If you’re new to race directing, you may be forgiven in thinking that in-kind sponsorship is little more than cash sponsorship’s poor cousin – something events have to resort to when all other race sponsorship alternatives have been exhausted.
This could’t be further from the truth.
In-kind sponsorship can add a ton of value to a race and often completely transform its profitability. What’s more, it is usually easier to deliver than cash sponsorship and can open your event to a much larger pool of potential sponsors.
In the rest of this extended article on anything in-kind, we walk you through what in-kind sponsorship is, what areas of your event it can be applied to and how to find the right sponsors for your race.
So what is in-kind sponsorship?
In-kind sponsorship (or value-in-kind sponsorship, as is its full name) is a type of sponsorship where the sponsor agrees to provide goods or services (value in kind) instead of cash as part of a sponsorship agreement.
That, fundamentally, is the only difference between an in-kind sponsorship and cash sponsorship: the form in which the sponsor contributes value to the event.
Because of this difference, in-kind sponsorship is often surrounded by some dangerous misunderstandings. One common one is that in-kind sponsorship is a form of charity, where the sponsor donates goods expecting nothing in return.
In-kind sponsorship is most certainly not charity. It is a reciprocal commercial relationship, just like cash sponsorship, and sponsors in both cases have very clear ideas of what it is you should be delivering in exchange for their contribution.
It is true that in-kind sponsorship is often easier to secure than cash sponsorship (see the “In-kind sponsorship benefits” section below) – that’s why it’s so great. But that doesn’t mean you should treat it any less professionally than any of your other commercial relationships.
In-kind sponsorship examples
Because in-kind sponsorship yields “stuff” rather than cash, seeking in-kind sponsorship should start with a look at your race budget. What are you currently spending money on that a suitable in-kind sponsor cover?
There are some obvious answers to this, as well as things that may not be immediately apparent, such as:
- Team travel expenses – These are often a significant cost for some races. Obvious sponsor targets for this include airlines, bus and train operators and even bus and car hire companies.
- Team accommodation – Hotels often jump at the opportunity of being accommodation sponsors for events. Typically the hotel will offer discounted or free accommodation for the event team in exchange for exclusive promotion and other sales privileges with race participants and guests.
- Participant giveaways – T-shirts, medals and other giveaways can be covered, either through direct provision by the manufacturer or through sponsorship by a third party. In many cases, the items may be provided by a local authority, tourist or commerce board who can often procure the items at a better price from a local business.
- Food & drink – Supplies can come either from a third party or, more typically in the case of water and energy foods, from the manufacturer who will happily contribute goods in exchange for exposure through the race.
- Policing expenses – Costs charged by the police and other public entities can in some cases be offset partly or fully by local authorities with an interest in promoting mass-participation events in their area.
- Venue hire – Wherever venue hire is required (e.g. for athlete briefings, race pack pickup etc) local authorities and hotel partners can help out in exchange for event exposure and other benefits.
- Transport, electronic equipment & fixed structure hire – Barriers, audiovisual equipment, buses for participant transport etc can often either be hired on the event’s behalf by local public partners or more likely be made available to the event from existing inventory.
- Volunteers – Let’s not forget about this very crucial aspect of your race. Volunteers are an invaluable resource and any deal that helps alleviate some of the strain of recruiting and training volunteers should be top of your agenda. Charities can be a very good fit for this and are often willing to contribute volunteers from their ranks in exchange for fundraising opportunities in your event.
How to find a sponsor for your race
Once you’ve identified areas on your budget you’d like to focus on (ideally, starting with big ticket items), it’s time to start approaching sponsors.
Finding a sponsor involves the same basic four steps, whether the race sponsorship is in cash or value in kind:
- What do I have to offer? Start here and ask yourself what you bring to the table. For most races this can be any number of things, from free publicity and brand exposure to sales opportunities and product trials. Before approaching sponsors, make a list of all your sponsorship assets (fancy talk for things of value your race can hope to offer to a sponsor). Don’t make this formal, but do make it comprehensive. At this stage you should be adding everything and anything to your list. You can decide what bits are worth focusing on later.
- Who may want what I have to offer? You might think the answer to this question will be a business or brand, but, as we saw in the section above, many race sponsorship opportunities exist with public organisations, local government, charities and other non-profits. Think who benefits from your event: if they’re getting something out of it, they’re more likely to want to put something into it.
