Power Sports Tuning: Sponsorships. - Power Sports Tuning

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Sponsorships. Why it's hard to find sponsors.

#1 User is offline   David - WI

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Posted 13 May 2006 - 03:57 PM

Did you ever wonder why it's so hard to get people & businesses to "sponsor" your race program?

Thank about it from the sponsor's point of view. If you sponsor somebody for $1000, you get to reduce your net income by $1000 for tax purposes... you don't get to take $1000 off of your tax bill.

The actual end-cost would depend on what your tax rate is. If you own an S-Corp or LLC you get taxed at your personal tax rate, so if you're total tax rate is 30%... the sponsorship still costs you $700!

Somehow, in order for you to break even on the deal, that racer needs to provide you with $400 in advertising value, $400 in useful product feedback, $400 in something!

Otherwise, why would you give up $700 in profit to save $300 in taxes... just to spite the government?

Let's say I have $1000 in profits for the year. I can:

1) pay $300 in taxes and keep $700 for myself... costs me $300.
2) pay $1000 out in sponsorships and get $300 off on my taxes... costs me $700.
I need to get $700 - $300 = $400 in "value" to break even on the sponsorship.

For large corporations that pay a flat 35% federal income tax plus say 9% in state income tax, the picture is a little different.

If they have $1000 in profits for the year. They can:

1) pay $440 in taxes and keep $560 for themselves... costs them $440.
2) Pay $1000 out in sponsorships and get $440 off on their taxes... costs them $560.
The large corporation only needs to get $560 - $440 = $120 in "value" from their sponsorship in order to break even.

Think about how much radio or newspaper advertising you could by for $400... does a sticker on the side of this guys car or bike get you at least that much exposure?

A lot of racers I know don't give back nearly enough "value" to their sponsors, because they think the sponsorship is a no-cost deal for the sponsor... but that's just not the case.

If you want someone to sponsor your race program, you need to find a way to show them that you can provide enough "value" for them to at least break even on the deal. Whether that means you get their name on TV or in the newspaper, you bring your family & friends into their restaurant or bar to spend money, you provide testing & feedback on their products... whatever you have to do to provide some "value" for the sponsor!
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