You are on page 1of 22

12/5/2012

SIGN BIZ, INC.

WHITE PAPER: SIGN SHOP SITE SELECTION

Research into Location as a Determining Factor in the Success or Failure of Non-Electric Sign Shops | Sign Biz, Inc. Advisory

WHERE TO LOCATE A NEW SIGN SHOP


Part of a series produced by Sign Biz, Inc., Brilliant at the Basics A White Paper on Sign Shop Site Demographics It has long been stated that location, location, location is vital to the success of many if not most businesses. This is equally true for a professional sign shop that is newly established or in early growth phases, in particular, for those that offer digital print and cut vinyl products as a mainstay. This white paper will identify the primary factors which drive the most successful startups and growing sign companies as defined above. While substantial documentation and research supports these findings, this is by no means an exhaustive analysis of every factor that contributes to the model for a viable and successful sign manufacturer. The Sign Biz, Inc. independent research and advisory body provides research on a range of economic, demographic and environmental issues affecting the welfare of entrepreneurs, in particular those in the sign industry. Its role, expressed most simply, is to help business owners and future entrepreneurs make better decisions, in the longterm interest of the sign industry. To this end, we are sharing some proprietary information that has fostered aboveaverage growth and revenues of the Sign Biz Network, a chain of sign companies established with the benefit of Sign Biz, Inc.s intellectual property. The benchmark study which launched later research and refinements to the data is a project initiated with the Direct Marketing Agency at a cost to Sign Biz of over $100,000. Why are we sharing some of this research? Because it is clear that too many entrepreneurs are opening sign shops in locations very unfavorable to the business, and as a consequence, are suffering unnecessarily. In some cases, this site selection mistake was due simply to lack of knowledge. In other cases, unscrupulous business opportunity providers have encouraged the entrepreneur to start up their business in an industrial location. This led to the demise of 35 businesses within a three-year period, and still the misinformation persists. We are here to set the record straight with sound market research and survey results. No entrepreneur should fall victim to poor site selection. We are here to make a difference. The following findings are based on a national business survey and business cases studies assessing the impact of location on sign shop performance.

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

I. Background North Americas future entrepreneurs are facing a number of challenges over the coming years, from lack of capital, to big box store competition. Those entering the dynamic, complex and multi-faceted sign manufacturing industry face additional hurdles. They face a large investment requirement for start-up while assets shrink and credit markets tighten. Worse yet, they will find a distinct lack of information about where to open such a business. In addition, unethical business brokers may push this business on candidates that are not fit for this work, for commissions that are excessive and which create bias on the part of the broker. The role of a business owner in the sign industry encompasses human resource issues, legal matters, permitting, contractor licenses, color calibration, internal networks, precision equipment, cutting equipment, art and design requiring copious amounts of high end design software, some manual labor, and a quest for differentiation. Recent increases in outplaced corporate executives, and the resultant flow on to increases in a drive for business ownership instead of a job, have highlighted the need to ensure consultants continue to deliver well-documented current information for new business owners. Sign business ownership is a complex task requiring a fast-paced, multitasking approach, and sound technical judgment. Sign Biz, Inc. is considered an industry leader on the use of benchmarking for sign businesses and over the course of more than two decades, has achieved extraordinary outcomes, including establishing a worldwide sign chain with the highest revenue per capita of any, franchised or otherwise. 1 Scope of the Report This report will: Examine the use of benchmarking and provide advice on how different benchmarking methodologies can be used to optimize site selection; Examine the types of lease sites in the trade area that best support a sign business, and Examine the research into factors that build a successful sign shop. Benchmarking At its most general, benchmarking measures a businesss efficiency against a bestpractice reference performance to uncover the systems, staffing, and marketing practices that would generate a desired outcome or ratio such as Return on Investment (ROI).