- What do I need? It is particularly important in the case of in-kind sponsorship to know what your races needs before approaching sponsors. It is less important for cash sponsorship where you can use cash to cover any kind of expense – for in-kind sponsorship you’ll be receiving goods or services, so you need to have a user for them and determine your target sponsors accordingly.
- How do I make a deal happen? If you’re in the early stages of developing your event, it’s best to focus on building relationships with your sponsors rather than trying to squeeze every last penny out of your sponsorship deals. Remember: your sponsor is your client and it is on you to demonstrate you can deliver on your promises before asking too much. Once you’ve proven your worth and built a good working relationship, you can look to expand the scope of your agreement further.
In-kind sponsorship benefits
It is true that in-kind sponsorship has certain limitations:
- It is of limited use in covering some general expenditure items, e.g. fuel and sundry expenses
- It can’t be used to pay salaries
- It can’t be banked as profit
However, because it is so effective at targeting costs and so much easier to obtain than cash, it can deliver some massive benefits to your event. Let’s look at some of these in more detail.
Perhaps the most important benefit of in-kind sponsorship is releasing cash earmarked against race expenditures.
In-kind sponsorship releasing cash sound counter-intuitive? It isn’t.
Take the example of race T-shirts. Suppose you have a $1,000 budget to spend on T-shirts for race participants. That $1,000 would likely have been raised through registration fees. Getting a sponsor to provide the race T-shirts, automatically releases that $1,000 formerly set aside for T-shirts.
So as a result of striking an in-kind sponsorship deal for the T-shirts, you now have $1,000 to spend in cash. Neat, right?
Better sponsor alignment
Since a lot of the items you need for your race are provided by businesses who have an interest in engaging with your audience, in-kind sponsorship provides a much better platform for mutual value creation than cash sponsorship.
Let’s return to the T-shirts example and let’s assume that you plan to cover the purchase of those T-shirts through sponsorship. You can either (a) seek a cash sponsor for $1,000 or (b) look for a sponsor willing to provide the items directly. And who better to do that than a T-shirt manufacturer.
By asking a manufacturer of the goods you need to provide the items as part of an in-kind sponsorship, you are achieving two things at once:
- Getting the items you need at a much lower actual cost to the manufacturer. The manufacturer will likely not think much of providing the items at cost and would much prefer that over putting up the cash equivalent.
- Giving the sponsor a natural, guaranteed activation channel for his sponsorship. After all, if you ask Adidas to provide you T-shirts for your race, they will know their product will be going straight into the hands of their potential customers. Which is much better than any promise of a logo placement or race bag leaflet.
So, when you can, go straight to the source: make your goods provider your in-kind sponsor.
Get more for less
Another useful feature of in-kind sponsorship is that it tends to be more targeted in scope than cash sponsorship. Cash sponsorship usually ends up extending to all aspects of an event. In-kind sponsorship is often much more contained.
For instance, an agreement with a hotel partner to provide accommodation for your team in exchange for a sales exclusivity, often limits your obligations to just that. Whereas a cash sponsor might require extensive branding rights across all your race materials, mentions on all your communications etc, an in-kind sponsor may be satisfied with a much more specific set of benefits. That can leave you a lot more flexibility to seek more lucrative deals elsewhere.
Last but not least…
In-kind sponsorship is much much easier to get – for a number of reasons:
- Lots of businesses, even very large ones, prefer providing goods rather than cash. That is not only because of the reasons discussed so far. In many cases, it is more efficient, in accounting terms, to provide value in kind. Often it is also much easier to obtain internal approvals to release goods rather than cash. And it is not unusual for cash sponsorship to fall victim to annual marketing and budgeting cycles.
- Lots of potential sponsors can utilise idle assets. For instance, it would be very straightforward for a hotel or municipal authority to grant use of an unused venue. Much easier than getting a sponsor cover the cost of hiring the venue at market rate from a third party.
Accounting for in-kind sponsorship
The peculiarities of in-kind sponsorship do not only touch on your potential sponsors. They also have a significant bearing on how you approach these agreements.
As we saw above, in contrast to charitable donations, race sponsorship is a reciprocal arrangement. Therefore it is often deemed a commercial transaction, regardless of whether the event receives cash or goods.
The exact in-kind sponsorship accounting treatment will likely depend on a number of factors: the legal entities participating in the transaction, the goods and services exchanged, the governing legal jurisdiction etc. So always check with your accountant the most suitable accounting treatment for all sponsorship transactions before finalising any such agreements.
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