White Paper Sign Shop Location Requirements

7/29/2019 White Paper Sign Shop Location Requirements

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12/5/2012

Research into Location as a Determining Factor in the Success or Failure

of Non-Electric Sign Shops | Sign Biz, Inc. Advisory

SIGN BIZ,INC. WHITEPAPER:SIGNSHOPSITESELECTION


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

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 start-

ups 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 long-

term interest of the sign industry.

To this end, we are sharing some proprietary information that has fostered above-

average 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 initiatedwith 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 siteselection.

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.


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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 aboutwhere 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 needto 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 best-practice reference performance to uncover the systems, staffing, and marketing

practices that would generate a desired outcome or ratio such as Return on Investment

(ROI).

1Sign Business Article, reprint: www.signbiz.com/images/2012_Franchise_Stats.pdf


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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 calculatingbenchmarks, 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 signmanufacturers 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 non-

electric, 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 ofgoods, 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.


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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.


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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 industrywere 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 allmaterials (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

2For more information, visit http://www.signs.org

3For more information on NAICS codes, see: http://www.census.gov/eos/www/naics/


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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 productionreaches 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 advertisingservices, 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. Thelatter may add value before passing them on to the ultimate user. Government data

show a significant number of signs being sold to advertising agencies.

4U.S. Sign Industry Size and Impact Study, the International Sign Association


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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.


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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 thefinancial 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 thatmoves 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.


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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 characteristicsand 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) andlife 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.

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


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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 modelanalyzed 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 off-

premise (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.


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

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.

2006 Sign Biz, Inc.


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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 prominentstorefront. 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.


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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.

In a mobile, media-dominated world, if the business fails to maximize the cost-

effective communication potential of its on-premise signage, it is operating at a

marked competitive disadvantage.


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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.

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 bedependent 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 thesuccess 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

6https://opendata.socrata.com/d/ednd-tza8


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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.

7http://www.signhugger.com/2009_10_01_archive.html


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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 shopsthat 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 FactorsFor 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.

8http://www.signbiz.com Dana Point, CA 1-800-633-5580


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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. BUSINESS COUNT2. TRAFFIC COUNT

3. RETAIL CENTER

4. STORE SITE VISIBILITY

5. STORE SITE SQUARE FOOTAGE AND LOGISTICS

6. INTERIOR LAYOUT

7. 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.


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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 timesand 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

MRLD @ 5.5

seconds (in

feet) per

Garvey, et

al.10

MRLD w/

Maneuver (in

feet) per

McGee and

Mace11

MRLD w/o

Maneuver (in

feet) per

McGee and

Mace

25-30 175 225 410 155

35-40 235 325 550 185

45-50 290 405 680 220

55-60 350 485 720 265

>65 385 525 720 280

9Manual 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.htm10

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.


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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 industrystudy costing more than $100,000, which determined that there are 20 vertical markets

which purchase the most signs from businesses described in this report.

12Often this information is available from state highway departments, local regional governments, or

municipalities.


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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.


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More ResourcesBass, 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--.HTMU.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

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