Jul 29

How to get Sponsors for Practically Anything

-How to Find Launch Clients
-Useful Co-opetition
-Strategic Investors
-Social Norms v Commercial Ones

I wrote this article in 2010, but took the above photos yesterday, the 28th of July 2015. My wife, Dawn, was the designated photographer. We rode over together on our trusty assembled-in-Vancouver Torino e-bike (top speed 42 kph, about 50 cents to charge it, no license, registration or insurance required, it’s covered by your homeowner’s policy or tenant’s insurance) to get a McCafé coffee, which frankly I prefer to Starbucks (too expensive and too poserish) or Horton’s (just plain bad coffee). 

The above photos are blatantly commercial. But if I was looking for sponsors (hint, hint) for my upcoming tour (I’ll be speaking about how to use real estate investing to provide for yourself and your family over the long haul), I might do worse than photograph myself in front of their premises, and put some of those action shots (move over Mission Impossible XIV) in my presentation to them.

Today, sponsors are needed not only to help not-for-profits, charities, NGOs, causes and foundations do good deeds (for which at least some money is needed) or pro sports teams, but pretty much everyone else–even the most mundane for-profit businesses, I argue below, can use and get sponsors. Why shouldn’t that be you?

Sponsors help you extend your market reach by appealing to their stakeholder group–their clients, their customers, their supply chain, their employees… Sponsors sponsor you for four primary reasons: 1) they like and trust you and your cause/business/organization, 2) they feel that your mission statement expresses a value or values that they can/would like to align with, 3) it benefits them by driving more customer traffic to their website/place of business–ie, sales track higher, 4) it aligns with their CSR, corporate social responsibility, mandate and policies.

So they do it for selfish reasons–more sales–and for unselfish ones–feeling good about themselves, and their place in the world. 

Where can you look for sponsors? Just ask yourself, “Who benefits from what I/we do?” then follow that chain to wherever it leads you.

It works. I’ve done sponsorship agreements in the many millions of dollars– while I was with the Ottawa Senators/Ottawa Senators Foundation, teaching at university, running my own not-for-profit, and running businesses of various sorts.

No matter how clearly I think I am explaining it, sponsorship remains a big mystery to most people, even after talking to me or reading something like this. 

I spoke with a young opera star this morning, a Russian-French-English speaking marvel by the name of Ksenia Kotchieva who also sings in German and Italian, http://profbruce.tumblr.com/post/102180619269/phoebe-services-open-house. She’s struggling to continue with her singing career and lessons, which are very costly.

image

“Get some sponsors, Ksenia!” I suggested. “It’s either that or wait on tables!”

“I can’t!” she replied to both.

But she can. So I did this for her:

1. googled “event planners Toronto”,

“event planners Montreal”, 

“event planners Ottawa”

2. that got her 800,000 leads

3. I told her that event planners are always looking for something different

4. what better way to improve their next event than have someone of her A-level talent sing Meine Lippen Sie Kussen So Heiss?

5. she’ll charge them $500 for an appearance with a $300 contribution to her education fund + travel and hotel

6. so it’ll cost the event planner $800 + travel/hotel, right?

7. wrong

8. their cost for hiring Ksenia will in fact be negative

9. huh?

10. yes, negative–they’ll charge their clients $1,500 or so for Ksenia, which means their cost to hire Ksenia is actually a -$700

11. this is called negative cost selling

12. it works

I gave Ksenia a goal, N = 3. That is, she must find 3 gigs a month for September, October and November. With all those Christmas parties, December ought to be higher…

Anyway, here’s the article I wrote:

For entrepreneurs and intrapreneurs working with NGOs, Not-For-Profits and Charities, getting sponsors is always top of mind. But I have found that you can get sponsors for practically anything. When I worked with the NHL’s Ottawa Senators, a (hopefully) for-profit business, we obviously spent a lot of time and effort on this. But less high profile businesses should also be looking at this not only as a source of potential new revenues but also as an opportunity to co-brand with other organizations for the benefit of both.

