NIL Deals: 8 Questions to Ask Before You Cash In
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NIL deals have revolutionized the world of college sports.
Now, you can make money from your “name, image, and likeness” as a student-athlete.
Before, compensation was limited to scholarships and stipends to cover the cost of going to school.
Sounds great… if you’re equipped to manage this life-changing NIL opportunity.
NIL deals involve legal contracts, investment decisions, and tax consequences – big topics for amateur athletes and their families to navigate alone.
If you have questions, seek out specialized advice.
In the meantime, we’re here to help.
We started by discussing the basics of what NIL means for you as an NCAA athlete.
Now, we’re exploring some crucial factors for you to consider before signing NIL deals.
But before we do, let’s discuss the NCAA’s interim policy.
The New NCAA NIL Policy
On June 30, 2021, the NCAA publicized its interim NIL policy. This policy allows NCAA college athletes to profit from their name, image, and likeness. Of course, the caveat is that student-athletes follow school policies and state laws on NIL.
Some schools aren’t located in a state with a NIL law. In that case, the NCAA is still fine with students profiting from their NIL.
Also, within the policy, the NCAA reiterated its stance against pay-for-play. Students aren’t allowed to receive payments for playing for a particular school.
Furthermore, the NCAA will continue to work with Congress to establish a national NIL law.
Again, the NCAA’s NIL policy is interim. It will remain in place until there are new NCAA rules, or federal legislation to replace it.
Clearly, this NCAA policy is a game-changer for college sports.
Essentially, the NCAA said it would no longer be a goaltender, blocking student-athletes from scoring NIL deals.
Crucial Questions to Ask Before Signing NIL Deals
Before you sign your name on that dotted line, first know what you’re committing yourself to. While this applies to any contract, NIL deals require special consideration to avoid potentially damaging your athletic career, academic future, and financial security.
With significant money on the table, some athletes choose to work with a sports marketing agent who specializes in college athletics. You can learn more about that in our interview with Doug Fillis of Accelerate Sports Ventures.
If you are navigating NIL deals on your own, make sure you do your research. Always consult with qualified professionals for any financial advice – ask your wealth advisors the right questions to make sure they have the expertise to help you.
So, let’s discuss some questions you should tackle before doing NIL deals.
1. What are the state laws?
There isn’t a national standard for NIL Deals. As a result, student-athletes must refer to state laws for guidance.
By knowing the state laws, you’ll discover the conditions by which you can monetize your NIL. You’ll learn what to do to avoid getting penalized.
Again, some states don’t have a NIL law. According to The Washington Post, those states include Alaska, Indiana, and Utah.
2. Who will own the intellectual property?
Your name, image, and likeness are your intellectual property as an athlete. Think of your NIL as you would an asset. To protect that asset, consider consulting with an intellectual property lawyer to discuss filing a trademark.
A trademark can shield your NIL from people and companies using your name, logo, or slogan for profit without your permission. Plus, by having a trademark, you’ll officially own your NIL.
3. How will NIL deals impact my scholarship?
Before signing NIL deals, consider meeting with your financial aid office. Ask them to help you review the details of your scholarship. If they can’t help, they should be able to point you to someone who can.
If there’s a chance that additional income may cause you to lose a scholarship, you should know this ahead of signing a NIL deal. You would need to calculate if your NIL money (after taxes and other expenses) can easily replace your scholarship money.
4. What are the types of sponsorships for athletes?
Sponsorships provide athletes the opportunity to partner with companies, and there are many ways to create lucrative partnerships.
As the athlete, you get paid while the company sponsoring you gains brand recognition. This increased brand recognition can lead to more customers for your sponsor.
Here are some of the most common forms of sponsorships:
Direct payment: A sponsor pays you to use their products in public.
Free products: A sponsor supplies you with their products in exchange for you promoting their brand. For example, a local pizzeria gives you free pizza in exchange for Twitter mentions.
Free services: A sponsor provides you with their services in exchange for your support. For example, a local barbershop gives you free haircuts in exchange for Instagram mentions.
Affiliate money: You promote your sponsor to your audience on social media platforms. In return, your sponsor gives you a percentage of profits generated from your followers’ engagement. If you have a large audience interested in your sponsor’s product, you can make spectacular profits.
Ambassador relationship: With this arrangement, you’re the sponsor’s ambassador. Meaning, you allow your sponsor to use your NIL in exchange for cash. But this strategy isn’t only good for putting money in your pocket; it can also help increase awareness of your brand, which positions you to charge higher sponsorship fees.
5. What is my market value?
Before you start hunting down sponsors, first determine your market value. Your market value determines the amount sponsors are willing to pay you.
But, how do you determine your market value?
One tangible measurement is the size of your audience on social media.
The more engaged your audience, the more appealing to sponsors. Think of an engaged audience as your tribe. Sponsors love to see that an athlete has a massive tribe. Especially if that tribe may be interested in the sponsor’s products.
Another way is to determine how many people show up when you compete. If you’re the main draw, sponsors may see that as a sign of strong market value.
After gathering your proof of market value, you can decide what you would like to offer sponsors. Such offers could include wearing their product or outright recommending them to your audience. You have many options.
6. What is the long-term mission of my brand?
As an elite athlete, you are your brand. Your brand is how people identify you.
Therefore, the long-term mission of your brand should align with the long-term mission of your life.
So, ask yourself these questions:
How do I want to be identified?
What perception do I want people to have of me?
What are my values as an athlete and an individual?
Five or ten years from now, how do I want people to feel about me?
Please think carefully.
If you tarnish your brand, your NIL can become almost worthless. That’s why it’s important to be selective about who you partner with.
If you develop a strong brand, your NIL can produce revenue for years to come. So, don’t just think of dollar signs when companies approach you. You also should consider if they align with the long-term mission of your brand.
7. What are the agreement terms of the sponsorship contract?
Examine every single detail of your contract before signing. As you know, that goes for any contract.
But don’t do this alone. The more complex and lucrative the deal, the riskier it is to sign without professional advice.
Strongly consider having a marketing agent, attorney, and accountant review your contract. They should all have experience with sponsorship contracts for NCAA athletes.
You want all-stars on your team, not walk-ons.
Again, make sure you involve a team of experts who are experienced with NCAA rules.
And always, make sure you get a stamp of approval from your school’s athletic department: Your sponsorship contract must honor school policy.
Be proactive and speak to the compliance officer at your school before you sign.
8. How will taxes affect my NIL deals?
You may have heard about student-athletes cashing in since the new rules came into effect. Clearly, there’s a lot of excitement about the profit potential of NIL endorsement deals. Student-athletes can finally earn compensation from their blood, sweat, and tears.
But there’s a serious consideration that many young athletes overlook… setting aside some of their NIL money to pay taxes.
Most students lack financial literacy. Even at the professional level, athletes often go broke due to a lack of financial literacy. NIL deals offer students an opportunity not just to earn money, but to learn about business, marketing, and managing finances at the same time.
As you begin to earn significant income, get prepared to see your first significant tax bill. Make sure you plan ahead and consult with a CPA about the tax obligation attached to all that money.
The Right Mindset for Lucrative NIL Deals
Whatever you do, please don’t step inside the NIL world with your helmet on backwards.
The better you prepare yourself, the more you can profit from NIL endorsement deals.
Ask yourself all the questions we discussed, but don’t stop there.
As you start earning money as an athlete, get in touch with qualified experts to discuss your situation.
Our team of wealth advisors has decades of combined experience in college athletics, professional sports, and helping elite athletes own their wealth.
Article by Will McGuffey, CFP® - Private Wealth Advisor at AWM Capital, Licensed Attorney