Sign Business Article, reprint: www.signbiz.com/images/2012_Franchise_Stats.pdf

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

Most commonly, benchmarking involves comparisons between similar businesses usually over time to identify their relative efficiency. An alternative approach is to determine the reference point using a bottoms-up model based on a single fictitious efficient firm. Regardless, there are many different types of benchmarks, multiple ways of calculating benchmarks, different ways of using such benchmarks, and several criteria for discriminating between competing approaches. One broad category of benchmarking assesses the extent to which a sign manufacturing enterprise is close to best practice after adjusting for factors outside its control (such as the economic health of the area it must serve, the distance between customers, the number of blizzards, and external competitive forces). It is particularly important in benchmarking to ensure like with like comparisons between sign businesses. For example, costs are higher for electrical sign manufacturers with fewer projects per worker shift. Ignoring this could lead to such businesses being categorized as inefficient compared with businesses with high project densities such as is found in a digital print cut vinyl non-electric sign shop. A new sign shop using the wrong benchmark would not make efficient investments or other decisions, and could become insolvent, indicating the risks of badly configured benchmarks a point made by some sign business opportunity providers. This is also a problem commonly found when approaching a bank for business capital: the incorrect business NAICS code and benchmarks are used when evaluating the sign shop. Research which follows substantiates our premise that directing a new nonelectric, high volume sign producer to a site or facility better suited to heavy equipment based electric sign manufacturer leads more often than not to inadequate revenue and insufficient clientele, factors often leading to the businesss demise. Business perspectives How businesses define economic space will naturally differ significantly from the concept as understood by the public sector. Large multi-national firms have a particular concept of location and produce products which are more generic, often considered commodities. As such, these entities regard trade and the movement and exchange of goods, capital, people, and knowledge as having only a limited connection to the geography, culture and identity of their real estate. However, the vast majority of firms are small or medium-sized businesses (SMBs), local family businesses and start-ups. Their concept of service is more functional, connected and essentially local with customers and suppliers often drawn from the immediate vicinity. Products and services tend to be more custom, tailored for each end-user. 2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

Box 1

A coat of many colors: benchmarking


Benchmarking approaches and methodologies include:

comparing the costs and performance of different network providers to identify best practice and maximum efficiency. In some cases, benchmarking can span various countries, though apparently this has proved challenging in electricity (Dassler et al. 2006) examining qualitative indicators about business practices examining trends in total factor productivity (TFP), which is the residual growth in output after taking account of changes in the inputs used to produce network services creating bottom-up models of an efficient fictitious supplier, built up from a detailed model of the infrastructure, operating costs, and demand conditions in the electricity market (Gmez-Lobo, 2007, p. 12) the use of aggregate and partial indicators simple ratios, index approaches and econometric approaches (corrected ordinary least squares, stochastic frontier analysis and data envelopment analysis).

Their practical use as a tool for creating incentives for better business performance also depends on balancing several criteria. A benchmark should:

test what it claims to (efficiency in one or more meaningful dimensions) and without significant bias. A failure to adequately control for differences in operating environments can lead to biased measures or create perverse incentives (such as favouring capital expenditure over operating expenditures) allow a regulator to measure the relative or absolute degree to which a business is inefficient with sufficient precision, and do that consistently across time and jurisdictions. In many instances, this also requires that small variations in the quality of data used in benchmarking do not materially alter the results be transparent, so that stakeholders can scrutinise the model for its performance and develop it further provide sufficient certainty so that a network owner has the confidence to make major capital investments in long-lived assets not involve onerous data obligations or take too much time to prepare have limited susceptibility to manipulation or gaming be no more complex than is required to achieve the above criteria.

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

II. U.S. Sign Industry Size and Impact Study With the U.S. Sign Industry Size and Impact Study, the International Sign Association2 undertook the most complete analysis of the U.S. sign industry ever performed. Members of the sign industry have long recognized that accurate measurements of the sign industry are lacking. Data on sales, employment, and economic impacts were difficult to locate and verify. Traditionally, the only measures of the size of the industry were taken from anecdotal accounts, proprietary sales information, and economic data collected by the US Census Bureau. Those sources were often difficult to verify and tended to undercount certain segments of the industry that were less familiar to the analyst (electric signs vs. digital graphics vs. display advertising). According to the SGIA Industry Profile Study, the sign industry is growing at a comfortable 5% to 7% annually. However, the growth of digital printing within the industry is greater, due to changing technology and customer demand. Probe Economics, Inc. was asked by the International Sign Association (ISA) to use government data to the extent possible to estimate the full size and impact of the U.S. sign industry. In the sections that follow, the authors discuss: the components of the sign industry; the extent to which they are measured by government data; with modeling as a method of measuring the sign industrys supply chain; the growth of the Sign Manufacturing industry as compared with all manufacturing; where the industry is located, by state; the international trade in signs; and, finally, the total size of the industry. Government data proved inadequate to fully measure the industry as the ISA would like, so the study went considerably beyond the scope of the original study, to estimate, as best they could, the size of several industry components, including: the value of signs produced by printing and advertising establishments; the contribution of wholesalers and brokers; the revenues and employment of sign installers; and the size of the sign maintenance industry. III. Defining the Sign Industry What is the sign industry and what should be included in it? The government has long reported data on Sign Manufacturing, which has the North American Industry Classification System (NAICS) code of 339950. This code is designated for establishments that are engaged in manufacturing signs and related displays of all materials (except printing paper and paperboard signs, notices, displays). 3 It is apparent that the sign industry is too complex to be captured by a single NAICS code. Signs are being manufactured, sold, installed and maintained by companies with
2 3

