The Disadvantages of Sponsorship

by Lisa McQuerrey ; Updated September 26, 2017
Businesswoman with a businessman talking in a meeting

Being a corporate sponsor involves donating money, goods or services, or otherwise supporting or underwriting certain costs for a nonprofit or charitable organization. While being a sponsor can raise your company’s image in public and brand you as a good corporate steward, you should know about some of the potential downsides to sponsorship.

Representation of Your Business

Charitable organizations often thank sponsors by displaying the company’s name or logo in association with the event, activity or project being funded. Your business might not have control over the specific way your organization is branded in this process. For example, if your logo is printed on an event banner in the wrong font or color, it can have a negative impact on how your business is recognized and perceived. Diminish the possibility of this outcome by asking to see all promotional materials that have your company name prior to printing and display.

Poor Publicity

Businesses may become sponsors as an anticipated way to generate cost-effective publicity and advertise the company. While this can be a benefit, the approach is not typically as effective as traditional paid advertising efforts. Sponsorship doesn’t allow you to target your audience, tailor your sales message or determine the timeline for promotion like mainstream advertising does. This can be a disadvantage for a small business that has a limited marketing budget.

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Relationship by Association

Unless you have an exclusive sponsorship contract, the organization you support will likely seek other financial sponsors as well. This could result in your business co-sponsoring an event with a competitor, or worse, with another business or organization that isn’t in line with your corporate ideals. For example, if you’re a green, environmentally conscious company sponsoring an event also sponsored by a major chemical-production company, the sponsorship has the potential to inadvertently associate you with the other organization. When considering sponsorship, ask about other sponsors in the mix and the right to be an exclusive sponsor if you see potential conflict.

Use of Funds

If you sponsor something specific, you’re likely to have control over how your money is used. If you make a general sponsorship donation, you may not have much say in how resources are allocated. For example, sponsoring a local youth soccer league and paying a $500 uniform bill lets you know exactly where your donation is used. If you make a $500 general sponsorship donation to that same league with no qualifiers about how the funds are to be used, it could be spent on any expense, or you may not get an accounting of where the money is used. Always ask for a breakdown of funds usage, both to see where your donation goes and to have records for tax-reporting purposes.

About the Author

Lisa McQuerrey has been a business writer since 1987. In 1994, she launched a full-service marketing and communications firm. McQuerrey's work has garnered awards from the U.S. Small Business Administration, the International Association of Business Communicators and the Associated Press. She is also the author of several nonfiction trade publications, and, in 2012, had her first young-adult novel published by Glass Page Books.

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