A Valuation is Good Business

I was once in negotiations with a potential Naming Right sponsor. I had completed a formal Valuation, so I knew what the opportunity was worth.  The amount of money the sponsor had offered was significantly below what the Valuation indicated. So, I asked “How did you come up with that figure? He responded that the amount he had offered “matched the total amount that another sponsor up the road had paid for their particular Naming opportunity.” In his mind, the Valuation I completed was irrelevant ; he was more concerned with losing face in the eyes of the other sponsor (a competitor).

Now, I am in the Valuation business. I make my living conducting Valuations on programs and properties. So, this came as quite a shock to me. The point is that the Valuation mean’t nothing to him – him and his company were using a totally different model and rationale for what the property might be worth. He saw the market value, not my Valuation as the true value of the property.

Even though he had a different model for establishing a value, I’m glad that I had completed  the Valuation, because it told me what the property was worth from a commercial perspective. If I hadn’t done the Valuation, how would I have known the true value of the property? Armed with this knowledge, we were able to negotiate another $20,000 a year for the property or almost $400,000 over the life of the agreement. In this  case, the valuation was used to get “fair market value” for the property.

The bottom line is that sometimes a sponsor uses some other method (other than yours) to determine the value of a property or program and it’s up for us to call them on it, if it’s warranted. Otherwise, we could be leaving money on the table or vise versa. It’s important to be consistent in how we place values on properties and know their value in a market. By knowing and understanding the value of our assets in a particular market, we are telling sponsors we know what we are doing and this strengthens our bargaining power. Thus, even though market conditions might want you to “guess” the value, a true Valuation will help you “understand” the value and provide a consistent method for putting a value on properties.

Later, BC

Leave a Reply

Your email address will not be published. Required fields are marked *