In the #sponsorship industry, revenue is used as a proxy for affordability when IDing prospective sponsors.
Put simply, if a package costs £1 million per year and a company’s revenue is also £1 million per year, they can’t afford to sponsor.
At caytoo, our rule of thumb for calculating affordability is 1% of revenue, although this can vary by industry. This relies on the calculation of sponsorship budget being a portion of overall marketing spend, which is around 2-5% of revenue in B2B companies, 5-10% in B2C companies, with high-growth categories (e.g. tech) spending in excess of 10% and sometimes far more.
Last year, the previously little-known TeamViewer appeared from out of nowhere to strike two major deals with Manchester United and Mercedes-Benz AG, worth an estimated £100 million per year in total, when the company’s revenue was estimated at only £500 million.
This clearly departs from our 1% rule.
There have been a number of deals cropping up recently that similarly show revenue does not always equal affordability.
1. A similar story to that of TeamViewer is Webull Financial becoming Brooklyn Nets’ jersey patch sponsor, at a huge $30 million per year, double or triple the value of any other jersey patch sponsorship in the National Basketball Association (NBA) that year. At the time, the company was pre-profit and had received $230 million in funding, so the deal represented around 15% of budget and was additionally not the only sponsorship the company engaged in.
2. In the past six months, Logan Paul and KSI’s PRIME have announced several major deals with global super-clubs Arsenal F.C FC Bayern München Munich and FC Barcelona, as well as the Ultimate Fighting Championship. The value of the UFC deal alone is reportedly ‘high 7 figures’, and Logan Paul recently confirmed PRIME’s revenue at $250 million. The company’s total sponsorship spend we therefore estimate to be around 10-20% of revenue.
3. In June AstroPay, renewed its front-of-shirt sponsorship with Wolverhampton Wanderers for $10 million per year, a figure that increased upon the previous year’s. Astropay has revenue estimated at < $100 million, meaning the spend here is minimum 10% of budget.
So what lessons can we learn from these examples?
Sometimes, revenue is not the only factor to when assessing affordability. High-growth industries and extremely aggressive marketing strategies may additionally signal a propensity to use sponsorship to fuel that growth.
What should you look for?
· Brands or industries that are receiving significant growth funding, like TeamViewer
· Challenger brands or start-ups you’ve never heard of that spend disproportionately on marketing, like Cinch and Cazoo
· Companies making senior marketing hires with sponsorship backgrounds or hiring an agency with a sponsorship remit
Where do you find that?
- M&A / financial media
- trade press
- LinkedIn
- Caytoo, obviously...
🔗 https://lnkd.in/eK6ZdPW4
caytoo | helping rights holders generate more conversations with potential sponsors
11moRights holders biggest mistake is taking too short term an approach