It turns out that organizations prefer being called ‘sponsors’ or ‘partners’ rather than ‘advertisers’. It’s like Disney World where employees are not employees, they are cast members and customers are not customers, they are guests. What you call someone or something matters*.

(* When we were campaigning to Bring Back the Ottawa Senators, we called the new building we wanted to construct to house our new expansion franchise, the ‘Palladium’. When you name something, it takes on a life of its own. Tolkein’s Middle Earth Elves understood this. Names are important.

In Ottawa’s Official Plan (the document that controls the shape that the City will take in future years), MCFs (Major Community Facilities) are called ‘Palladiums’; this has become a class of land use of its own. Although the stadium is now called Scotiabank Place, the street that runs past it is called Palladium Drive so the name should live on for quite some time but perhaps not as long as Ents live, which is several thousand years.)

I have often wondered why we don’t see more co-branding. If I was selling high end cars, I might co-brand with a top fashion house and an exclusive watch maker: sell all three brands at one time, share advertising costs (whoops, sponsorship costs) and leverage one brand off the other two. Perhaps people who buy those watches will like the suits or dresses and people who like the cars will also like the watches.

Question: So why do corporations and individuals sponsor any organization or an event in the first place?

Answer: In part, because of their internal values and, in part, because they want to enhance their own goals. In this essay, we will address the latter motivation.

People are highly motivated by two emotions – fear and greed. Organizations may sponsor an event, say, because they fear, if they don’t, one of their competitors will. This happens a lot with categories like telecommunications. If Bell hears that Telus is trying to ‘horn in’ on their sponsorship of, say, Opera Lyra, they’ll redouble their efforts. The old saying is: “Treat them mean and keep them keen.” Nothing like a little competition (and fear) to up sponsorship involvement.

What about greed? To appeal to their greed, you have to know and understand your target sponsor’s business almost as well as they do. This is similar to negative cost selling whereby you are able to show a potential client that some combination of the benefits you create for them and reduced costs outweighs the cost of buying your product or service. 

Launch Clients and Co-opetitors

Finding launch clients for practically anything is very similar to finding sponsors: you follow the value chain in both directions.

First, you look at who benefits from your new product or service. Second, you look at your supply chain and ask: should the people I buy from also buy from me? When I ran the Ottawa Senators, I would ask: “Is this guy who is fixing our plumbing, a season ticket holder? If not, let’s find another plumber.”

Your accounts payable is a great source of potential launch clients and a possible source of launch capital* as well. Suppliers will often provide you with interest-free loans to buy their products and can sometimes be induced to go beyond that and invest in your new enterprise. They do this because, if you are successful, they have helped create another customer for themselves.

In any event, your bookkeeper/accountant and his or her list of AP can be and should be part of your sales team.

There is another direction you can go in to look for launch clients. You can look for strategic partners and co-opetitors*. This is like the TV series, LOST, first they went back in time, then they went forwards in time and, in their last season, they went sideways (to an alternate reality).

(* Co-opetition is when you sometimes compete with your competitors and sometimes co-operate with them, thus, they become ‘co-opetitors’. For example, REALTORS compete for listings and buyers but co-operate through their online MLS system where all (or most) listings are deposited. They typically will share commissions 50/50 when one is a listing agent, representing the Seller, and the other is a buying agent, representing the Buyer.)

So you can slip ‘sideways’ to look for people who have a strategic interest in your success and these people may also be competitors.

If you have a solution for failed windows (the vacuum seals often fail in less than 15 years), perhaps you would look for investment and first orders from commercial building owners. But you might also go to window wall manufacturers even though you are potentially cutting into their sales of replacement windows. They might see that it is in their best interests to also offer a cheaper solution to their clients (i.e., building owners). They could be investors in your business but they could also be clients since they could become re-sellers of your service. They would now be able to offer, in addition to, replacement windows, a cheaper, faster, less disruptive alternative (resealing windows or allowing condensation to escape through newly installed air valves.)

For example, the owner of a PODS franchise I know is looking at investing in
http://www.frogbox.com/, a business that markets reusable plastic moving boxes. These are a replacement for (mostly) throw-away cardboard boxes and could, at least in theory, cut into the demand for PODS. But the owner of the PODS business is a forward-thinking kind of guy and feels he might as well benefit from this potential new entrant in his marketplace; it is coming anyway. This is a strategic move for him in his marketplace.

