of sponsorship and may want to rethink accepting that in-kind donation.
Budget Comes Before Sponsors
I’m going to repeat myself: “if you haven’t developed a comprehensive budget where you know the exact cost of every sponsor benefit, you cannot develop or price your sponsorship opportunities. The budget step MUST come BEFORE the sponsorship step.” Once you have completed a basic budget that covers all elements of your event, you can then begin to layer in the cost and revenue of each type of sponsorship under consideration to make the budget work the way you want it to work. This step provides the framework for what will ultimately be the sponsor benefits that you offer within each level, and ideally includes a healthy combination of items that cost money (like complimentary attendance at all meal functions) and that don’t cost money (like logo recognition on a website or speaking time at the podium).
Your turn: what are the common objections and obstacles you face when developing an event budget with sponsorships?