Can a $500 Sign Generate $1.9 Million in Additional Revenue for a Health Clinic?

A Sarasota, Florida health-care clinic had a great suburban location, demographically. However, due to its location at the end of a two-story complex surrounded by oak trees, its fascia signage simply wasn’t visible from the interstate (0.2 miles away) or the four-lane frontage road with a median. The owner had a dozen other clinics, so he knew something was wrong with the amount of business the clinic was conducting.

The owner subsequently placed a very simple 10 x 24-inch. sign in plain site, with only the clinic’s name and the words “urgent care.” Within 24 hours, the number of clients nearly doubled. Over the course of a year, this increase would equal nearly $1.8 million in additional revenue. To read the full story, go to http://www.nxtbook.com/nxtbooks/STMG/sott_201411/index.php#/110

How Can the Value of an On-Premise Sign Be Calculated?

Richard Bass is a certified appraiser in Sarasota, Florida. During his more than 30 years in business, he has testified in court as to how a sign’s value can be appraised. In a presentation for The Signage Foundation, bass outline three case histories where the absence of a sign could be measured economically. Planners, Signs and A Community’s Economic Well Being (Powerpoint) – Rick Bass

In a 1995 case in Decatur, Georgia, a Days Inn was allowed to use an electronic message center for four years that was actually situated on a third party’s property. Property ownership changes occurred, so a payment needed to be determined. Three approaches were used: comparable sales, income and cost.

For the “comparison” method, the sign was compared to a billboard, Based on outdoor-advertising prices, for the 49 months, the price was calculated to be approximately $1.6 million.

The “income” approach examines Days Inn’s income for the same time period: $8.4 million. The percentage of this attributable to the sign was calculated at 25%, which made it $2.1 million. Because half of the guests already had reservations (which meant the sign didn’t draw them in), the figure was reduced to $1.050 million. Adding a 10% for interest earned, the final figure became $1.2 million.

The “cost” approach considers how else the property could be used. based on 238 units, the value of each motel room was set at $31,765. If they were all converted to apartments, their value would be $25,000 each. The value difference, $6765, multiplied by 238, becomes approximately $1.6 million.  The full story, with detailed calculations, appeared in the April 1999 issue of Signs of the Times magazine.

Do Wall Murals Improve Small Towns?

The Walldog Festival movement began 2.3 years ago when more than 100 signpainters descended upon Allerton, IA, on July 30- August 1, 1993. In addition to restoring an eight-year-old painted wall mural, they created seven other hand-painted murals. Currently, the vast majority of non-electric signs are created with computer-cut vinyl or digitally printed material.

Most recently, on June 24-28, 2015, the Walldogs traveled to Delavan, WI, a wintertime circus town, for a festival entitled The Greatest Walls on Earth. There, two colorful murals commemorated Delavan’s history. Over the past 22 years, the Walldog Movement has produced 520 murals in 28 towns via the efforts of 257 signpainters.

So what difference has this made for any of the towns?

Pontiac, IL was the site of the 2009 Walldog Festival (June 25-28), which resulted in 18 murals for a town with a late 1800s courthouse. In the aftermath, Mayor Bob Russell wrote:  “When I walked around on that Sunday evening at the end of the event, and looked at all the murals, I still couldn’t believe what I had just seen happen.  The many buildings that just a few months before were looking old and tired, now looked new and alive.  A long-time city resident came up to me and said, ‘This city hasn’t looked this good in 40 years’.  I agreed with him.  Since that weekend, thousands of local residents, and untold numbers of visitors from around the world, have been able to enjoy the beauty of the murals, as well as learn more about the history of Pontiac.  It is a pleasure to be downtown and see people strolling along the streets, taking pictures, or just enjoying everything that the murals have brought to our city.”

Dr. Robert Roarty, who works with the Pontiac Tourism Dept., wrote, in 2012, “Pontiac, like most small Midwestern towns, has continually struggled to maintain economic viability in its central business district.  The competition from regional malls, large discounters and internet commerce, combined with aging buildings that were built in the late 1800s, has resulted in the decline of the downtown Pontiac business district.  This ongoing situation was further exasperated in 2008, when, in January, the City of Pontiac experienced a major flood, which put additional economic stress on small businesses.  Shortly after the flood, Governor Blagojevich announced his intention to close the Pontiac Correctional Center, the City’s largest employer.  The prospect of losing 800 jobs, and the economic uncertainty the Governor’s plan engendered, froze the local economy.  Then, in September of 2008, the national [and international] economy suffered a major setback.  All of these events, in a short period of time, had a devastating effect on the small businesses which comprise Pontiac’s ‘Main Street’.