For more information, visit http://www.signs.org For more information on NAICS codes, see: http://www.census.gov/eos/www/naics/

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

other codes. In addition, we would like to know something about the industries that supply the sign industry with goods and services, either directly or indirectly, and about those that sell, install and maintain signs after they are produced. ISA and the Probe Economics team tried to measure the sign portion of these other related economic sectors and to quantify the other channels that sign production reaches end-customers without using traditional sign companies. An extensive first round report was created at the cost of more than $10,000. It is a good starting point for understanding the non-NAICS 33990 business. The most recent U.S. Census Bureau data (2006), characterized sign manufacturing NAICS # 339950 as an $11.7 billion industry, but in 2006, the U.S. sign industry had shipments of $49.5 billion and employed 262,700 employeesso these new numbers may appear surprising. However, long-time industry members observed that billions of dollars of signs are created in business sectors that are not characterized by the Census as sign manufacturing: industries like digital printing, display advertising services, graphic design, etc. Unfortunately, despite the digital sign companies lobbying for an appropriate NAICS code for their industry, there isnt one yet that is specific to the digital signage industry. The closest NAICS industry category would be 323115, which covers digital printing, and particularly large format digital printing, which is closer to business these shops engage in, but still contains some very large, very high end digital printing press businesses as well as billboard material manufacturers, both of which require more expensive equipment and complexities. At the present time, there are an estimated 15,000 licensed sign companies in North America. In addition, a further 5,000 10,000 related businesses make up the bulk of what is considered the true sign industry, including digital print houses, screen printers, graphic designers, and installers. The target for wide-format media is therefore in the range of 20,000 to 25,000 entities. Sign Manufacturing occupies a central place in Figure 1.4 Once the signs are manufactured, most are sold directly to the establishments that will use them, but signs are also sold through wholesalers or brokers, or to other kinds of establishments. The latter may add value before passing them on to the ultimate user. Government data show a significant number of signs being sold to advertising agencies.

U.S. Sign Industry Size and Impact Study, the International Sign Association

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

The agencies, which also may make signs, presumably pass most on to the ultimate user, in some cases without even taking physical possession. Some ad agencies retain title to the signs they purchase or make, and then rent them out. Printers, graphic designers and other kinds of companies also make signs or contribute to their manufacture. With the advent of new printing technologies, such as wide format ink jet printers, more signs are being manufactured by companies that the government classifies as being in the printing business and not the sign manufacturing business. In the July 2008 ISA Member Survey, 8.1 percent of the respondents described their companies as being in Digital Printing. IV. Size of a Typical Non-Electric Sign Shop

There are approximately 15,000 licensed digital sign businesses in the country, and according to third party research, only 32 National sign companies exist today. Studies reveal that the industry is predominantly small and medium-sized businesses, with more than half made up of 2-4 employees.

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

Approximately 25% of all sign companies have 5-6 employees. The industry is served by media suppliers who deliver sheets of plastics, metal, roll media, and sign manufacturing components, all within a 1-2 day turnaround. With small operations that grew up as entrepreneurial ventures, two factors are created that challenge these businesses and threaten their viability. The first challenge is to educate a new business owner about the value of a visible site and the importance of demographic prequalification of the target area. The sign industry is notorious for pinching pennies -- even in terms of a shop lease site. Therefore, cost relative to value must be clearly communicated. The second issue goes to the management and strategic vision of the operation. Benchmarks exist for measuring the dollar-volume of sign sales per sign designer, and for the revenue brought in the door by sales consultants. Another benchmark exists for COGS (cost of goods sold). If an entrepreneur does not have access to this information, they are highly likely to underprice, over staff, and have little, if any profits. If the financial house is in order, the mission is to create differentiation. With a number of competing entities in the marketplace, standing out is of overwhelming value. This is where, at the inception of a new sign business, well-researched site selection criteria becomes a marketing imperative. V. Site Selection Considerations

Research has proven that when clients are at a store, or point of sale, they are more likely to purchase a good than at any other time or place. Assessing the impact of a lease site on business performance must begin with an understanding of the fundamental purpose of the business. Here are some basic examples: For a travel destination, such as a hotel, the location is most often to chosen to provide easy access and good visibility from the freeway. Signage includes a pole sign visible far before the freeway exit. For a home and garden center, the location must be near dense and growing residential communities, on a thoroughfare that allows most who live in the area to see the facility and signage. For a business bank, visibility and easy access are two key factors. Traffic that moves at 35-miles-per-hour or less is ideal and even synergistic businesses in the same center are desired.