In the sports business, arenas and stadiums may be operated by another team’s arms-length management company: another form of co-opetition.

To look for co-opetitors, ask the question: “What is the nearest substitute for the product or service we offer?” For repaired windows, it is obviously new ones. For a new home, it is an existing one and for a new single family home, it may be a townhome. For one type of fast food, it is a different type of fast food.

Home builders often compete and co-operate. They know that if a Buyer doesn’t happen to like a competitor’s home they might walk across the street and buy one of theirs and vice versa. They know that a Buyer of a townhome from a competitor might one day trade up to a single family home they build and that, as people age, they might trade down too.

Petrol companies, fast food, homebuilders, even tech firms often benefit from this type of competitive synergy. Marketing efforts by one benefit all firms in the marketplace as someone who samples the wares of company ‘X’ is likely to look at competitive products as well.

When IBM came into the marketplace with its first PC in the early 1980s, Apple stood to benefit as the overall market for PCs took off even if their market share dropped. This is just as true for Blackberry-maker RIM today as Apple emerged as a key competitor with its iPhone series. Of course, you have to be able to keep up with your competition or you will cease to exist.

Now here is an equation for you to think about. In a co-opetitive marketplace, you could see demand increase by 50%, viz:

.667 + .667 = 2.0

Huh?

Well, suppose that 1/3 of your potential clients prefer another type of product, say, the brick homes built by a competitor. And further suppose that 1/3 of their potential clients prefer the stucco homes that you build. In the current market, you are both losing 1/3 of the visitors to your sales offices to other alternatives elsewhere in the City. But if you decide to co-locate in a new real estate project where your sales centres will be right across the street from each other, then the 1/3 of customers you might have lost and the 1/3 they might have lost might now be retained (obviously, you would not capture them all as if you lived in a closed system but, at least, you both now have the opportunity to try top retain them whereas before they were just going elsewhere.)

So Demand (DD) has increased from time 1 to time 2, viz:

DD(1) = .667 + .667 = 1.334, customers lost = .333 + .333 = .666,
DD(2) = .667 + .667 + .333 + .333 = 2.0.

So the overall market share of these two builders has increased by 50%; a remarkable, real world example of synergy between erstwhile competitors. Co-opetition is a powerful force.

Back to Sponsorship… So What are Sponsors Looking For?

An upcoming event at the Telfer School of Management (planned for March 2011) will be a conference on CSR, Corporate Social Responsibility. A group of students organizing this event came to me asking: “How do we get sponsors?”

Well, we need to ask and answer a series of questions to help them develop a strategy.

1. What do these students have that potential sponsors want? Basically, what do they have to trade?

Answer:

• Access to Telfer and top students

2. Why do sponsors want access to students?

Answer:

• Recruit them.
• Sell them cars.
• Sell them insurance.
• Sell them credit cards.
• Sell them mortgages.
• Sell them REALTOR services.
• Sell them furniture.
• Sell them legal services.
• Sell them accounting services
• Basically, sell them all the things that new graduates are going to need within the first five to seven years > university.

3. Who sells cars, insurance, credit cards, mortgages, REALTOR services, furniture, legal services, accounting services, etc?

• Answer this and you have your list of potential sponsors.

4. So let’s say they approach a Bank to sponsor the CSR Conference, what should they say?

Answer:

• Well, what they shouldn’t say is: “Give us money because we’re poor but nice students plus CSR is a good cause. And, oh, we have a great website that we can add your logo to.”
• They should, instead, follow the French dictum: “Suivez l’argent.” Here is a model of how this all might work:

image

Getting Sponsors: A Model

As an example, a Bank sponsor might be allowed to set up a booth to recruit students and to issue credit cards 1 week < the conference and 1 week > the conference in the Telfer School of Management (perhaps in the lobby of the Desmarais Building, a valuable location to a potential sponsor). With every credit card applied for or issued, the students might also get a free, co-branded Bank/CSR t-shirt, creating yet more leverage for the sponsor and the conference organizers.