“The impact of the Murals on Main Street event was both immediate and long-lasting.  For the four days of the extended June weekend, the downtown business district was more alive than it had been in years.  Thousands of local citizens were joined by hundreds of out-of-town visitors as they watched and commented on the creation of the 18 new murals, the displays of the Art Dogs, and the events associated with the Hang Loose Car Show and Pontiac Heritage Days.

Many of the older buildings in the downtown business district were spruced up prior to the event with new paint, brickwork, and other improvements.  The net effect of this renovation is a marvelous and lasting change in the appearance of the city center area.

“The new murals have given the city’s tourism bureau an entirely new asset to promote. Visitors continue to come to Pontiac to marvel at the beauty of the new murals.  These 18 new murals not only add beauty to the city, but serve as highly visible reminders of Pontiac’s social, commercial, and political history.  Senior citizens, school groups, clubs and organizations from around the state have made our murals a popular attraction.  Route 66 heritage travelers, who come to visit the Route 66 Hall of Fame and Museum, find so much more to see and do in the city that they frequently stay far longer than they originally anticipated.  These longer stays have resulted in increased economic activity for the entire Pontiac business community.

“Since the close of the 2009 Murals on Main Street event, the city has planned, organized, and opened a new museum dedicated to both the history of outdoor wall sign painting and the modern Walldogs.  The International Walldog Mural and Sign Art Museum preserves the legacy of the early advertising wall sign painters and provides a much needed context for the thorough appreciation of the Pontiac’s new wall murals.

“Pontiac’s impressive collection of murals is also directly responsible for the city gaining two new attractions.  In 2010, Tim Dye, an avid collector of Pontiac and Oakland automobiles, came to Pontiac to see our murals.  While exploring the city, he stuck up a conversation with the manager of the Walldog Museum about the town, the murals, and the city’s prospects for the future.  The result of that conversation, and many subsequent conversations, was Mr. Dye’s decision to open the Pontiac-Oakland Automobile Museum in Pontiac last year.  In a similar case, the International Society of Gilders learned about Pontiac through the internet and was impressed by our city’s collection of murals and the Walldog Museum.  Earlier this year, the Society decided to base its organization’s national museum here.

“In 2010, 2011, and so far in 2012, the number of tourists who visit Pontiac has increased dramatically.  The average annual increase hovers around 40% for each of the last three years.  The impact of the 2009 festival will continue to be felt by the citizens of Pontiac, and the many visitors who come here, for many years. ”

Jay Allen, a very active Walldog, observed, “Kewanee [Illinois, 2013] entered the Rand McNally ‘best town in America’ contest weeks after its mural project and won ‘Friendliest Community in America’. The murals were obviously a huge part of the swelling pride in the town . . . Belvidere [Ilinois, 1997] won the Illinois Arts Council’s ‘Governor’s Award for the Arts – Community’  and a Tourism Award for Creative Projects the same year.”

To read more about the Walldog Festival and the Walldog Movement, go to http://thewalldogs.com/

Do Signs Help First-time Customers Find Stores?

Signtronix is a California-based sign manufacturer that creates signs for small independent businesses nationwide. From 1996 through 2011, it asked its customers (retailers) to ask their first-time customers (shoppers) how they first found out about their store. Over this 14-year period, 46% of these 13,040 first-time patrons said they’d heard about the retailer because of its on-premise sign. Other possible responses were “word of mouth,” (37%) and “Yellow Pages,” “newspaper,” “radio” and “television,” all at less than 10%. Here were some of the initial verbatim comments from new sign owners (as reported in the June 1998 issue of Signs of the Times magazine):

• From a Lebanon, IL cleaners: “We have added 20 new customers who didn’t know we were here.”

• From a Cedar Springs, MI picture framer: “Our business has increased 30-40% because of the sign.”

• From a Santee, SC BBQ restaurant: “In the first week of the sign being hung up, our business increased by at least 60-70%.”

• From a Bradley, IL comic-book store: “Ninety percent of the new customers came in because the sign attracted their attention.”

• From a Cookeville, TN tattoo shop:  “No more than 10 minutes after putting up the new sign, two customers pulled in.”