A resemblance between the demographic qualifications and clientele of a business bank and those of a non-electric sign business can be demonstrated.

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

Example Case Study #1: National Retail Banking Business -Excerpt This study was prepared by the Economics Center, University of Cincinnati for the Signage Foundation, Inc. and published in August 20125 A bank with more than 500 branches nationally, which we will call Secure Savings, agreed to provide data about the use of signage as it pertains to Secure Savings branch characteristics and performance. Secure Savings requested that its identity not be disclosed in the presentation of this case study. The banking industry uses on-premise signage extensively and spends a great deal of money on branding, design, placement, purchase, and maintenance of its signs. Retail banking is a highly competitive industry, and branch visibility receives muchattention and investment. Some of the operating characteristics in retail banking are similar to those in the retail trade and accommodation/ food service industries. For example, in resource materials prepared for its members, the Bank Marketing Association advises: Banks need to think more like retailers. Convenience retailers such as restaurants or gas stations know the value of good visibility. If your customers cant see your sign or find your building, they wont visit your branch (Beery, 2002). Signage concerns begin at the site selection stage. Selection criteria for Secure National Bank includes visibility and convenience of access, along with population density and size. We need to be visible so that, when people need us, in their minds, they know where we are, stated one of the banks real estate executives. Case Study Approach and Data Secure Savings has extensive data on its branches, which permit a more extensive analysis that explores issues beyond the basic signage considerations that have dominated previous research. As with the previous case study, this analysis focused on 47 locations within a single metropolitan area, which serves to eliminate many non-signage factors that would otherwise be difficult or impossible to control for. These scores were part of a broader six-factor assessment of banking center conditions that was performed by an outside consultant. The other five characteristics on which bank branches received a score from one to five (with 5 being the best score) were: location, accessibility, and parking for the banking center; and land use pattern (land use mix and density, traffic flow) and life cycle (age and economic vitality) of the surrounding area. Among the factors included in the model, the only other one that appears to have a significantly positive impact on visibility is one of the banking center characteristics location which produces a 43 percent increase in the probability of a top visibility score.
5

http://www.thesignagefoundation.org/LinkClick.aspx?fileticket=5i1Ap9waG1M%3D&tabid=59&mid=496 p.25

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

Comparing Signage to Banking Center Performance The second part of the analysis examines the impact of signage and other condition characteristics on branch performance. The sample consisted of the same 47 banking locations previously analyzed. The outcome of interest was average monthly teller transactions in 2011. This component of the analysis modeled the incremental impacts of on-premise signage and condition characteristics on the number of average monthly teller transactions. The model analyzed teller transactions as a function of: The number of signs by type (pylon, monument, wall letters); Other banking center condition scores (location, accessibility, parking); and Surrounding area condition scores (land use characteristics, life cycle). The results indicate that, when taking into account the other variables, a pylon sign is associated with 1.15 times the average monthly number of teller transactions. The magnitude is roughly the difference between a bank having 375 daily teller transactions and 325 transactions. This difference is a considerable impact on monthly transactions. Not surprisingly, the rating given to banking center parking is the only other variable that has an impact on teller transactions. As these transactions occur on-site, it is reasonable that banking centers with more available and more easily accessed parking would also tend to have more transactions. The statistical analysis indicates that three factors have effects of much greater magnitude than the others. These three location, pylon signs, and monument signs affect the success of the business when comparing benchmark activities. The ROI of Visible Locations Would you have any way to be exposed to a business bank that was located in the back of a light industrial park? The fact that industrial parks are located in less traveled thoroughfares means that the business bank is unlikely to achieve anywhere near the 375 transactions per day of a competitor located in the right site. Consider this same bank, without a way to communicate with potential customers about where the business is located and the nature of its product or service. Of course, if the budget allows, marketing strategies may involve static on- and offpremise (billboard) signs, as well as television, radio, newspapers and flyers. This marketing activity is quite costly, and the reach pales in comparison to what the banking competitor achieves in the right location: 35,000 pairs of eyes on their sign every day at the lowest cost per 1000 impressions. It is clear that a visible location and good signage among other site criteria generate more business at a lower cost for a bank, than any other method to reach prospective customers. In fact, for nearly all businesses, a well-places on-premise sign, and a good location, can mean the difference between success and failure. So much so, that the US Small Business Administration examines closely the signage of a new business before approving a small business loan. 2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

