Making Money For Your Sponsors:
Providing Your Sponsor a Return on Their Investment
Let's start with a question: When you pitch a sponsor, what do you ask for? $250? $500? $1000? $5,000?
That's easy... well, maybe... but HOW do you decide how much you ask a sponsor for? Is it based on WHAT YOU NEED or WHAT THEY MIGHT MAKE BACK for their business? Believe it or not, the most successful sponsorships are the ones that actually make money for the sponsor, so it's important to understand the next question as well!
If Sponsor X invests $1,000 in your team, how can they actually make that money BACK so that they get a positive Return on their Investment (ROI) in YOUR race team?
As much as the words ‘branding’ and ‘awareness’ get thrown around in the sponsorship world, if you are able to answer that question on behalf of your sponsors, then you are about 10 laps ahead of most of the field in a 20 lap feature to claim the title of ‘Sponsor-Focused Racer’
If you haven’t thought about this, don’t worry! We’re about to explain it so that you're competing with the leaders! It's not a guarantee that you'll get more sponsors, but if you know exactly what it will take for your sponsors to make money, then you're that much closer to helping them achieve a positive ROI in sponsoring your team!
WHAT YOU NEED TO KNOW TO START!
In order to do this, there are 2 basic numbers you need to know from your sponsors:
1) What is their ‘average sale’ per customer? What is the average amount of money that a customer spends at their business?
2) What is their profit margin on that average ticket? This is also known as their 'average sale per customer' or in the cell phone world, it's called Average Revenue Per User (ARPU). Knowing this helps you figure out the bottom line we’ll get to in a second.
Remember, these are not numbers that business owners might give up easily! After all, that’s their private business information! However, as we’ve talked about in a previous tip, if you really want new sponsors, then you have to be able to talk to business owners about THEIR business and the more you talk to a business owner about THEIR business, the more they’re likely to give you this information… ESPECIALLY if they know you are using it to figure out whether sponsoring you might be beneficial for their business.
WHAT TO DO WITH THE NUMBERS
If you know those 2 numbers, you know all you need to know so that you can understand how your sponsorship can potentially make money for your sponsor. Let’s go through an example.
Let’s say Jim and Joan’s Furniture Store is your potential sponsor and you’re asking them to invest $1,500 in your race team… Let’s get to the numbers!
AVERAGE SALE: Their ‘average sale’ per customer is $500 (no, it’s not cheap furniture, but for every $850 couch they sell to someone, they also sell a $150 end table to someone else!)
PROFIT MARGIN: After deducting the wholesale cost of the item and the commission to a sales person, they make an average of 25% profit on the sale. (Note, we're not sure of this number for furniture stores, we're just using round numbers for easy math!)
THEIR NET PROFIT: When all is said and done, they make approximately $125 profit on each sale they make ($500 x 25% = $125)
YOUR RETURN ON THEIR INVESTMENT: In order for their $1,500 investment in YOUR TEAM to turn a POSITIVE ROI, your racing sponsorship needs to deliver them 13 new customers. (13 new customers at $125 profit each means $1,625 in new profit)
THE SUMMARY: If Jim and Joan’s Furniture spends $1,500 sponsoring your race team and you want them to have a successful experience, you need to figure out exactly how you can deliver 13 NEW PAYING CUSTOMERS to their business!
Now, we’ll admit, this may seem almost ‘too simple’. And yes, guaranteeing a 'return on investment' is not always that simple... However, for the sake of an example and helping you understand ROI at the most basic level, we’ve tried to make it as basic as possible. This way, if you’ve never thought about what investing in your team means to your sponsor’s bottom line, now you have the basic understanding of how to "Do The Math on Their Behalf"!
We’ll take this a step further in our next Sponsorship Tip, but for now, here’s our suggestion: Spend the next week thinking about the folks who sponsor your car RIGHT NOW. How many new customers do each of them need to start to make money on their investment in YOU!? Knowing the answer for each of them could be the difference between having them back next year and having to search for new sponsor all over again!
In an upcoming tip, we'll tie together our THIS TIP from a few weeks ago with this tip so you can REALLY start to make a difference for your sponsors!
Best of luck to you and if you'd like to offer any feedback on this sponsorship tip, feel free to CLICK HERE to send us your thoughts!
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