• From a Clover, SC flower shop, three weeks after getting a new sign: “I have gotten about 30 new customers.”

• A San Fernando, CA car dealer said sales increased by $6,000 net per week, so the sign paid for itself in less than a month. He decreased his other advertising from $16,000 to $12,000 per month.

Can a Grand Opening without a Sign Directly Cause Loss of Revenue?

On August 18, 1995, a Best Buy store was set to open in San Antonio. By contract, the store was to receive two double-faced pylon signs that faced I-470 by June 1. One 297-sq.-ft. sign did become fully operational the day before the grand opening. The second, 207-sq.-ft. sign, however, didn’t become operational until September 4. Contractually, Best Buy was deprived of one sign for 78 days and the other sign for 96 days. Best Buy hired an appraiser to assess the damages.

Of particular note, the value of the signs had nothing to do with the cost of their fabrication or installation. Instead, their value was based on their communicative and visibility function. In such cases, three property-valuation methods are warranted:

  • Market comparison
  • Income capitalization
  • Cost of replacement

For this particular case, the latter two methods were used.

Cost of Replacement

Traffic Audit Bureau (TAB) numbers, which measure the average number of cars (and people) who would pass the signs daily, state that 99,000 people would see the signs. Thus, the two signs “missed” 15.4 and 19 million “exposures,” or roughly 3 million exposures a month, by not being erected in time. According to a licensed appraiser’s “market comparison,” achieving similar exposure would require one mid-week newspaper insert (200,000 exposures @ $7,258) and one Sunday newspaper ad (345,000 exposures @ $12,520), plus a saturation of TV exposure (2.5 million exposures @ $16,926). This totals $36,704 per face or $146,816 per month for all of the signs. By prorating this one-month cost over the 78- and 96-day delays, the replacement cost becomes $424,767.

Income Capitalization

For this approach, 120 Best Buy customers were surveyed over a two-week period. Thirty customers (25%) said they first became aware of the store because of the sign. Another 38 (32%) said the signs were “useful in locating the store.” Only 22 (18%) said they didn’t use the signs to find the store. The other 30 people didn’t answer the question. This suggests 25% of the store’s business was directly attributable to the signs. Historically, a sign’s direct impact on a business’ sales ranges from 10-50%, with QSRs (quick-service restaurants) at the high end.

In its first year of operation, the Best Buy store averaged $308,687 in monthly sales. If the 25% figure is used, the Best Buy signs generated $77,172 in monthly sales the first year. For the 78- and 96-day periods, then $224,000 was directly attributable to the signs.

Best Buy paid monthly rent of $34,626 (approximately 75 cents per square foot), or $1,154.20 daily. Local industrial buildings that don’t need signs paid approximately 40 cents per square foot. So a signless building would pay approximately $620.27 daily, or $533.94 less daily. Again, using the 25% figure, rent directly related to the signs would be $133.49 daily. Thus, for the 19 days, a rebate of $2,536 in rent would be due.

Estimated total damages were calculated at $227,536. Although the case was settled out of court, Best Buy did receive compensation in the form of rebated rent for less than the assessed damages. Terms were not officially announced.

But clearly, the value of the signs, even for just a 2.5-month period, exceeded $200,000.

University of South Carolina Professor Asks Business Owners to Evaluate their Electronic, Changeable-message Signs

Hendrikus E.J.M.L. van Bulck is an Assistant Professor of Business Administration at the University of South Carolina Sumter. He teaches marketing, entrepreneurship, small-business management, financial management, accounting and strategic management. He is also a partner in Van Bulk Partners, CPAs, LLC, where he is responsible for corporate planning and business valuations.

Van Bulck surveyed the 36 Sumter businesses that had programmable, electronic, variable-message signs (EMCs) for their businesses.  The businesses included 20 retail stores, five gas stations, six service-oriented businesses, five fast-food restaurants, five pharmacies and three banks. Here are some of their observations:

  • More than 85% of the respondents said the EMCs “helped bring in more customers”, and 25% “strongly agreed.”
  • 83% said the sign “measurably increased sales.” 17% “somewhat disagreed,” but no one “strongly disagreed.”
  • 89% agreed with the statement, “The LED sign makes people more aware of the location of the store.”
  • Only 8% said “Customers found such signs unattractive.”
  • 92% said the signs “were easy to update.”
  • 89% would “recommend the sign to other businesses.”

Study: The Value of Signs

Formal Report: Details