5. If the Bank sponsor gave the CSR Conference, say, $2,500 as a sponsorship fee, what is their ROI and is that even important?

Answer:

• Yes, whether they make it evident or not, the Bank is expecting a Return on Investment, ROI.
• To recruit a single top notch student might cost $15,000 and up through conventional recruiting tools and procedures.
• That recruit could add to the Bank’s top and bottom lines. Let’s guess $14,000 in his/her 1st year, $35,000 in years 2, 3, and 4 and they stay for four years.
• Credit cards are one of the most profitable Bank lines. It is also one of the most competitive.
• So if we just look at recruiting and credit cards (forgetting about Bank insurance and mortgages as well as investment services for now), we get:

ROI = -2,500 + 15,000 + 25,000 + 35,000 + 35,000 +35,000 + N*V,

Where N = # of credit cards sold to students during the sponsorship deal,

And

V = the capitalized value of each credit card issued.

• We are assuming that the Bank recruits just one student
• As you can see, ROI is likely to be highly positive.

We call the above approach: Negative Cost Selling. Basically, what you are telling each sponsor: “The cost of your sponsorship will be more than offset by the benefits it generates and we can quantify this for you.” The benefits are made up of either higher marginal revenues or lower marginal costs or some combination of the two. It is your job to show that the benefits are greater than the costs. Be specific.

If you go into each sponsor presentation equipped with this type of approach, your success rate is bound to improve.

Strategic Investors

These are people who invest in your new enterprise because it is strategically important for them to do so or because they do it for social reasons instead of commercial ones.

I recently advised Angella Goran who is working to get JOK Wear off the ground (a line of women’s and men’s sports wear that uses bamboo-based natural fibers that don’t retain odors) to go after strategic partners* rather than Angel investors or VCs. The former are far more likely to act faster than the latter and ask for a lot less. They usually don’t want any equity either. Perhaps Angella can do a deal with a large chain store to give her a pre-order of $2 million with 10% ($200k) cash down and the balance on delivery. Then maybe she can factor her receivable for cash giving her access to a significant amount of funding up front.

Why would the chain do this? A) Because they like her product, B) they like and trust her and C) they might ask for a 2-year exclusivity agreement– to keep it out of the hands of one or more of their competitors.

This is what AT&T did with Apple and the original iPhone: they gave Apple an unbelievable deal including access to a portion of their subscribers’ CMRR (Committed Recurring Monthly Revenues) in return for an exclusive period, mainly to keep the iPhone from Verizon.

Apple did it again with the iPad, asking companies to pay $10 million just to be featured at the launch.

If it is OK for a hugely profitable company like Apple to engage strategic investors, it’s OK for startups and the rest of us too.

Notice that in return for the strategic investment (in the form of a pre-order) Angella gives up no equity, takes on no debt, has no monthly repayments and still gets access to capital. Of course, she has to deliver on her promises (to deliver) which is where trust comes into play.

Another form of strategic investing is via social norms– where people would prefer to give you the money rather than lend it to you or invest it for a return. If you ask a $550 per hour lawyer to do some pro bono work for a worthy client, they might very well agree. But if you offer them $80 per hour for the same thing, they might tell you off in a huff. This is the difference between commercial and social norms. 

There is a wonderful site that epitomizes this that you can visit at: http://www.kickstarter.com/. You can put your project on their site and raise money from people who want to see the project go forward and are willing to contribute financially to that. In return they get, nothing (!) at least in terms of Rate of Return.

If you are launching, say, a children’s book and need some startup cash, maybe the donors (parents) will get a thank you postcard, a calendar, fridge magnets, an autographed copy of the book, a producer credit, a pack of ten copies, a personal author appearance and photo session in return for various-sized contributions. (See: Twig the Fairy Storybook project, http://www.kickstarter.com/projects/twigthefairy/twig-the-fairy-storybook?ref=category).

image

Launching a Children’s Book?