This graph depicts the cost per impression of various forms of advertising:

2006 Sign Biz, Inc.

VI. Location Factors in the Success of Non-Electric Sign Shops The monthly cost of a light industrial park lease site may range from .10 a square foot to perhaps a $1.50, per month. The business strip mall location will have a rent of between $2.00 and $4.00 per square foot. Why should a sign shop pay the higher rent? The correct strip mall or business service location will have excellent exposure and illuminated signage for each tenant. See Figures 1 and 2. Businesses pay a premium for retail sites that provide exposure to consumers. But the money spent by the business to secure its retail location typically 25% to 50% more than would be paid for an industrial location that lacks street exposure or the zoning ability to host illuminated on-premise signage.

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

From surveys of the Sign Biz Network conducted over the past two decades, the right location drives the lions share of new clients for the first months or years of operation. This is a critical time for a new business, and the bread and butter business and exposure to new customers is vital to success and rapid capitalization of investment. Some area populations are more transient than others people may move or change jobs frequently, or the area may accommodate the needs of a high number of tourists. Transience can impact a business significantly, because the higher the number of newcomers to an area, the more difficult it is to be profitable without a prominent storefront. A business that relies heavily on residential traffic, such as a Laundromat, will be especially affected by the number of residents who relocate each year.

In addition, on average, at any given time, more than 16% of the population will have recently relocated to an area and will be unfamiliar with local businesses. This is compounded by business employee changes, and sign buyers being relocated. A business that relies on commercial traffic, such as a deli that caters to the lunch time crowd, or a non-electric sign company, will be affected by the turnover rate of businesses in its trade area. If a business is located in a trade area with demographics that change significantly throughout the year, more prominent signage is needed in order to successfully attract replacement customers. A visible, easy access location with signage can be very successful at communicating to the passing public the products or services available inside the building. A third to a half of a retail businesss monthly lease is directly due to the potential advertising exposure; the on-premise signage is simply the most available means by which to take advantage of the asset.
Sign Biz, Inc.

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

In a mobile, media-dominated world, if the business fails to maximize the costeffective communication potential of its on-premise signage, it is operating at a marked competitive disadvantage.

On-premise signage performs many of the identical functions of outdoor advertising media. These include read/react, in which the sign is read and urges the reader to immediately react by purchasing the particular good or service to which the sign refers (in terms of outdoor advertising, this is known as the informational/directional sign); and read/recall, in which the sign is read and remembered later when the need arises for the good or service to which the sign refers. The signs also perform an extend recall function, in which repeated exposure to the message enhances the unaided recall period. In other words, the advertising potential of the on-premise sign is so great that it can allow a small, independently owned business to compete with even the most powerful chain or franchise. James Kellaris, who holds the Gemini Chair of Signage and Visual Communications in the University of Cincinnatis Carl H. Lindner College of Business, has illustrated how good signs reduce search costs by making information more available to consumers. Utilizing data collected in a 2011 survey of over 100,000 North American shoppers, Kellaris found that: Shoppers associate sign quality with store and product quality (34%); and Shoppers make store choices based on the information communicated by store signs (29%). Few small businesses can afford or justify massive advertising campaigns, and so rely on their on-premise signs for much of their marketing, particularly if communicating with potential customers is simply about identifying their product or service and location, as in the case of a digital sign company. Seminal research was conducted to assess the impact of on-premise signage on the performance of a Southern California fast food restaurant chain and a national specialty import retailer (Ellis et al., 1997). For the fast food chain, signage improvements were the best predictors for sales increases. For the specialty import retailer, sign specific changes or additions were associated with significant increases in sales revenues.

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

While the Southern California studies focused on fast food and specialty import chains, it has been argued that on-premise signage is likely to be even more important for small non-chain businesses (Conroy, 2004). Many small businesses do not have the relatively large marketing budgets and shared electronic media buys of national chains. These businesses are more likely to be dependent on their signage for most of their communication with potential customers. Case Study Two: The Sign Biz Network The Sign Biz Network is a chain of sign companies that was established in 1989, with the first start-up operation opening its doors in 1990. The location qualifications were built on proprietary market research, and today, nearly 200 independently-owned sign companies have been established with this model. Examination of the growth in revenue, and speed of that growth, of more than 180 of these non-electric start-up sign companies over a 24-year-period has proven that the success of these companies is closely tied to the lease site qualities, in much the same way that banks benefit from a visible and accessible location. The locations with rent between $2.00 and $4.00 per square foot, per month, yielded a much faster ramp-up (by a factor of 4) and ultimately achieved higher revenue than their start-up counterparts in industrial sites. To put it into perspective: On average, the Sign Biz Network start-ups are able to pay all of the businesses monthly expenses, including rent, by month six, and many by month four. More than one in four has achieved $500,000 in annual sales, and 23 have achieved more than a $1 Million in annual sales the highest ratio of any sign chain, franchised or otherwise. In sharp contrast, another chain of 150 non-electric sign shops that started in light industrial sites had 35 of those businesses fail in a 36-month period.6

