While individual donations make up a large part of every nonprofit’s funding, organizations often need additional sources of support through corporate sponsorship. However, obtaining a corporate partner can feel like a daunting task. You may not be sure where to begin or how to go about reaching out to large companies and businesses to ask for their support. It’s easy to get overwhelmed, and you might get to the point where you wonder if pursuing a sponsorship is even worth it.
Well, don’t worry, we have you covered! Corporate sponsorships often end up being invaluable sources of revenue, and if you’re ready to dive in, we have the ultimate guide to help you along your sponsorship journey.
What is a corporate sponsorship?
A corporate sponsorship is a formal agreement between a non-profit and a for-profit business that benefits both parties. Generally, a business provides some kind of support to a nonprofit through a monetary donation or with donated goods and services. In return, they receive increased exposure in the community and tax benefits.
What are the different types of sponsorships?
Before you start your sponsorship search, it’s important to understand what your sponsorship needs are. To begin with, there are two different types of corporate sponsors you can pursue.
- Organization sponsors provide year-round support for your nonprofit. This support may include matching donations to your organization during a fundraising campaign or giving a sizeable donation to a major project your organization is working on.
- Event sponsors provide support for a specific event your organization is hosting. This support can take many forms, from donating goods and services to making a financial donation.
There are four different ways your sponsors can provide support.
- Financial sponsorships are fairly straightforward in that they’re a donation from a corporate sponsor. This could look like giving a general donation to your nonprofit or donating money to make a specific event possible. Matching gifts are another way a corporate sponsor could provide financial support, whether it be a year-round program that matches donations company employees make or for a certain period of time during a specific giving campaign.
- In-kind sponsorships are extremely useful for specific events your organization is hosting. An in-kind donation is not a financial gift, but rather a donation of goods or services. This could include allowing your nonprofit to use a venue, having a band volunteer to play at your event, or even donating the services of the company’s staff during an event.
- Media sponsorships give your organization exposure via radio or TV station advertisements.
- Promotional sponsorships are similar to media sponsorships, but instead of gaining exposure from a radio or TV station, you’ll partner with an influencer or prominent local leader and gain exposure from their audience.
Sponsorships are seen as a win-win partnership between companies and nonprofits. In exchange for their support, your nonprofit will give your sponsors exposure through logo placements on merchandise, logo banners during an event, or provide other perks and benefits.
Why are corporate sponsorships important?
If your donations or grants are supporting your nonprofit just fine, you may wonder, do I even need to obtain corporate sponsorships? Well, there are many benefits to finding corporate sponsorships, and they can help your organization thrive.
Partnering with well-respected and well-known businesses can lend your organization credibility and give your nonprofit increased awareness in the community. With corporate sponsorships, you’re often benefitting from large financial donations, which can help you reach fundraising goals more quickly. And with in-kind sponsorships, you’ll find that the overhead costs for your fundraising events can be greatly reduced, meaning that more of your donations will go towards your organization’s programming rather than to executing your event.
How do you ask for a corporate sponsorship?
Now that we’ve covered the basics, it’s time to go out and actually search for your sponsors. The competition can be steep for corporate sponsorships and getting large companies to pay attention to your nonprofit isn’t easy so make sure you have the right strategy.
Search in your community
To increase your chances of success, start by targeting branch locations of large corporations near your nonprofit. Networking with more local locations can get you in the door, and branch locations may have sponsorship resources you weren’t previously aware of.
Large corporations headquartered in your local area are also a great option for sponsorships. Due to their location, they’re more invested in the local community and will be more willing to partner with an organization that’s doing good in the area. You may already have personal connections to these corporations through your organization’s board members and volunteers. Networking is the best way to meet individuals who can help you obtain a sponsorship from these large companies.
Target the right companies
Check companies’ sponsorship history to know who to target. If you’re seeking a sponsorship from a business who’s partnered with an organization like yours in the past, they’ll probably be more receptive to a sponsorship request from your nonprofit. For example, grocery store chains are usually more likely to partner with food banks in the community.
Be careful with who you propose a sponsorship to. If you’re looking in the wrong places, a sponsorship can backfire on your organization. Seeking sponsorships from companies who don’t align with your mission can reflect poorly on your organization. For example, in 2009, the American Academy of Family Physicians (AAFP) struck a deal with Coca-Cola and received backlash because soft drinks and sweetened beverages are often pointed at as large contributing factors to the obesity epidemic.
If you’re still struggling to find corporate sponsorships from these sources, try searching online. Many corporations have corporate giving programs you can apply to online. These programs typically come in the form of matching gifts, but they also often offer volunteer grants as well. Many large corporations only sponsor a small percentage of nonprofits, so don’t rely on these sources too heavily when searching for corporate sponsorships.
Try local businesses
As you’re searching for large corporate sponsorships, don’t forget about local businesses in your community. Your board members, volunteers, and other members of your nonprofit likely have strong ties to small business owners, and many small businesses are eager to partner with nonprofits to boost their profile in the community.
If you’re seeking in-kind sponsorships, pick your event committee strategically. Are you seeking entertainment for your event? Try to find a volunteer who might play in a band. Do you need help with printing promotional materials and banners? Think of donors that may have ties to a local printing company. With a little bit of strategy, you can cut event costs significantly.