Bloomberg Businessweek (Oct. 30, 2011) report that anywhere from 39% to 58% of the projects placed on Kickstarter.com reached their crowd funding objectives: https://www.dropbox.com/s/kdw2gpxua4hucmm/kickstarter-vc-bbw-oct-2011.pdf?dl=0. The projects do not draw down any of the funding until all the funding has been committed to try to reduce the failure rate.

There are hundreds of ways to bootstrap* your new enterprise and the Internet has made things much more interesting, accessible and wondrous.

Major Craig’s Chutney

I met with Andrew
Craig, owner of Major Craig’s Chutney early in 2012. Andrew,
like the gentleman he is, played the role of Brigadier General Marc Licinias in
Quantum Entity Short Film, Generation Q based on Book 1 of my sci-fi trilogy. He
was a true volunteer for the acting gig not a voluntold, really.

image

He told me the backstory of his then three
year old business. Turns out his great, great grandpappy served with British
forces in India
circa 1884. While there, Major James Craig experimented with ingredients and
cooking methods for all kinds of chutneys and brought those recipes back with
him back to the British Isles where a subsequent generation somehow found their
way to the wilds of northern shelf Canada and brought with them the knowhow and
written copies waiting to be rediscovered by Andrew in 2009. Thus was major Craig’s born—if you
need North India, Cranberry, Jerk, Butternut
and Beer (yum) chutneys, well, now you know where to go.

Andrew came to see me and, well, it’s a
pretty tiny business. He needs a bit of capital to expand and he can’t take on
any debt or partners (it’s a PB4L, Personal Business for Life). Why no debt?
Because he can’t yet support any. Why no partners? Because if he has a partner
(or takes on any debt) it won’t be long before either the partner owns his
family’s recipes or the debt holders do (i.e., the Bank or other lenders).

So what’s a progeny of Major James Craig
to do nearly 150 years later? Issue script and find strategic partners and
sponsors, that’s what.

His clients, distributors, food prep
supplier, his label printer, his ingredient growers—he has a lot of people in
his business ecosystem who want him to grow and succeed. If he issues script to
them in $25, $50, $100, $200 and $500 amounts with a premium of say 15 to 20%,
that’s a pretty good deal for them and even better deal for him—same as for
Tracey Clark.

There is some other cool stuff Andrew can
do to raise more ‘free’ money. If you look at the image below, you’ll notice
that strategic partners are everywhere, you just have to be able to see them.
It was there staring poor Andrew in the face all the time. He was looking but
not seeing. One of his suppliers is in fact fast-expanding Beau’s Brewing.
Amazingly, it was already right there on the label! How much are they paying
Major Craig to be co-branded this way? Nothing. Yet.

That will change. What I want Andrew to do
is put five strategic partners on his label, his new website (when he raises
the ‘free’ cash to build a decent site) and in his nice Xmas gift boxes (see
the last image I have included near the end of this section) which are perfect
vectors to carry his strategic partners’ messages to his clients—things like
teensy recipe books, coupons, tickets, biz card, promo items, what have you.

How much of his equity does he give up to
get their sponsorship money? Zero.

How much interest are they charging him to
give him their dough? Zero.

In fact, he doesn’t even have to repay the
money since it is a sponsorship/marketing/advertising cost to them, i.e., an
expense. Truly free money for Andrew.

image

One other note I should add. I suggested
to Andrew that he sign up his sponsors for two years. He just isn’t going to
have time to start over every year at ground zero. He will also give his
sponsor partners an option on a third year at the same cost provided they
exercise that option at least six months prior to the end of the term of their
agreement. After that, if he is as successful as we hope, the price will
increase so this is a big benefit to his sponsors.

Lastly, Andrew can use his Xmas packaging
as a vector to deliver his sponsor messages. In a way, he could learn something
from LooseButton.com: they deliver their monthly Luxe Boxes to subscribers and
get paid on three sides of their biz model.

Or he could do worse than copy the
Manpacks.com biz model– they managed to turn products (men’s underwear,
cologne, razor blades, etc.) into a service by delivering their stuff monthly
or quarterly or semi annually and developing a nice recurring revenue model for
themselves. 

