Sponsorship deals are now a central part of the income you can earn as a sporting professional.
Alongside what you generate from being at the very top of your game, partnerships with brands and companies can provide valuable funds you can use to achieve your financial goals.
This summer of sport has really brought home the importance of carefully managing and navigating relationships with your sponsors and partners.
From the Euros to the Olympics, many young athletes were thrust into the spotlight during these competitions. These individuals will no doubt have found themselves with a window of opportunity, being approached by brands who want to benefit from their new platforms.
In particular, 17-year-old Spanish footballer Lamine Yamal was one of the breakout stars of this year’s Euros. In his short career so far, the Barcelona winger has already been courted by some lucrative opportunities.
According to Business Post, Yamal switched from his Nike sponsorship to Adidas in a 10-year deal reportedly worth €32 million in February of this year.
For such a young athlete, this is a fantastic opportunity – and one that he will no doubt receive plenty of support in navigating over the course of his career.
Stories like this underline the huge importance of creating strong relationships with your sponsors and partners, and managing those links throughout your career. Read on to discover some key elements to help you do so.
Surround yourself with a team of professionals
Making the right decisions when signing a sponsorship deal can be far more straightforward when you have a team of professionals to help you navigate the landscape.
Below are some of the professionals you may want to consider having in your corner to help you:
- An experienced sports agent can negotiate the best possible terms for you and ensure you receive fair compensation based on industry standards.
- A lawyer, particularly one specialising in sports or contract law, can review a contract to protect your interests and avoid unfavourable clauses.
- A financial adviser can help you manage the income you receive from your deals and ensure you make sensible decisions with your long-term financial health in mind
- A tax planner can provide strategies to mitigate your tax liabilities, ensuring that you efficiently manage your tax obligations and maximise your after-tax income.
Having a team of experienced individuals can be indispensable, offering support and guidance as you manage relationships with your partners and the income you receive from them.
Understand the terms of the contract you sign
As an athlete, you will be accustomed to the complicated nature of the contracts you have to sign. Sponsorship deals are often similarly complex.
So, just as you would with a sporting contract from a club, tour, or organisation, it is equally important to understand the terms you are agreeing to with a company.
For example, some brands may insist on exclusivity clauses, which may limit your ability to sign with other sponsors who would be deemed competitors. You need to be sure that you are happy with this arrangement.
Furthermore, there may be performance incentives, including bonuses or penalties based on your athletic performance or even public behaviour. It is crucial that you understand these terms before you sign.
Finally, you need to know the conditions under which a contract could be terminated, either by you or the sponsor. Fully acquaint yourself with these rules so there are no surprises throughout the term of the deal.
Think about the brand alignment
For some athletes, brand alignment is crucial for them to sign a contract. For example, you might have personal or religious views that conflict with a brand or sponsor’s product or service.
This matters when choosing a sponsor for two reasons:
- It is important for you to choose sponsors that reflect your personal values – or that at least do not conflict with them. Otherwise, you may feel you are compromising on a part of yourself.
- Your partnerships need to fit with your public image. A mismatch in brand and how you present yourself in public could lead to a backlash or even long-term reputational damage.
As part of your public image, it is worth thinking about your public presence, particularly online. Many sponsorships are tied to your public persona, and that extends to your social media accounts. Be mindful of the activity you engage in, both in person and online, to ensure it does not impact your sponsorship agreements.
It may also be worth having a crisis management plan in place just in case you do face any negative publicity. While it will hopefully never happen, it is sensible to be prepared with a plan so you can mitigate damage to sponsorship relationships if you ever need to.
Aside from your relationship to the sponsor, you may also want to consider the long-term impact of a brand deal on you individually. How might it affect your career in the long run? What might it mean for potential future opportunities or endorsements?
It is well worth thinking about these aspects before you sign a deal, rather than a few years down the line when you realise that it might not suit you.
Plan for taxes
It is no secret that athletes face high levels of taxation. While the additional income from a sponsorship deal is very welcome, it is important to remember that this will likely increase your tax liability too.
It is important to understand and plan for this additional tax burden, especially if you sign international deals as these can come with complex tax arrangements.
Often, it is sensible to set aside a portion of sponsorship income to avoid any surprises at the end of the tax year.
A professional financial adviser or tax planner can help you assess your tax liability, and assist you in finding methods to mitigate it.
Plan for taxes as an international athlete in the UK
If you are an international athlete competing in the UK, you may encounter complex tax issues due to overlapping earnings from UK events and global sponsorships. To avert these complications, some athletes have previously opted to avoid UK tournaments altogether.
While some major events, like the 2021 UEFA Super Cup, may offer tax exemptions, you will generally need to report your UK-related income, including all global sponsorships, to avoid substantial penalties from HMRC.
As you navigate these tax challenges, consider the following additional points:
- Endorsement Income: You might be taxed on a portion of your global endorsement earnings based on your time in the UK. It is crucial to ensure accurate reporting to avoid any penalties.
- Image Rights: Payments for image rights, often routed through offshore companies, can complicate your tax situation. HMRC closely examines these arrangements to prevent disguised salaries, so make sure your setup complies with regulations.
Addressing these tax challenges requires careful management, so it is advisable to consult with a financial adviser or tax planner to ensure compliance with UK tax laws.
Diversify your income streams
It can be useful to diversify by having a range of income streams from various sponsorship deals. This reduces the risk of you becoming overly dependent on a single contract, which could leave you vulnerable if it were to end prematurely for any reason.
This is partially why it is so important to check and understand the terms. A deal may be lucrative, but if it prevents you from creating other partnerships then it may not be the right one for you.
It is also worth looking at how you can put that income to work by investing in other long-term opportunities. For example, you might want to consider:
- Business ventures
- Property investments
- Setting aside funds for your retirement from sport.
Again, this is where a financial adviser can add real value, designing an appropriate investment strategy with your circumstances and lifestyle in mind.
Use sponsorships to prepare for the future
An athletic career is famously short, and you will likely face two retirements: one from sport, and another after transitioning into your second career.
With this in mind, it is vital to make the most of the income you receive from your sponsorships while you have it by preparing for the future.
It is wise to prioritise saving and investing this wealth while you can, especially as sponsorship income can fluctuate. A financial adviser can add huge value here, assisting you in making effective decisions.
Additionally, while there are no guarantees of being able to do so, you may want to think about how you can use these sponsorship deals to secure post-career opportunities. Whether that is through business ventures, media roles, or other endorsements, think about how you could leverage these partnerships you have built to ensure financial stability in future.
Get in touch
Want to work with an experienced team of financial planners? Get in touch with us at ProSport.
We know the specific financial challenges that you will face throughout your sporting career and beyond. We will work with you and create a bespoke plan that helps you make the most of the wealth you earn from sport and your sponsorships.
Email enquiries@prosportwealth.co.uk or call 01204 602909 to find out what we can do for you today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning or buy-to-let (pure) and commercial mortgages. Think carefully before securing other debts against your home.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