Location as a Variable in the Success / Failure of a Sign Shop When factoring in all other variables, and cross-referencing business demographics of comparable businesses in each of the two chains, it is clear that location has exerted a disproportionately large influence on the success (or failure) of a non-electric sign shop.

https://opendata.socrata.com/d/ednd-tza8

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

VII. Quality of the Data Given that this survey captured self-reported information about individual businesses, questions may arise about its objectivity and validity. Fortunately, a body of marketing research has established that the self-reports of business owners about the factors that influence the performance of their business are highly correlated with those factors that could be identified using independent, objective data (see Robinson & Pearce, 1988; Venkatraman & Ramanuiam, 1986). VIII. Location as a Variable Related to the Volume of Customers Objective data from numerous commercial appraisal studies have shown that properly designed, sized and placed signage can significantly increase a businesss volume. An effective sign can increase sales volume by 25%, or even as much as 65%. Once a business generates enough revenue to cover its fixed overhead costs, subsequent sales contribute to potential profit. Increased sales volume and profitability allows the business owner to hire more employees and to finance additional inventory, thus expanding purchasing choices for consumers. This increase in customers is vital to a businesss growth and stability, especially in the early years. A national survey of the Sign Biz Network found the average number of clients supporting a non-electric sign shop. This poll was conducted online in the fourth quarter of 2009 and queried 180 shops. 7 The 45% who responded serve as a contribution to the conversation on the characteristics of digital sign companies in the current pentad. (We use a five-year period for charting changes in this industry, versus a decade-marked examination, due to the rapid deployment of new technologies, and rapid growth of the digital sign enterprise. That combination of technological advances and strong growth pushes fast metamorphosis of many digital sign operations.) These companies represent mature (more than 50% were in business five years or longer), small businesses (around 85% of them had eight or fewer employees) and represent the core of this market in the retail, commercial, digital sign space. Some of the respondents produce or service electrical signage, but probably wouldnt identify themselves as such- and all started life as digital sign companies. None of the respondents were part of a franchise chain. Essentially, the data serves as a good cross-section of companies that make up our target market in this particular space.

http://www.signhugger.com/2009_10_01_archive.html

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

The central question asked was, What number of clients represent 80% of your companys revenue? Sign Biz, Inc. conducted the poll, and interviews were conducted with a cross-section of respondents. The following narrative discusses the results. We found that more than half (54%) of digital sign shops earned 80% of their revenue from client bases ranging from 42 to more than 200 regular customers. Those shops that grew over a 12 to 20-year-period to fulfill a unique market such as ADA signage, electrical, or other distinctly commercial-style applications often relied upon a small client base of large accounts that generates the bulk of the business. Of those shops responded to the question with figures greater than 30: A significant number -- 30% -- have client bases ranging from 42 to 80 companies. A further 10% see 80% of their revenue from 90 130 clients. Another 8% say 130 - 200 companies generate 80% of their revenues. And 6% have more than 200 businesses generating the lions share of sales. While there was alignment between traditional digital and larger client base, there was no correlation between the range in client base size and revenues. Some multi-million dollar shops had 30 clients, while others had more than 200. This would beg the question: What is the definition of a digital sign shop? A traditional digital sign shop that is more than 2 years old is most likely to have between 42 and 130 companies that generate the bulk of their revenues. This also substantiates the results of an earlier survey (Q4, 2008) that shows less impact from the recession on shops with a wide range of retail establishments being served. In contrast, shops with few, large accounts were more likely to experience a deeper cut from the downturn in the economy. The high-volume, digital print cut vinyl operation had clients with 80% to 90% repeating year over year. For anyone considering the launch of a new sign business, it is recommended that a new business owner identify the minimum requirements of a trading area by examining the existing locations within the industry that would be comparable to a market situation that Sign Biz Inc. has identified as the PMA, or Primary Market Area. IX. PMA and Range Factors For a non-electric sign shop, a radius of 6-8 miles has been designated the PMA for a non-electric sign shop, from which 80% of the sales volume will originate. The Range is 18-20 miles. Sign Biz, Inc.8 developed and refined 32 criteria for demographic and retail site recommendations for the purpose of providing new store owners with guidelines to properly evaluate and qualify retail store sites.
8