Regular chutney delivery service anyone?

image

A ‘Major Craig Chutney Xmas Gift Box’
could also be a vector for delivery of coupons, biz cards, recipe books, event
tickets and messages from strategic partners, investors and sponsors!

Curved Driver

A couple of guys I know came
to my office in 2009—they had a series of products they were trying to get off
the ground—a curved golf club, a curved hockey stick, a curved walking stick
and a curved ski pole. They believe that, for example, their curved driver
helps duffers hit the ball straighter while their curved hockey stick they say
helps make a player’s shot ‘heavier’. 

I cautioned them against a
GO-BIG-OR-GO-HOME strategy; it almost never works for these types of gadgets. I
told them to use a go slow approach. Build a 10 cent website using a platform
like Shopify, go to a few trade shows, ask a few high profile folks to try
their wares and endorse them if they like them (but don’t offer them any money
because they don’t have any to give away), get involved with social media
(especially Twitter and FB), start a blog, trade links with some friends on the
web to boost their Google page ranking, basically, do stuff that is
inexpensive.

Their goal (which I set for
them) was to build a sustainable PB4L (Personal Business for Life) that within
a few years might earn $120,000 per year PROFIT, spilt between the two of them.
If one of their gadgets takes off terrific. If not, a PB4L that produces some
income will be better than nothing and they will take great satisfaction from
it.

Their idea when they walked in
the door was to raise $300,000 to $400,000 from, say, 30 people and then blow
it all on big product orders from China, an advertising campaign, a presence in
major retail chains, investment in celebrity endorsements, getting major
distribution players to back them and so forth.

This approach usually spells
disaster. If you have a game you have invented or a gadget of some kind,
established players in those industries don’t want to hear from you. They are
deathly afraid you might later claim that your product is similar to one they
were already developing. Juries are often only too willing to believe
(sometimes justifiably) that a large corporation has essentially stolen an idea
from a small scale inventor and damages (especially in the US) can be huge.

Plus these established players
hog all the shelf space and don’t want to share it with you.

For every Air Hog or Trivial
Pursuit there are millions of ideas, concepts and patents that never amount to
anything and often cost their inventor everything. So aim low, go slow, don’t
risk too much money and you may get a pleasant surprise on the upside.

The guys also asked me if they
could sell their ideas to one of an established player. You already know the
answer to that—no. Ideas are abundant and cheap. Large players buy cashflow and
market share; in my experience, they won’t pay a farthing for just an idea.

Another thing that can really
assist these guys is to get some sponsors. This was a new idea for them and we
discussed how it might work:

1. They believe, and I agreed,
that the curved driver was probably the best gadget to start with.

2. I told them that the golf
audience is a highly desired one by advertisers but hard to reach.

3. What if they put the logos
of a few sponsors on the shaft of each driver?

4. Law firms and accounting
firms want to reach this audience and they have (at least in Canada) restrictions on how they
advertise. Adding their logos and URLs on the shafts of these drivers would
suit them perfectly.

5. Other potential sponsors
might include high end autos, a beer company or winery and purveyors of luxury
goods, maybe even resorts and hotels.

6. Every time a golfer drags
that driver out of his or her golf bag, they see these logos—they aren’t
zappable like TV ads.

7. They continue to work for
the life of the club—five or more years.

8. The clubs might retail for
$250 and cost about $60 each. Perhaps they could put five logos on their
drivers for, say, $6 per club so half their costs are covered by sponsors!

9. If the average golfer plays
12 rounds per season and brings his or her driver out 18 times, then the cost
to the sponsor for 1,000 clubs is $4.63 per thousand views. This is the
fundamental measure of advertising efficiency, known as CPM (Cost per Thousand,
the ‘M’ is the Roman numeral for thousand).

10. That is a very reasonable
CPM; CPMs can vary from $5 for newspapers to $15 or more for glossy magazines
to as much as $60 for highly targeted web ads. Facebook advertising can cost
even more. Mail drops in Canada
can cost 15 cents each when delivered by CPC (Canada Post Corporation) which
obviously works out to $150 per thousand. So $4.63 to deliver a highly valued
audience is a pretty good value proposition.

