What should a property do when a sponsor threatens to walk away from a deal because they don’t have the necessary budget?

The answer: consider alternative payment structures.

Properties can use alternative payment structures to structure deals that don’t necessarily involve cash. The deals can be particularly beneficial to new properties that are struggling to secure sponsors by reducing the risk associated with sponsoring an unestablished property.

Below, IEG SR highlights five alternative deal structures, as well as their pros and cons.

Revised Payment Schedules
Properties can use revised payment schedules to give sponsors more flexibility in how and when sponsorship fees are paid.

Case in point: A three-year contract could be back-loaded so that the sponsorship fee is reduced in year one but higher in years two and three.

While properties can use revised payment schedules to overcome a sponsor’s budget objections, they must be comfortable with a lower fee in the first year of the partnership.

Revised Payment Schedules

Pay For Performance
In pay-for-performance structures, a sponsor pays a fee based on the delivery of predetermined benefits or objectives.  

Those objectives can range from the performance of a team to event attendance to the number of promotional items distributed at an event.

Properties that go down this road need to make sure that performance metrics are based on factors under their influence. For example, properties should be held accountable for attendance at an event but not the number of consumers that apply for a credit card at a sponsored event—a factor that may be outside the property’s control.

Pay For Performance

Promotional Commitments
Sponsors can get around a cash rights fee by providing marketing support in lieu of cash.

Properties that go down this road need to consider whether or not they need promotional assistance, and if they do, how much assistance they need. Promotional commitments can be a great way for properties that sell tickets or raise money for a cause, but not so great for established events that draw sell-out crowds and/or carry strong name recognition.

Promotional Commitment

Fund Raising Partnership
This payment structure allows a sponsor to conduct a fundraising program to raise additional funds for a sponsored property. That could include an employee fundraising program or a cause-related marketing program.

Fund-Raising Partnership

Escrow Accounts
This is a pay-for-performance variant where a sponsor puts money into an escrow account to ensure the property does everything they promised. If the property does not provide all the deliverables or do everything they said they’re going to do, the sponsor isn’t obligated to pay the money.

Escrow Accounts