In-kind sponsorship: goods and services instead of cash

In-kind sponsorship is sponsorship paid in goods or services rather than money: a venue lent for the day, catering supplied at cost, printing done in-house by a sponsor’s marketing team, a recording crew, a block of cloud credits. It is common at regional events and it is the part of a sponsorship programme most often accounted for badly. The reason is a single question that rarely gets asked at the point the offer is accepted. Does this remove a line the budget already had, or does it add a line the budget did not have? Everything that follows depends on the answer.

What actually gets offered

The offers cluster in a small number of categories. A company lends a room, an auditorium or a canteen, which at a regional event is frequently the whole venue question settled. A caterer or a sponsor’s own facilities team covers coffee and lunch. A print shop produces badges, signage and the programme. A production company records and edits the talks. A hosting provider supplies credits. Occasionally a law firm or an accountant does the paperwork for a first-year event, which is quietly one of the most valuable donations on the list.

Those split into two groups that behave nothing alike. The first group covers things the event was going to buy regardless, and every one of them maps onto an existing budget line. The second covers things the event had not planned to have at all, and those arrive with hidden costs attached: somebody has to receive them, store them, transport them and dispose of what is left.

Why the retail value is the wrong number

A donor states a value, and the value stated is almost always the price the donor charges its commercial customers. That figure is not what the donation is worth to the event, for two reasons. The first is that the donor is very often giving away capacity it could not have sold anyway. A venue offering a Saturday is offering a day when the offices are empty, and the commercial day rate attached to it is a rate nobody was going to pay that Saturday.

The second reason matters more. A production company that quotes a large figure for filming, multi-camera editing and captioning is quoting for a service the event would never have bought at that specification. Left to its own budget, the event would have hired one freelancer with one camera, or set up a fixed camera and accepted the result. The correct valuation is the replacement cost at the standard the event would itself have chosen, which is routinely a fifth of the quoted figure.

Booking the retail number does active harm. It inflates the reported budget on both sides, it places the donor in a sponsorship tier far above what the event received, and it distorts the tier table for every cash sponsor who paid real money at the same level. A cash sponsor who discovers this is a cash sponsor who negotiates differently the following year.

The rule: it must replace a line

The working test is short. In-kind sponsorship should remove a line that is already in the budget, not add a new one. Donated catering removes the catering line and is worth exactly what that line was. Donated recording removes the recording line, if there was one. Donated lanyards for an event that had no lanyard line save nothing whatever, and cost a volunteer an afternoon at a collection point and a cupboard for the four hundred that were not handed out.

Cloud credits are the standard illustration. They are genuinely generous, they are worth a great deal at list price, and a one-day conference that runs a static site and a ticketing service it does not host has no line for them to remove. The credits expire unused. Nothing was saved, and a tier was given away.

Where it genuinely helps

Venue, catering and recording, in that order. The venue is usually the largest fixed commitment an event makes and the one that has to be signed earliest, which means a donated venue changes whether the event happens at all rather than merely improving its margin. Catering is the largest variable line and scales with attendance, so covering it removes the risk that a good ticket sale becomes a loss.

The counterpart is concentration risk. When the largest line in a budget is held by a donation rather than a contract, the event has a single point of failure with no penalty clause behind it. A donated venue withdrawn eleven weeks out is a different problem from a paid venue cancelling, and the difference is that only one of them comes with a refund and a reason to fight.

Writing it down

An in-kind arrangement needs the same document a cash one gets, with three additions. The agreed value in writing, stated as the replacement cost rather than the donor’s list price, so that both parties are describing the same transaction. A date after which withdrawal is not possible, which is the clause that actually protects the event. And an explicit statement of which benefits the donation buys, because a donor valuing its own contribution at list price will otherwise assume the tier that figure would have bought.

One further point belongs in the treasurer’s head rather than the agreement. In-kind pays no invoices. An event whose sponsorship is largely in-kind can be comfortably in surplus on paper and still unable to pay a venue deposit in March, because none of what it has raised is money.