http://www.signbiz.com Dana Point, CA 1-800-633-5580

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

From this, a unique type of business service center with active business market engagement is sought. Sign Biz, Inc. has established 200 retail store locations across the U.S. and in six foreign countries with this model. Following are some of the factors that are critical to proper lease site selection.
1. 2. 3. 4. 5. 6. 7. BUSINESS COUNT TRAFFIC COUNT RETAIL CENTER STORE SITE VISIBILITY STORE SITE SQUARE FOOTAGE AND LOGISTICS INTERIOR LAYOUT FAVORABLE LEASE TERMS AND FREE RENT CONDITIONS

Other factors include street/road curvature, number of traffic lanes, speed limits, landscaping, building setback, and sightline obstructions from other signs, buildings, poles and berms, and more.

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

The professional development path of a digital sign company starts with a viable, visible location and excellent signage. This enables the new non-electric sign company to capture a significant market share of clients with a full-service line of digital products and related services, on the path to any number of specializations. For some businesses, new technology is expanding the sign choices available to businesses for communicating with potential customers. Electronic messaging and video displays on signs are becoming increasingly common, especially for businesses whose brand or image requires that they are perceived as cutting-edge in the quality of their products or services (Post & Pfaff, 2007).

X.

Clients Preference for Signage

Before opening a business at a particular location, an attempt should be made to determine whether approaching motorists will be capable of seeing the business in time to react to the sign and stop. A number of sources provide data on driver reaction times and distances at various speeds. Two possible sources for this information are the local Department of Motor Vehicles driver manual, which gives data pertaining to stopping distance in response to traffic emergencies and traffic signs/signals, and The Signage Sourcebook (Table 15), which takes into consideration time needed to read and respond to an on-premise business sign. TABLE 15 Minimum Required Legibility Distances (MRLD) in Varying Situations Speed (MPH) MRLD @ 4 seconds (in feet) per MUTCD9 175 235 290 350 385 MRLD @ 5.5 seconds (in feet) per Garvey, et al.10 225 325 405 485 525 MRLD w/ Maneuver (in feet) per McGee and Mace11 410 550 680 720 720 MRLD w/o Maneuver (in feet) per McGee and Mace 155 185 220 265 280

25-30 35-40 45-50 55-60 >65

Manual on Uniform Traffic Control Devices, Federal Highway Administration, U.S. Government Printing Office. This manual is available on the Internet at http://www.mutcd.fhwa.dot.gov/index.htm 10 Garvey, P.M., et al, 1996. Sign Visibility: Research and Traffic Safety Overview. Bristol, PA: The United States Sign Council. 11 McGee, Hugh W. and Douglas L. Mace. Retroreflectivity of Roadway Signs for Adequate Visibility: A Guide, Report No. FHWA/DF-88-001, Federal Highway Administration, Washington, DC, November 1987.

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

The data in this table is relatively simple to use. For purposes of illustration, assume the speed of traffic in front of the prospective business site is 30 mph, and the street has one lane in each direction. One can walk down the street from the site and stand at the legibility distance listed on the table (following the recommendations of Garvey, et al in Table 15, the distance would be a minimum of 225 feet) and look at the site. Another way to view this type of data is to factor in viewing distance for the majority of those vehicles that pass the business, and adjust letter-height accordingly. See chart:

Put simply, the sign should reach out and talk to people. See Figure 16 below. But a business owner cannot know how to present the message without knowing whom it is intended to reach. Origin-destination studies are essential in this regard. An origin-destination study provides crucial information beyond generalized traffic counts. It also describes the demographics at any given time of the individuals on the street. 12 This information is critical to the development of an effective communication system. If shoppers do not typically drive down a particular street, businesses located there will need off-premise signs to direct traffic to their sites. Sign Biz, Inc. has the results of a benchmark industry study costing more than $100,000, which determined that there are 20 vertical markets which purchase the most signs from businesses described in this report.

Often this information is available from state highway departments, local regional governments, or municipalities.

