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Good Surprises vs. Bad Surprises - the Importance of Contracts

by Emily Taylor
  
29 03 2010

Easter is less than a week away!  While I realize that Easter means so much more than chocolate and bunnies (sometimes one and the same); you really can’t help but remembering the traditions you might have experienced growing up.    In our family Easter is a really big deal.  My mom went each year with my sister and I to buy a brand new Easter dress and a girly tradition we all loved.  My parents were also pretty smart – after church they would put all four of us down for a nap after a big lunch while they high tailed it over to Walgreens to buy the Easter candy at half off now that the holiday had already come.  They then proceeded to fill and hide eggs inside and out – and with four kids there were eggs EVERYWHERE!  At least that’s how I remember it… After the mad dash scrambling to fill our baskets with as many eggs as possible we would report back to the kitchen table to discover our finding; opening the little plastic eggs and finding out if we got sweet tarts or a Cadbury egg was just plain exciting.  You couldn’t peel us away from the table before we had unveiled every little surprise. 

But I think we can agree that some surprises are not always fun when it comes to sponsorship.  When you’re expecting something sweet and tasting something sour it’s going to show up in your reaction!  While there aren’t many activation efforts that are implemented without one or two surprises, the good news is there is a way to protect yourself and your partnership from experiencing a surprise that can devastate a partnership; and that is by negotiating, documenting and signing a living contract

When you and a sponsor have gone through a proposed agreement, and have determined that you have a mutually beneficial interest in partnering together, the next priority for both of you is likely going to be that you want a contract in place.  Now, keep in mind, if something is not included or defined in the contract, then no one is help accountable to implement or activate, so it’s best to work through the nitty gritty details of customization before the agreement is signed, this makes sense, too, because how can you truly know if you want to partner if you haven’t discussed the ins and outs of the requirements to partner.  This should shed just a bit more light on why you should allow sufficient timeframes in order to allow a partnership to be presented, negotiated, signed, sold and activated.  This is clearly not an overnight process.  Not everyone would say so, but my personal stand is that you can’t be too small of an opportunity to create a living contract.  Having a contract in place is never going to hurt you, if you think about the details you want included and aren’t half hearted in your effort to define the important pieces; but it will always help you.

So what should you include in a sponsorship contract in order to keep the surprises at bay?  The following list is not exhaustive, but a good start of items to consider when writing a contract and working through the details with a sponsor:

  1. The obvious details: who this contract effects, specifically the sponsor and sponsee, the date of the agreement, and contact details of each party. 
  2. Partnership Expectations: since you’ve spent all of your time creating an attractive proposal and discovering the key objectives of your sponsor, it would be wise to communicate the agreed upon reasons for partnership.  What each party plans to get out of this effort, and the justification for why it all makes sense.  Since you’ve really already defined this, it shouldn’t be tough to highlight in the contract.  This comes in handy for multiple reasons: as activation progresses you’ll want to refer back to the “why” behind each effort – if it fails to support the main reasons why your sponsor wants to partner with you, it’s probably not the best activation effort.  If you have new ideas or can think of innovative new ways to activate, this is a good reference point as well;  (obviously if you do activate new efforts post contract, you’ll need to get them approved or bought in by the sponsor as it could either change the price, or require more on their part).  Last, knowing the reasons for partnership will also be a good reference point for ROI reporting, information collecting for post event reporting, and the results will give you a leg to stand on as you move into renewal conversations.
  3. Terms of the agreement: this might be one of the most important places to get specific about.  This should highlight everything from the method of payment, types of payment (if in-kind exchanges are included), details around any kind of development that hinges on the amount; for example – if the amount of payment is directly related to the number of event attendees, you’ll need a formula for communicating the ticket sales and determining time frames for cash received.  Timeframes should also be carried over when you walk through the specific assets and activation efforts related to the partnership as well.  If you need to create and publish a radio spot by a particular date, this should be communicated in order to prepare the sponsor to offer what they need to get it done in a timely manner.   Whether it’s a definition of category exclusivity being offered (with specifics around what does and does not apply to the category), what kind of media exposure you’re offering and the details around ability to use sponsor logos or any other boundaries around brand affiliation, you should define as specifically as possible what you are each bringing to the table and answer the line of who, what, when, where, and why questions.  It’s also wise as you proceed with each effort/asset, that you define the value associated.  It’s never a bad thing to underscore the value of the partnership you’re offering.
  4. In case of dissolved agreement: there should be a section which clearly indicates what happens if either side needs to dissolve the agreement.  Are there any extenuating circumstances that will dissolve them of any obligation to provide the funding promised?  Bankruptcy, change in leadership, etc.  If not, you need to clearly communicate that understanding, knowing that ultimately it is in your best interest to maintain the relationship when at all possible while at the same time protecting yourself and your property.
  5. Who’s responsible for what: never assume!  This really ties into the terms of the agreement section, but when you’re walking through activation efforts, it would be foolish not to identify how these things are going to happen, or at least the most appropriate contacts from each party that will be communicating to make sure efforts run smoothly.  Rarely does one step up to the plate to deliver if it hasn’t been clearly assigned. 
  6. Renewal benefits: It can only help you to start pre selling.  Anyone who has been in sponsorship for any length of time can attest to the fact that regardless of the side you’re on (sponsor or property), it is much less of a headache to renew and continue a partnership than to start fresh, and how better to communicate your loyalty and value to a brand than by offering a benefit to renew that is outlined in the contract.  Perhaps you give them first chance (within a reasonable timeframe) to renew as an exclusive sponsor, or title sponsor.  Or maybe you give them a percentage discount for agreeing to renew by a certain date for a 5 year agreement.  Either way, you want to plant those seeds early.

Again, these are just a quick glimpse into some of the items you really should consider including in a sponsorship contract, it’s not exhaustive, but a good start.  So, not only to underscore your credibility, to set yourself up for renewal, and to protect yourself from getting a jellybean when you were expecting Reece’s Pieces; put together a detailed and thorough contract!  Any stories on what you’ve experienced with or without a contract in place?  Tell us your victories or your horror stories, educate your peers by telling us of your experience with contracts. 

 

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