11. Co-op advertising is the
way of the future—more brands will be sharing the same space. If you are
selling a high end car why not have an attractive person modeling top end
clothes and jewellery to help defray some of the costs. That is, sponsors can
have sponsors! Firms will pay to have their products placed in other ads!

Here is how you calculate
CPMs:

CPMs for Golf Driver

Average 12 rounds per year

No. of Holes 18

Use of Driver 18 100%

Views of Driver 216 per year

Life of Club 6 years

Views of Driver 1296 during
life of club

Cost of sponsorship $6

Cost of sponsorship $6,000 1,000
clubs

CPM $4.63

Sponsors dollars help defray
your costs but sponsors can become delivery channels too. When the guys sign up
a sponsor, the agreement might look like this:

A. They sponsor 1,000 clubs at
$6.00 each.

B. They agree to sponsor
another 1,000 clubs after the first 1,000 are sold.

C. They agree to buy (at a
reduced price, say, $175 instead of a retail price of $250), 20 clubs per year
for the next three years.

D. They have to pay 50% of
their sponsorship on signing and the balance within 6 months.

E. They pay for their first 20
clubs—50% on signing the Sponsorship Agreement and the balance within 30 days
of receipt of their order.

F. They agree to feature the
product on the Partners Page of their website and all of the co-sponsors too.
They link to all of them and they and their co-sponsors link back to them—they
cross promote and raise everyone’s page rankings in Google.

If you look carefully at the
above, you will see that there is an emphasis on cashflow. Under this model, if
they sign up five sponsors, they will end up with $23,750 right up front—enough
to pay for their first order of clubs, go to a few trade shows, set up a simple
website and have some money left over. They will also be expecting another
$23,750 after they deliver the clubs to their sponsor and collect the balance
of their sponsorship.

Here is their simple cashflow
model:

Cashflow Model

No. of Sponsors 5

No. of Clubs 1,000

Cost per club $6

Cost of Sponsorship $6,000

Deposit $3,000 50%

Purchase of Clubs 20

Purchase Price $175 per club

Purchase Price $3,500 for all
clubs

Deposit $1,750 50%

Cash on hand $4,750 per
sponsor

Cash on hand $23,750 total

Just as important, their
sponsors will do something with the 20 clubs they have been ‘forced’ to
buy—they will give them away at golf tournaments that they host, they will give
them to favored clients and, guess what, they have now become powerful
distribution channels for the company.

Nashville Food Cupboard

 

I find sponsorship
opportunities everywhere. A couple of young fellows came to see me recently and
I sketched out a plan for them to do some ZERO COST GOODWILL MARKETING for
their new business, Acme Enterprises in Nashville
(the names and places and numbers have been changed).

They wanted to do a food drive
for the Nashville Food Cupboard and they wanted to offer as an incentive to get
people on board a draw for tickets to a Titans game. They had arranged to get a
private suite from the Titans for $2,000 (a reduced rate from what the normal
commercial value would be) subject to their being able to find the money. They
had 30 days to come up with the dough.

Here is the program we set out
for them:

1. They decided to support the
Nashville Food Cupboard, a worthwhile cause.

2. It would not only help the
Food Cupboard which was experiencing a shortage of food and a simultaneous
increase in demand as the economy worsened but it would also help build their
brand and that would help Acme earn the trust in the community and that would
mean that Acme could better compete in a tough marketplace and sell more of
their services.

3. They got a favourable rate
from the Titans for a suite ($2,000) but still had to find the money to cover
it—they just didn’t have it in their budget for this year but knew they needed
to do something to help the community and to help themselves.

4. Everybody who brought in
food donations would get one ballot for every item—you bring in ten cans and
you get ten ballots.

5. They would hold a draw and
the winners (there would be four of them) each get a pair of tickets to the
suite.

6. Then they would go out and
sign up four other local businesses to co-sponsor the food drive.

7. Each sponsor would throw in
$500—for that, they each got the right to accept food donations in their place
of business (driving more traffic to their stores and offices). Plus they each
got two tickets to the suite.

