I was recently involved as an expert witness in a case involving sponsorship broker remuneration. As I reeled through all of the ways a broker can be compensated, and the various factors that go into determining the remuneration level, I realised that I hadn’t addressed this subject in my blog for a long time.
Never fear, here is the fully revised and updated guide to hiring and paying a sponsorship broker.
There are three types of broker remuneration, and most brokers are paid on some combination of these:
When sponsorship brokering was first around, it was fully commission-based. There was then a trend toward an up-front fee plus commission. Now, the norm has shifted toward retainer plus commission, with no up-front fee, and requiring an up-front fee is seen as a red flag.
If you hire a broker on retainer plus commission, the commission rate will usually be much lower than if you pay a straight commission.
As much as it would be financially convenient for cash-strapped, newer and smaller rightsholders to pay commission only, that is extremely unlikely.
The fact is that there are more people who want sponsorship brokers than there are good brokers around, so they are able to cherry-pick the properties that are easiest to sell.
For less established properties, you will be lucky to get a broker at all. If you want any chance to find someone to sell on your behalf, you need to budget for a retainer. For established properties with a strong fan base and a good track record with sponsors, you may be able to get a broker to work on commission-only, but don’t count on it.
This is a big question and can affect total broker remuneration by quite a lot. It has to do with what happens once a contract runs out and a new contract is signed. There are two approaches:
In either case, the broker will be remunerated…
The actual levels of remuneration vary from broker to broker, and can be different within different markets or market segments. Below are a few examples of how broker remuneration might be structured:
Brokers should also be compensated if they secure contra (AKA “in kind”) that fills a genuine need:
Some brokers charge the same amount in commission on genuine contra. Others reduce the commission on contra. If it’s genuinely saving the property cash, my personal view is that it should be compensated as if it were a cash sponsorship.
This really boils down to ease of sale. Big, established, sexy (in a marketing sense) properties are relatively easy to sell, and these are the properties that interest sponsorship brokers the most. The harder it is to sell, the more they’ll charge to do it, up to the point where they believe the sale is unlikely and not worth their effort.
The most common factors that contribute to the ease or difficulty of sponsorship sales, or the amount charged, are:
The upshot is that you’re asking a broker to put their reputation on the line for what you’re doing, and they’re only going to do it if they know they’re selling on behalf of a credible, professionally run, financially stable operation. If you fit that bill, you may well secure a broker, and get them at a reasonable rate. If you’re lacking any of the above, it is going to be much more difficult to get a broker at all, much less at a reasonable cost.
And for all of you out there with just some wild idea, with no plans or infrastructure – and I hear from dozens of you every month – forget it. Nobody – NOBODY – is going to sell sponsorship for your “concept”.
Granting sales exclusivity means that any sales will result in a commission to the broker – ANY sales. That means some huge brand could rock up and directly make you a great offer, with no involvement whatsoever from the broker, and that broker will still be paid a commission.
I’m not a fan of sales exclusivity. I believe all properties should have the ability to make direct sales, if they get the opportunity.
There are a few tips on what you should look for in a sponsorship broker.
There are no guarantees that a broker will be as successful as you hope they will. An offer of a guaranteed level of sponsorship would be a red flag. Targets, yes. Guarantees, no.
If a sponsorship broker offers a guarantee, that is a huge red flag. With sponsorship broker scams on the rise, you should be across this and other red flags. I recommend you read, “How to Spot a Sponsorship Broker Scam (and One Broker You Should Avoid)“.
When a broker contract ends, there will often be a few prospects that are in the middle of negotiations. Generally, a broker will finish any pending negotiations and be awarded commission, even if their retainer relationship is over. They should not be pursuing new sponsors once the contract has ended, unless mutually agreed.
You do need to specify in the broker contract what constitutes “negotiations”. This would include things like having multiple correspondence expressing interest in an offer, or clarifying or adjusting an offer, offers and proposals being reworked, and providing requested information, so the offer can be sold internally.
Some (terrible) brokers play sponsorship like a numbers game, sending out generic letters and/or uncustomised proposals to sponsorship managers at hundreds of companies. That’s really old-school, and is unlikely to raise any money at all, so that broker likely won’t be working for you for long.
But, what if you sell a sponsorship to one of those hundreds of companies down the track? Should that broker be remunerated? No. Sending generic material to a database doesn’t comprise “negotiations”, any more than a real estate agent putting a flyer in your mailbox means they get a cut when your house is sold. Either way, it’s just junk.
First off, I’m not a broker, so don’t ask. There are a lot of industry directories where you may find brokers (aka “sponsorship agencies”). Just get onto Google and go for your life.
If you’d prefer to start with a more concise list, you may want to check out the Power Sponsorship Broker Registry. I created it because I get asked to broker all the time and I don’t offer that service, so I wanted somewhere to point people!
For all you need to know about sponsorship sales and servicing, you may want to get a copy of The Sponsorship Seeker’s Toolkit 4th Edition. You may be interested in my white papers, “Last Generation Sponsorship Redux” and “Disruptive Sponsorship: Like Disruptive Marketing, Only Better“.
If you need additional assistance, I offer sponsorship consulting and strategy sessions, sponsorship training, and sponsorship coaching. I also offer a comprehensive sponsorship capacity-building service for large, diverse, and decentralised organisations. Please feel free to drop me a line to discuss.
If you’re interested in a self-paced, online sponsorship training course, with lots of inclusions, check out Getting to “Yes”.
© Kim Skildum-Reid. All rights reserved. To enquire about republishing or distribution, please see the blog and white paper reprints page.