5 Ways to Increase the Value of your Sign Company
Take these steps now to increase the value of your sign business and prepare it for sale.
The start of a New Year is a good time for business owners to take a look at what they accomplished during the past and at the same time, look forward to where they want to take the business in the New Year and how they are going to do that. Most of us are so busy with the day-to-day challenges of our business that we don’t take time out to reflect, but we should! I would encourage everyone to also set some goals and measure your progress as the year plays out. I sincerely believe it will make a difference in your results if you do!
There are currently about 30,000 sign companies in America today, making it one of the most popular and steady industries in our economy. Most sign companies have 3-5 employees and sales employees can bring in an estimated $100,000 each. The sign industry bounced back from the 2009 recession much faster than other industries and is currently bringing in an average of 5.5% in profit margins. Signage businesses provide services to a very diverse customer base, ranging from trade shows to small businesses to major government jobs. The market segmentation comes down to about 37.2% of signage jobs being for indoor signs and 68.8% being outdoor signage. The total investment for starting a signage company or buying into a franchise is relatively low, usually between $80,000 and $200,000, making it a popular choice for first time entrepreneurs looking to start a business.
If you have been operating your own sign company or franchise for a few years, you probably have some idea of what it might sell for. Oftentimes, business owners believe their business is worth far more than it actually is, so understanding some of the formulas that go into valuing a signage company can help owners ensure their company comes in on the higher end of these multiples. Keep in mind that only a professional M&A intermediary can tell you the real worth of your business and these formulas serve only as an idea of what your business might be worth.
- 5x SDE includes Inventory
- 45-60% of Annual Sales + Inventory
Now that you have an idea of what goes into valuing a sign company, you can begin making changes in your business to ensure you get a higher sales price. There are 5 steps that business owners of sign companies can take now to help increase the value of their business and make it more attractive to potential buyers.
The first step to increasing sales and revenues is to develop a marketing program. There are dozens of different platforms that signage companies can use to get their name out and the following can be done very economically (and sometimes FREE!):
- Social Media (Facebook, Twitter, YouYube)
- Website Development
- Email Marketing Services (ConstantContact or MailChimp)
- Direct Mail Campaigns
As a service business, sign companies also have two major marketing advantages that other businesses do not have. One, you provide a tangible product to customers that allows you to create a portfolio with which you can showcase recent projects and use for advertising purposes. Start posting pictures of your signage jobs to your website and social media, so that people who are looking for a sign company will actually see pictures of your work. Two, most sign companies have service vehicles that deliver products to customer sites. Get these vans wrapped with your logo and contact information and use it as a rolling advertisement throughout your service base. Even if people don’t call you immediately, they will remember your van when they are thinking of who they should call for signage services.
Expand Product & Service Offerings
Sign companies offer a variety of products and services and if you are thinking of selling within the next couple years, you may want to consider expanding your offerings. Research the higher margin products and services that the leaders in your markets are offering. Also, consider bigger ticket items that you are comfortable adding to your product offering. Eliminate small ticket items or low margin items. If you don’t know your margins on the various products you offer, conduct an analysis. Even taking on one additional service, such as vehicle wraps or awnings, can multiply your cash flow and increase your customer base. If offering additional products and services is not feasible for you, you also have the option of increasing your service radius. Expand your marketing efforts a few extra miles and increase your numbers without any major expenses (except fuel).
One of the most valuable assets of a business in the mind of a buyer is the staff. No buyer wants to walk into a disorganized business that requires renovation and rebirth. Hire qualified employees and take the time to train them properly. Cross train them in different departments so that if someone calls in sick, the department can continue functioning. A good business owner understands the value of investing in their employees and realizes that these are the people that will continue moving the business forward, even after your departure.
Focus on High Propensity Users of Signage
Work with your sales and marketing team to determine high propensity accounts you would like to target. Think of companies with several departments or divisions, these companies will use a lot of signs. For example, a manufacturing company with multiple facilities or a service company with a large fleet of trucks. Create a marketing plan that will speak directly to these prospective accounts and display services that applies to their specific needs to help draw them in.
Work on the Business, Not in it
This tip goes for all types of businesses, not just signage companies – work on your business, not in it. Business owners are often required to wear many hats to keep the business running smoothly, but all too often, we see the owners in the trenches doing the lower level work that employees should be taking care of. As the owner, you are the ultimate overseer of your business and to do this job successfully, you need to remove yourself from the nitty-gritty and take a step back to access how the business is doing and what needs to be improved. When owners dedicate too much time to tasks that employees can take on, they are unable to really focus on the future of the business, and that’s what is important. If this sounds like you, it’s time to step back and access. Only then can you determine what needs to be done to increase the value of your business and prepare it for sale.
Sooner or later, you will begin to think about selling your sign company and we hope these tips will help get a better idea on how to maximize it is worth.
If you are looking to sell your business, the times have never been better. The economy is thriving and the small business market in the Southeast is booming. Small Business Administration (SBA) backed loans are being granted at a higher frequency and for more dollars (up to $5 million per transaction) than ever before, creating a very favorable position for business owners looking to sell. The first step to selling your business is getting a professional valuation. Valuations are one of the most important tools a business owner can equip themselves with. At Viking Mergers & Acquisitions, we offer no-cost, no-obligation valuations to business owners. We have valued 32 other signage companies, just like yours! Give yourself that extra edge; call us today and find out how you maximize the value of your business and make 2015 the year you take the next step.