Valuation of sponsorship assets is a tricky process. You have to know what you want in order to measure it correctly. And of course, the world of sponsorship valuation has changed dramatically over the decades and immensely so in the past two to three years.
As they say, there is more than one way to “bake a cake” remembering that all roads to lead to Rome! So, I thought I would share some of the ways there are to determine the “value” of your sponsorship marketing assets! This is going to be a two-part series because otherwise you will be reading this all day. Three processes today and three next week…
- The guessing game. Yes, some people still use this approach of pulling a number out of thin air because they think they know what it is worth. (Lol… I have been in the business for 35+ years, and I still cannot do this… I would never tell someone what their asset are worth without using anyone of the following methods that I will present next week. For this week the ways I would suggest you avoid!) This guessing approach is great if your buyer is unsophisticated and does not know how to do a proper valuation.
- This approach (#2) is as bad as the one above. This is the process called “I will ask them for what I think they have to spend”. Great approach until they start talking to other partners and find out they paid 40% more for basically the same bundle of assets. Now your integrity is shot, especially when you cannot justify your valuation methods. And again… yes there are properties out there still doing this!!! So much for transparency and data driven valuations. Even AI can do better than this!!
- The comparative approach. If you have rink boards and a gala and a golf tournament you are selling… you can compare to a similar set of rink boards, gala event and golf tournament. If they are getting $5000 dollars and yours is pretty similar in assets and the audience, then this is a justifiable valuation process for high level, nonmetric based valuation … based on two criteria. First of all you have to be running a similar property. If your rink boards are in Punnichy, Saskatchewan (population 218) versus an OHL arena; or your gala is 80 people in that same rink in Punnichy, to raise money for new paint on the walls of the arena versus a black tie affair at the Vancouver Convention Centre for 1500 people and their golf tournament is in a PGA certified course with 144 players and the tee prize is a Ping driver and your event is on the golf course at Punnichy, (sorry to be picking on Punnichy… but a good example and also a lovely community) with a dinner banquet with tube steaks (hot dogs) and the tee prize is a pack of three tees… then you have a problem using this method. And second, you need to be sure that the comparison(s) you are using are valid. If that golf tournament you are comparing to is similar to yours and they pulled their pricing out of their behind… then you have issues.
Those three valuation processes exist but they are not the ones I would be following if it was me and we discourage our clients from using these options. But it is always important to remember that any valuation is an estimated value. The true value is what the partner is willing to pay. Sometimes it is based on gut instinct, sometimes guessing and sometimes it is based on verifiable data driven metrics with multiple benchmarking verifications that are applicable and researched as verified. But when it comes down to it, the value is what the sponsor is willing to pay.
Just like the value of your house is not what you list it for or what the government tells you it is worth based on telling you how much you owe in property tax… it is worth what the buyer is willing to pay. Sometimes that is bang on with what you are asking, sometimes it is below or above list price. And sponsorship is the same… but when you have a verified valuation you know your “bottom line” selling price. If it is correct, someone will buy it at that price… you need to hold your ground.
More next week. But if you want to learn even more on sponsorship valuations and have access to those that do those valuations or those that have had them done… register for the Western Sponsorship Congress® – Alberta Forum today before the price goes up and it gets sold out again!
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