- A small church in rural Oklahoma was named after a major donor in 1935. The congregation has outgrown the church and it is time to do major renovations and build a new front as well as build a new kitchen and increase classroom space by 50%. The major donor is long gone and no one knows where his family is. Does the old name go on the new facade? Can they seek a 7 figure donor for naming rights to the building?
- A couple in St. Louis lost their son in a car accident in 1965. A room at a recreation center was named in their son’s memory. Both of the parents are dead. The room is shabby and every piece of furniture needs to be replaced. Does the new room have the same name if the family isn’t paying for the remodel?
- A gala is coming up for a $35 million dollar health-related charity in New York. They are planning to offer naming rights with event sponsorship since they have multiple facilities and none of the sites are named or any of the rooms. Should naming rights be associated with event sponsorship and if so, what should they charge?
There are two things you need to avoid the above problems:
1. Research on industry standards and area norms.
2. A clear, simple letter of agreement that you share with donors at the time of the naming.
This is a business transaction. You wouldn’t sell a house or a car or even used clothing on E-Bay without some research. You need to know what your naming rights are worth. This is called “valuation” and is based on very specific determinations. In order to establish fair market value, you first must develop an inventory of your property’s assets and decide what those assets are worth by comparing the assets of similar organization and similar size projects in your community.
There are two ways to do this. You can hire a professional group to research the value of your naming rights, or you can do it yourself. If you choose to do it yourself, you need to look at similar organizations and then at similar size projects in your community. For instance, if you are a hospital in New York City, you can check with other hospitals across the country to find out what a $50 million building would go for in terms of naming rights. However, if you are building a $50 million dollar building in Sioux City, Iowa, and other enormous projects were named for much more or much less, you will need to use those numbers as a guide as well. You have to research similar projects and similar cities.
You not only have to fix a price for naming rights, but also the length of time of the naming rights which are either for a limited period of time or in perpetuity. Large projects like stadiums that are most commonly named by corporations only retain the rights for 3-5 years. Universities tend to offer longer periods of time. You can offer a variety of terms based on the number of years and whether the room or facility or program is endowed. (“Endowed” meaning that there is a special fund for maintenance and upkeep where a large sum is invested and the interest is spent.) For instance, you might offer a dental clinic to be named for a gift of $50,000 for 10 years, $75,000 for 20 and if it is endowed, perhaps through a life insurance policy for $1 million, the name remains for the life of the building.
The letter of agreement requires signatures from both parties, the donor or business entity buying the naming rights and the organization representative. The letter of agreement will clearly define the terms and conditions of the transaction and for how long as well as the naming rights sponsorship benefits such as category exclusivity. The agreement will also delineate any additional costs to support this relationship such as maintenance of the space, joint marketing initiatives and other items as negotiated.
Remember, not everyone is looking to put their name on a building. Although there are many Donald Trumps in the world who love their own name in lights, on towers, and even on vodka bottles, there are even more people who are interested in honoring someone who has been dear to them. It is your job to ask for the right amount of money, for the right period of time and offer naming options.
My family donated the funds for Trailnet in St. Louis. We love having our name on the wall of an organization that shares our values and that we care about as a family. It was a small gift, but they made us feel like Rockefellers. We can’t wait to save for the next gift.
So although not everyone is looking to put their name on a building we love the Donald Trumps in the world who love their name in lights, on towers and even on vodka bottles …. they are willing to pay for a good cause with a good return on investment. And even the little guys like my family can get in on the fun.
Next month, we’ll talk about how to approach potential sponsors, what to bring, and how to find the perfect fit for your donor and your nonprofit.
Special Thanks to the sponsorship gurus Robyn Perlman and Gail Meltzer at Core Strategies for Nonprofits for help with this article.
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