8. The suite holds 20
people—four winners of the draw would use 8 seats, the four co-sponsors would
use 8 seats and the two owners of Acme would each get one. Plus they held back
two seats for the Nashville Food Cupboard—one for the Executive Director and
one for a guest of the ED—presumably a key sponsor of the Food Cupboard would
also like to attend.

9. Donations would be accepted
at Acme and the other four locations for three weeks prior to the game.

10. Every Friday would be
dress down day and every employee would wear a Nashville Food Cupboard t-shirt.
On the back would be the names of the four sponsors and Acme.

11. The employees would
receive these really well designed t-shirts for free.

12. Each co-sponsor would pay
125% of the cost of the shirts—Acme would pay nothing—since they are putting in
their share in the form of SE, sweat equity. After all, they are organizing the
whole thing, putting in lots of hours including helping the Food Cupboard’s
truck make the rounds and pick up the donated items. Plus they are driving a
lot of new customers to the four co-sponsor locations.

13. It would be a fun
afternoon at a Titans game, hoping they could win a game that season (the Titans
were off to an 0-4 start in 2009).

14. They would also put out
media releases—announcing the food drive and later the winners with happy
smiling faces everywhere.

This is the model we sketched
out on a piece of paper for the guys:

Nashville Food Cupboard Biz Model

image

So sponsorship applies not
only to large businesses like pro sports teams but to startups and SMEEs as
well.

ProfBruce

* For more on bootstrapping your way please see: http://profbruce.tumblr.com/post/152682933059/bootstrapped-things-every-tech-or-other-startup

ADDENDUM

Christie Lake Kids, an Ottawa-based charity that helps children referred in to its programs at age 9 by Social Agencies or the Police, is one of my favourite charities. I have suggested to them that they may be able to offer a national or regional chain of stores a strong value proposition based on a co-branding approach, which goes something like this:

image

Feedback Loop: Suivez L’Argent

The question is: could CLK show a national chain that their volume and bottom line will increase by more than the cost of their sponsorship during, say, a two week period during which a percentage of sales go to CLK? Is the fact that a percentage of sales goes to benefit the kids during that period enough to drive more customers to their stores? Of course, CLK would have to show that the increase in sales did not just cannibalize sales that they would otherwise have had at other times of the year. CLK might also be able to show that the chain’s association with the charity brings not only immediate higher volumes and better bottom line but also new lifetime, customers who might not have otherwise thought to shop there.

Both organizations could benefit from this co-branding effort – CLK could get a sizeable, recurring new revenue stream and the national chain ups its CSR status and its sales.

Strategic Investors Summary

One of the most overlooked
sources of self-capitalization for new enterprises is the strategic investor.
What is a strategic investor? Someone who has a strategic interest in your
success.

How do you find them? Look
through your value chain.

Why go to strategic partners?
They will generally make investment decisions faster than Angels, VCs, banks or
governments and they will have more capital and better connections throughout
your industry than raising money from friends and family.

What will they ask for in
return? Often much less than anyone else—perhaps they will be satisfied with,
say, an exclusive period during which they can feature/market/use your products
or services thereby keeping your products or services away from their
competition and further differentiating themselves in the marketplace. The
funding they provide may also come with fewer strings attached.

When Apple launches a new
product like the iPhone, iPad or iPad mini, what is it worth to a third party
app developer, say, to be included on their home screens? Organizations pay
significant rights fees simply to be featured in product launches like these.
What’s good for Apple is good for your next startup as well.

@ profbruce

Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD, Century 21 Explorer Realty Inc broker, Ottawa Senators founder, Real Estate Investment and Business coach 1-613-762-8884 bruce.firestone@century21.ca twitter.com/ProfBruce profbruce.tumblr.com/archive brucemfirestone.com

MAKING IMPOSSIBLE POSSIBLE

postscript: see also, How to really finance
real estate
http://profbruce.tumblr.com/post/159975041334/how-to-really-finance-real-estatekic

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Bruce is an entrepreneur/real estate broker/developer/coach/urban guru/keynote speaker/Sens founder/novelist/columnist/peerless husband/dad.

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