12

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

XI. CONCLUSION Businesses make decisions about their signage within the context of their available financial resources, target customer base, and location characteristics. The results presented in this report emphasize the importance of carefully assessing the role location and signage play in a business overall marketing and branding strategy given the specific characteristics of the non-electric sign industry. The research shown in this report indicates that the location of a sign manufacturing facility is a critical factor for business success. The implication of these results is that location influences the vitality of a digital print and cut vinyl products sign provider much like it does for a bank. This study can foster more well-informed discussions between potential new sign industry entrepreneurs and their real estate agents. For more information about the sign industry, or to learn more about the complete business development program and start-up program offered by Sign Biz, Inc., call:

T 800-633-5580 (US & Canada) T 949-234-0408 Sign Biz, Inc. 24681 La Plaza, Suite 270 Dana Point, CA 92629

The author accepts no responsibility for the consequences of this document being relied upon by any other party, or being used for any other purpose, or containing any error or omission which is due to an error or omission in data supplied by other parties.

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580

More Resources
Bass, Richard W. (2011) Planners, Signs and A Communitys Economic Well Being Proceedings from the 2011 National Signage Research & Education Conference, Cincinnati, OH. Beery, Al. (2002, May). Site selection insight. ABA Bank Marketing, 34(4), 28-30. Berger, AA. (1989). Seeing is Believing, Mountain View, California: Mayfields Publishing Company. Blakely E.J. & Leigh N.G. (2010). Planning Local Economic Development: Theory andPractice. Fourth edition. Thousand Oaks: Sage Publications. Browning, G. (1996). A Tangled Web, National Journal, 28(36). Christadoulou, J. (2009). Comprehensive Review of Literature on Signage: 1950 to Present. Washington DC: Signage Foundation, Inc. Conroy, D. (2004). Whats Your Signage? Albany: New York State Small Business Development Center. Edelman, D. (2009). Comprehensive Review of Literature on Signage: 1950 to Present. Presentation at the National Signage Research and Education Conference, Cincinnati, OH. Ellis,S., Johnson, R., & Murphy R. (1997). The Economic Value of On-Premise Signage. San Diego, CA California Electric Sign Association. FedEX Office. (2012). Hey There, Whats Your Sign? Insights into the Signage that Attracts Consumers. Heather, K. (2003). Economics and the Internet. Teaching Business & Economics, 7(1). Kellaris, J. J. (2011). 100,000 Shoppers Cant Be Wrong: Signage Communication Evidence from the BrandSpark. Presentation at the National Sign Research & Education Conference, Cincinnati. Morris, M. (2001). The Economic Context of Signs: Designing for Success. In Morris, M., M. Hinshaw, D. Mace and A. Weinstein. Context-Sensitive Signage Design, Planning Advisory Service. Chicago: American Planning Association. Post, G.V., & Pfaff J.F. (2007). Internet Entrepreneurship and Economic Growth. Journal of International Technology and Information Management, 16(3). Taylor, C.R, Sarkees, M.E. & Bang, H. (2012). Understanding the Value of On-Premise Signs as Marketing Devices to Businesses for Legal and Public Policy Purposes. Journal of Public Policy & Marketing. Posted online on 28 June 2012. Taylor, C.R. (2010). Value Provided by On-Premise Signs: Measuring the Economic Value to the Business Enterprise. Presentation at the National Sign Research& Education Conference, Cincinnati, OH Taylor, C.R., Susan Claus, and Thomas Claus (2005), On-Premise Signs as Storefront Marketing Devices and Systems. Washington, DC: U.S. Small Business Administration. Tufte, E. (1990). Envisioning Information. Cheshire, Connecticut: Graphic Press. van Bulck, Hendrikus E.J.M.L. (2011). The Effectiveness of Outdoor Electronic Message Centers. Presentation at the National Sign Research & EducationConference, Cincinnati. Venkatraman, N., & Ramanujam, V. (1986). Measurement of performance in strategy research: A comparison of approaches. Academy of Management Review, 11(4): 801-814. U.S. Census Bureau. (2011). Statistics of U.S. Businesses: 2008. U.S. Department of Commerce. http://www.census.gov/epcd/susb/2008/us/US--.HTM U.S. Small Business Administration. (2003). The Signage Sourcebook: A Signage Handbook. First Edition. U.S. Small Business Administration and The Signage Foundation for Communication Excellence, Inc. U.S. Small Business Administration. Understanding the Value of Signage. http://www.sba.gov/smallbusinessplanner/start/pickalocation/signage/text/understand.html
http://admin.txsigns.org/pdfs/library/Economic-Value-of-on-premise-signage-web-site.pdf http://www.sba.gov/content/tips-choosing-your-business-location http://www.sba.gov/community/blogs/7-ways-increase-foot-traffic-your-small-business

2012 All Rights Reserved Sign Biz, Inc. 1-800-633-5580