Sponsoring. A smart move or not?
- Amber Kuipers
- 28 Feb 2023
- Edited 18 Jul 2023
- Managing and growing
Business owners are often asked to sponsor events, but how do you become a sponsor, what are the benefits, and is it deductible? Discover whether you can benefit from sponsoring.
You can sponsor events big and small at a local, national, or even international level. From the Eurovision Song Contest and professional football clubs to local village fêtes.
What is sponsoring?
Sponsoring is the act of investing money or material in a project, programme, or person. Mostly in fields like sports, culture and entertainment, or social causes (source: Kees van Maren, author of the book Sponsoring). The sponsored party provides a counter service, such as communication opportunities. The entrepreneur always receives a quid pro quo, a service in return otherwise it is a donation.
There are many different kinds of sponsoring:
- Sports, for example by supporting a tennis club.
- Social causes, for example by supporting a charity.
- Events, for example by supporting a festival.
- Arts and culture, for example by supplying paint and brushes to a cultural initiative.
- Science, for example by supporting scientific research.
None of these are mutually exclusive: you can support sports and social causes at the same time by sponsoring a charity fun run.
Is sponsoring tax deductible?
If you, as an entrepreneur, sponsor in exchange for publicity, the sponsorship costs are 100% deductible. Sponsorship then takes place from a business point of view. Think of brand awareness, product or brand introduction and personnel recruitment. Here, VAT is also processed as input tax in your sales tax return. The sponsored party writes an invoice to your company and VAT is levied on these sponsor contributions. This expense is also deductible if your company makes a tax loss in the year in question.
Private sponsorship (not for business reasons) is a gift. In this case, the costs are still (partially) tax deductible if you meet certain conditions (in Dutch).
Set a target
Sponsorship is not just for large organisations, although they usually have a bit more to spend than an SME or sole trader. Budgets vary. Do not think too big, locally there are plenty of initiatives too. Advertisements of your company on the website, your company name in social media posts or your company logo in the programme book of a theatre company. And you can also sponsor a smaller part of an event instead of the whole event.
In practice: Champagne
Brut & Bubbels is co-owned by Theo Vrolijk and five of his friends. Together, they organise champagne presentations and tastings. The friends behind Brut & Bubbels met each other on a football pitch 40 years ago. To celebrate their origins, they have been sponsoring their old football club for more than 14 years. With a billboard along the main pitch and one ball per season. What they receive in return? “When new year’s drinks roll around, we serve our champagne, we regularly host champagne tastings, and we provide the bottles when the first team wins the cup. All these activities have landed us new customers.”
Show your commitment or improve brand awareness
Determine if and why you want to be a sponsor. And pin down what you want to achieve. Even if no one has asked you to sponsor them yet. Do you want to sponsor your daughter’s hockey team to help out? Having your logo feature on their shirts will provide extra visibility.
Do you want to boost brand awareness among a specific audience or improve your image or customer loyalty? Make sponsorship part of your marketing communications strategy. It is also a good way to expand your network. Sponsoring local initiatives and charities shows you take social involvement seriously and can be commercially beneficial at the same time.
The ideal match
Besides an emotional click, do you also have a substantive match with the initiative? Suppose you own a toy shop, then sponsoring youth activities is a better match than, say, an event for students. Check if your chosen sponsorship partner matches the mission and vision of your company and target group.
In practice: connecting with young people
Sisters Sonja and Jacqueline Evers are the founders of Online Evers Marketing and sponsor a local youth softball team with shirts, balls, and clinics. “We chose to focus specifically on kids, because we feel a close connection with children’s softball. Jacqueline's daughter plays softball at a high level and we were avid softball players when we were young ourselves. It has not resulted in any new projects yet. But our website and social media channels do get more visitors on the days following clinics that we sponsored. For us, the social benefits are most important. We help encourage kids to play sports. Besides, softball is not as popular as hockey, for instance, and needs all the help it can get.”
Sponsorship is a form of collaboration. Have you found a collaboration that suits you and your company's values well? Then discussing the sponsorship collaboration is the next step. Make clear agreements and schedule evaluation moments. This will make your goals more measurable. And you can make timely adjustments if results are disappointing. Set your expectations in advance:
- What results do you expect?
- How long do you want to work together?
- What return do you want to get from the partnership as an entrepreneur?
- What service is the sponsored party offering in return?
How can sponsoring benefit you?
You can support initiatives you like by sponsoring them. If you want to sponsor something, make sure you are fully committed. Do it right or do not do it at all. Only give it the go ahead if you have the time and money you need and if it is a good fit for you and your company.
In practice: an awkward pairing
Anne Bos, co-owner of a dental practice in de Meern deliberately chooses not to sponsor anything or anyone. “Acquaintances often ask us to sponsor their initiatives, but we always turn them down. It has nothing to do with financial or social considerations. It is just that commerce and care are an awkward pairing. We have other ways to generate brand awareness, like monitors in our waiting rooms.”
If you have the time and capacity, announce your sponsorship activities wherever you can, such as on your own website or social media. Post a video or write a blog to tell your target audience about who you are sponsoring and why. If you are short on time, ask the sponsored party to help. Create content together, like an article on your partnership or photos of an event that clearly showcases your sponsoring efforts. Both parties can then share this content on their own media channels.
Beforehand, carefully consider why you want to sponsor or not and what you expect from this. Besides all the advantages, sponsoring also has a few disadvantages:
It takes time and money, especially if you do it professionally.
Results are difficult to measure, it is not always clear what it costs you and what it delivers.
You risk reputation damage when the sponsored party appears negatively in the news or on social media.