Lending financial support to a local cause or event is a great way to advertise your business.

But how do you know if the return was worth the spend?

To raise their profile in the hospitality sector, Norwich-based accountancy firm Farnell Clarke sponsored the organisation of the Norwich City of Ale festival last year. “We also printed beer mats for the participating venues,” says founder and director Will Farnell.

But was this money well spent? Farnell certainly thinks so: “We didn’t go out with an objective to generate X amount of revenue, it was purely about raising the awareness of our brand. The festival and the launch party at which we spoke were covered heavily in the local press. We also saw from social media engagement that our objective was being met. The people and the venues involved in the event were retweeting, commenting and sharing our content.”

Return on investment

Measuring the actual ROI of sponsorship is notoriously difficult.

“It’s easier to track the results than the benefits of sponsorship,” says Sarah Brown, business coach and “ideas inspirer” at business consultancy inspire2aspire. “For example, you can easily track the additional visibility you now have by counting how many people attended an event. But if you used sponsorship to target a large prospect and it gets you a meeting, that could be a benefit. Similarly, if the sponsorship is your main route of getting into a new geographical area, you can then probably attribute new clients coming from that area to the sponsorship.”

Wiltshire-based accountant and bookkeeper Natasha Penny always asks new clients where they have heard about her service, Busy Books. “This goes into an Excel database, which gets converted to a monthly pie chart and clearly shows the source.”

From this data, Penny estimates that 40% of her new clients come onboard as a result of Busy Books’ sponsoring activities, such as being the official business sponsor of the Bratton village Christmas Lights Switch-On last December. Although she does admit this figure also includes new clients who have heard about Busy Books because of their regular fundraising efforts to help local charities.

Penny adds: “I also firmly believe that other new clients – those who come from referrals and personal recommendations – do so because of our good works. People are talking about us and recognising our ethos to do good in the world, not just make profit.”

Giving back pays back

Marsha Ward, founder of AAT-accredited accounting and bookkeeping business The Number Hub, believes businesses have a responsibility to support the communities from which they draw their employees.

Last year, The Number Hub sponsored a local school through the funding of its rugby team kit, giving the school a much-needed financial boost.

Ward says: “Sponsorship helps youth teams achieve their goals and develop transferable skills that are essential in the workplace and that we can all draw upon as employers in the future. We take great pride in being an active partner to this and to other educational establishments, and we draw from these to attract AAT students to join our team as we grow.”

Before you decide to sponsor

Think carefully why and who or what you want to sponsor, and whether the cause or the event will fit in with your brand.

Tim Prizeman, director and marketing consultant at Kelso Consulting, has been advising accountants for 25 years. He says: “Do you simply want to do a good turn, such as sponsoring the shirts at your child’s football team, or is your objective to meet local business owners? Too many times sponsorships start as the former, but then people seek to squeeze business out of them and get frustrated when it doesn’t happen.”

Think about your target market. What kind of events would they attend? Brown says: “If you focus on agricultural clients, then sponsoring a farmers event may be an obvious thing to do.”

Also, what will you get as part of the sponsorship deal?

Prizeman says: “You need to tie down these details in advance. Having your name or logo on display is okay, but will people really get in contact simply because of this? Probably not. So, will you also get to put your flyers in the sponsoree’s mailings or get to speak at their launch event?”

What else are you going to do to convert this opportunity into potential new clients? “You need to be prepared to do your bit – engage in the social media activity around the event and involve your existing clients, encouraging them to share the news and details with their contacts,” says Farnell.

How much should you spend?

Often, a small cash injection is enough.

Busy Books paid for advertising of the Christmas Lights Switch-On. “We also gave out goodie bags with branded merchandise such as pens, diaries and chocolate on the night,” Penny says.

But be realistic. “Spending a few hundred quid on a local event isn’t going to suddenly make your brand the next PwC. If you have a long-term goal such as ‘have a well-recognised brand’ then it’s a long-term commitment. Successful brands take years to build, even in local communities,” says Prizeman.

Claiming sponsorship expenses

Finally, sponsorship costs that are “wholly and exclusively” business related are tax deductible.

Graham Wilde, director at tax consultancy TaxNetUK, says: “The cost of advertising is tax deductible, but ‘hospitality’ that constitutes ‘entertaining’ (for example, purchase of tickets to the event) is not.”

Capital expenditure, such as a contribution to a permanent exhibition that provides an “enduring benefit” or purchase of capital assets, is also disallowable. “Although in some cases special tax relief may then be available under the intangible assets or the capital allowances regimes,” says Wilde.

Iwona Tokc-Wilde is a business journalist.