Some Tips on Value-In-Kind Payments

Value-In-Kind ("VIK") or Contra payments are a common form of compensation in #sponsorship - where a sponsor provides payment for a sponsorship deal with something (goods or services) other than cash.

Often, these payments are a win-win arrangement. But there are a few things that every rights holder or property should watch out for when negotiating a deal with VIK payment 👇 👇 👇

1) Identify if the goods or services are "budget off-setting":

- If a good or service that a sponsor is offering to pay you with is something that your organization would have spent money on in your budget anyway... then VIK can be as good as cash in terms of the impact on your bottom line

- If a sponsor offers you 5,000 bananas but you had no banana budget... well that's not a meaningful form of payment

- This is economics/trade 101 but sometimes we need a reminder to not get excited by certain offers that don't 'benefit your bottom line

2) Try to quantify the amount by BOTH units and value:

- Different companies have different margins, wholesale pricing, and MSRPs (Manufacturer's Suggested Retail Price). So if one clothing manufacturer offers you $100K worth of shirts, it likely won't translate to the same number of shirts as another clothing manufacturer's $100K worth of shirts offer. Get specific in your negotiation around how many units you'll be receiving.

- That said, it can also help to quantify the "replacement cost" value of a VIK payment. That way, you can still track thethe value of the deal internally alongside your cash deals.

3) Media/promotional assets can benefit your property, but understand how the value of media can be manipulated:

- Many sponsors offer media assets/ad units as a form of Value-In-Kind payment. If you deem this to be a valuable form of payment (see point #1), it's still important to question the value being claimed.

- There are all kinds of different ways to value media. The most common angle to consider is whether or not the rate card (published) value of the asset is being used as opposed to what you could actually negotiate for the unit if you were to try and buy it. Go through a mini exercise of determining what it would cost your organization to secure the proposed promotional assets/promotional plan!