Time your ask right
When you reach out to businesses for sponsorships, make sure you’re asking at the right time. Businesses and large corporations often square away funds in their budget specifically for sponsorships, so asking at the right time will better ensure that you get a positive response. Reach out as soon as you know you’ll need a sponsor for an event and try to time asks when it isn’t a busy season for the company. People will have less time to meet and any emails you send might get lost in flooded inboxes.
What should you include in a nonprofit sponsorship packet?
Once you’ve identified companies you want to reach out to for sponsorships, it’s time to put together your sponsorship packet and letter. Let your needs and goals inform what you include in your ask, and make sure you have a cohesive strategy.
Personal cover letter
When you make a sponsorship ask, it’s important to build a personal connection. Explain why you’ve chosen to reach out to this specific company and emphasize how your partnership will be mutually beneficial. If you’ve come across some potential needs from your sponsor in your research, share how you think your nonprofit can add value to your sponsor’s business.
Outline your nonprofit mission
Sharing your organization’s impact will be an important part of your sponsorship packet. You can present this information however you think will be most effective, but if you want to grab a potential sponsor’s attention, try to make this part of your sponsorship packet as engaging as you can.
Let your potential partner know about your programming, and present information with colorful graphs, attention-grabbing numbers, and powerful images that showcase your nonprofit’s impact. If you’re asking for an event sponsorship for an event you’ve hosted before, include information about the success of past events and how it’s helped the communities you serve and your past sponsors. While you may be reaching out to a business, your appeal should be to the people behind the corporation, so tell your story creatively and make it personal.
Overview of sponsorship levels
It’s important to offer your potential sponsors an overview of the sponsorship levels you’ve set. Create acknowledgment tiers with different incentives for businesses based on the value of the sponsorship. Consider what your needs are, the types of businesses you’re reaching out to, and if you’re seeking an event sponsorship, how big your event will be.
Include a wide range of sponsorship levels so that businesses of all sizes can become a sponsor. Keep benefits and perks varied between levels and make it clear how you’ll recognize all sponsors for their support during events and throughout the year.
Other best practices
While you’ll be sending out sponsorship letters and packets to businesses directly, it can be helpful to keep your packet available somewhere on your website. If you send a sponsorship packet to companies via email but it becomes buried in their inboxes, having the packet readily available on your website will make it easier for them to find later on if they’re seeking information.
Once you’ve gone over your organization’s mission and sponsorship levels, don’t forget to include your contact information and the URL to the online version of your packet. For further clarity, briefly outline the next steps for what to expect if the business agrees to a sponsorship.
What are the tax implications for corporate sponsorships?
Once you’ve obtained a sponsorship, it’s important to know what you can and cannot do to navigate complicated tax issues.
In many cases, a financial donation from a corporate partner counts as a qualified sponsorship payment. This means that the donation is acknowledged just like any other donation to your organization would be and is a tax-free gift. However, in some situations, a corporate sponsorship may trigger unrelated business income taxes.
If the donation comes with a stipulation that the company will be the “exclusive provider” for your event and limits the sale, distribution, availability, or use of competitors’ products, services or facilities, the IRS sees that as a “substantial return benefit” and the donation will become taxable income. Exclusive sponsorship arrangements remain charitable contributions so long as they don’t come with the stipulations an exclusive provider agreement has.
Another way that a corporate sponsorship becomes taxable is if your nonprofit advertises for a sponsor. If you place a link on your website to a specific product on the business’s page, endorse a product, or mention price information about products, a sponsorship becomes taxable. Some corporate sponsorships are partially a charitable contribution and partially an advertising payment, in which case, a portion of the sponsorship payment becomes taxable.
To keep a sponsorship categorized as a charitable contribution, you can only provide value-neutral displays of a business’s product and link only to a sponsor’s home page from your website. If you’re running an event where your sponsor provides you with free samples of a product, you can still hand them out, but you can’t provide an endorsement.
While generally nonprofits do not pay federal taxes on their income, certain corporate sponsorship stipulations could actually mean you do have federal tax responsibilities. On a state level, tax rules differ state-to-state so it’s vital to do your research and ensure that the corporate sponsorships you receive are being reported correctly when tax day comes around every year. Just make sure you’re doing your due diligence when tax season rolls around every year and consult with your trusted professional financial advisors.
So, you’ve found a business that wants to become a sponsor. Where do you go from here?
Before you begin your partnership, make sure you have everything in writing. Draft up a sponsorship agreement that documents the goals, expectations, and obligations both sides have. Include how you’re planning to acknowledge your sponsor’s support in advertising materials, merchandise, and event printouts.
You should communicate with your sponsors consistently leading up to events they’re sponsoring and with other updates if they’re year-round sponsors. If you’re working with an event sponsor, schedule a post-event ROI meeting so you can discuss how successful your event was and get feedback from your sponsor about your partnership.
As always, don’t forget to show your gratitude to your sponsors for their support. Small details matter when sending a thank-you, so lean into this with handwritten notes and personal details. You can also thank your sponsors publicly with a social media shoutout to help them gain even more exposure.
With follow-up communications and ROI meetings, you can ensure that your sponsors feel like a part of the team and cultivate a long-term partnership that goes beyond a single event.
Finding a corporate sponsor can greatly benefit your organization. With such a valuable form of support, you can accomplish so much more when you’re event-planning or expanding your organization’s programming.
If you’re looking for more resources to obtain a corporate sponsorship, check out these links: