For most business owners, the idea of using Name, Image, and Likeness (NIL) rights to market their small business does make a lot of sense.  That’s because the spotlight has been on Power Five Conference athletes who sign six and seven-figure deals with major corporations. 

The fact of the matter is, that only a small percentage of student-athletes sign giant NIL deals.  The vast majority of NIL deals are much more modest in size, and NIL just might be a perfect way to help small businesses tap into new and profitable customers. 

NIL deals are similar to other types of social media marketing.  The most common approach is for athletes and business owners to work together to promote their products online.  Businesses can also bring in athletes for in-person autograph signings and meet-and-greet events for fans, or they can use them in print or TV ads.  

NIL agreements can be a highly effective tool for any small business.  Here are five tips to help you get started:

1.   Don’t Think Like a Fan:  Everyone turns into a fanboy once in a while.  But when it comes to NIL deals, the starting QB or the All-Conference point guard might not be the right fit for your business.  Even at small schools, there are hundreds of student-athletes in a variety of sports.  Your best bet is to look for athletes who align with your brand and values, and maybe even already use your products or services.

2.  Define the Target Audience:  Are you trying to reach new types of customers?  Or bring in more of the most profitable customers you already have?  Asking these types of questions helps business owners be specific about their goals and makes it easier to choose an athlete to work with.

3.  Social Media Presence:  This is important for both the business and the athlete.  If you already have an established social media marketing strategy, look for athletes who will fit well into your existing campaign.  Don’t get hung up on the number of followers – you should look for student-athletes who are consistently active on social media, with strong engagement with their followers.  If you are trying to establish a social media presence for your business, you may want to look for an athlete with a larger following, who can drive new followers to your accounts.

4.  Think Local:  Businesses don’t have to be next door to campus to have success with NIL partnerships.  But it is important to think locally when you are deciding who to partner with.  Do they have ties to the community you serve?  Every town has a hometown hero – even if they left and went to school somewhere else, they can still have a lot of influence.  Don’t forget there are many different schools in a lot of cities.  There are D2, D3, and NAIA schools that have very successful programs, and student-athletes who tend to stay longer and build ties locally. 

5.  Set a Budget:  Just like in any business, top talent is the most expensive.  Decide how much you want to spend on NIL deals, and look for athletes that fit everything we’ve already discussed.  And don’t get locked in on just a single athlete.  Schools and programs are open to NIL agreements that allow businesses to work with multiple students or even entire teams.

Important Considerations

NIL agreements are new, and depending on the size of the institution, student-athletes may not have the same level of support and resources major universities provide.  This is still a binding contract, so both parties need to fully understand the expectations.  Also, various legal and institutional compliance requirements can vary greatly from state to state and school to school.  It’s always wise to make sure everyone understands the state and local laws, as well as the NCAA regulations.  Some colleges have disclosure requirements when a student-athlete enters into a NIL agreement, and new regulations from the NCAA set standardized requirements for NIL contracts above certain dollar levels. 

As a business owner, you should make sure and discuss any contract with your attorney before signing the agreement.  You should also consult with your CPA or tax professional to make sure both yourself and the athlete are aware of income reporting requirements. 

NIL deals can be a valuable tool for small business owners to tap into new markets, grow their existing customer base, and generate more profit.  Not sure where to start?  Nilcreator.com can help.

Are NIL Contracts a Business Expense?

Most businesses spend money to market their products or services. Since most NIL agreements involve some sort of social media marketing or promotion of a business, it would make sense that the owner could claim the cost of the contract as a business expense, but it’s not quite as black and white as you would think.

Basically, the expense must be considered “ordinary and necessary” to be deductible. Necessary expenses are the easiest to define: utilities, rent, etc. Ordinary expense refers to spending that is common to your trade or industry. Also, necessary expenses must also be ordinary expenses to qualify as a deduction.

For example, social media marketing, the kind most often done by student-athletes, may only be ordinary and necessary for certain types of businesses. It makes perfect sense that the star forward on the soccer team is promoting how great the pizza shop near campus is, or the sporting goods store next to the stadium. But it wouldn’t be ordinary or necessary for the star outside hitter for the volleyball team to post about the great work the local asphalt paving company does.

The good news for the athletes is that none of this matters to them. If the asphalt company wants to pay the star volleyball player to post about them, that is 100 percent allowed. It’s up to the business owner to determine if the cost of the contract can be deducted.

Another important thing to consider for the business is compliance with the Federal Trade Commission (FTC) guidelines. They require anyone endorsing a product to disclose if they have any financial, employment, personal, or family relationship with the brand.

As always, both parties to any agreement should consult with their legal and accounting advisors before signing the contract. Athletes should always seek advice before entering into any contract, if you are not sure what resources are available, speak to your coaches, AD administrators, family, and friends.