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Business Management

2015 Commercial-Sign State of the Industry Report

Respondents claim 17% average sales growth

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Last year, ST revised its CAS/Commercial State of the Industry (SOI) Report for the first time in three years. Although it didn’t feature the professionalism and precision the survey had previously enjoyed when conducted by Smyth Marketing Resources, it nonetheless provided a decent snapshot of how non-electric sign companies were faring. This year’s followup survey, which benefited from a slight uptick in the number of useable responses (131 versus 121, see Table 1 in slideshow), provides a way to compare the two sets of results. Respondents were not required to answer every question, so the number of responses in the following tables will vary. All of the latest results are for the completed 2014 fiscal year.

Our respondents
We sweetened the pot a bit by offering a $5 gift card to everyone who participated in the survey. Overall, we received 163 responses (32 respondents answered “no” to the initial question: “Does your business primarily sell non-electric signs?” That response ended their participation.) Independent sign companies outnumbered franchise sign companies (Table 1) by a nearly 8:1 ratio (111 to 14).
The average age of responding companies was 23 years, slightly less than last year’s average of 25 (Table 2, see slideshow). One company, founded in 1900, is even older than ST! The median age was 19 years, meaning half of the responding shops are older than that, and half are younger. One-third are less than 12 years old.
The average sales volume for this year was $1.7 million, which nearly triples last year’s average of $674,717 (Table 3), but there’s a simple explanation. One respondent reported an $80 million sales volume, which accounts for nearly half of the aggregate reported sales volume of $162 million. If we simply exclude the $80 million company, the average drops to $910,000. Last year, our respondents collectively predicted their average 2014 sales volume would be $878,227, which is very close to what transpired, assuming the $80 million company isn’t included. Additionally, a $30 million company responded, which also raised the average. Perhaps the more telling statistic is the median, $250,000. Our instructions stated, if you had multiple branches, to count all of them as a single entity. It’s possible the two largest figures came from a franchise. Last year, the highest reported sales volume was $20 million.
Overall, 2014 was a good year. The average company reported a sales-volume increase of 17.2% over 2013 sales (Table 4). Last year, the average respondent reported an 11.2% sales-volume increase from 2012 to 2013, so growth accelerated last year. Less than 10% of the respondents (9 of 95) reported their sales volume dropped in 2014. Approximately one-third said their sales volume didn’t change in the past year, which was nearly double the percentage reported last year. Five companies reported doubling their sales volume (100% increase). With more than 20 companies less than five years old, this would be more likely. Similarly, more than 25 companies reported sales volumes of less than $100,000, which would also make doubling more likely. Thus, one of the limitations of Table 4 is that it isn’t weighted by sales volume or longevity. Everyone’s figures are treated the same.
The average number of employees is 11.6, which is quite a bit higher than last year’s average of 8.8 (Table 5). Again, the $80 million company, with 300 employees, skewed these results. If we delete it, the average drops down to the 2013 level, at 9.3. Two other companies reported having 150 or more employees, but, after that, 60 is the next highest figure. And again, the median figure of 4 is probably more telling. Last year’s median was 3. Only 28 of the 124 responding companies reported having 10 or more employees. If companies reported not having any employees, we counted it as a 1.
As with the average sales volume, which isn’t weighted, we can calculate a sales-per-employee figure, although, with 124 people answering the employee question, and only 92 answering the sales-volume question, it’s akin to mixing apples and oranges. Nonetheless, the total sales volume of $162 million, divided by the total number of employees, 1,444, calculates at an average of $112,188. Last year’s average was less than half of that at $52,388. If we again delete the $80 million company (and its 300 employees, which indicates $266,667 in sales per employee for that company ), the sales-per-employee figure lowers to $72,400. However, when Smyth Marketing Resources last calculated this figure for fiscal 2010, it was $105,000, and that was the lowest figure from 2008 to 2010.
The 90 respondents reported an average profit margin of 40%, which represents a healthy increase over last year’s average of 32% (Table 6). Last year, our respondents predicted a 37% profit for 2014, which means this year’s results even exceeded that. Typically, prognostications are rosier than what subsequently occurs. The median profit margin was 34%. When the “mean” (average) and the median are close together, it indicates more credible results. Three people reported a 100% profit margin, and six reported profit margins of less than 10%. During the Smyth Marketing years, the highest reported profit margin was 14.6%. However, Smyth always acquired its data through phone calls, so the interpretation of profit margin may vary with different respondents. Some owners may view their compensation as equivalent to profits, or they may give themselves a specific salary, which would, of course, significantly lower “profit”.

Signs they make
All things being equal, the percentages in Table 7 should tend upward, because we deleted Architectural/ADA signage as a category this year. Otherwise, in a major change from last year, banners significantly supplanted vehicle graphics as the largest generator of sales. Whereas banners jumped from 18.7% last year to 25.1% this year, vehicle graphics likewise fell from 26.7% to 20.7% (Table 7). Of the 92 responding companies, 10 more sell banners (88) than vehicle graphics (78). Banners constitute 98% of all sales for one company, and 15 others say banners are at least half of their sales.
As for vehicle graphics, one company cites them for 88% of its sales, and 10 others rely on them for half or more of their sales. Window graphics and dimensional signage stayed on par with each other as both enjoyed significant increases, from 9.9% to 14.8%, and from 10.1% to 14.0%, respectively. One company only does window graphics, and only five of the 92 respondents reported doing none. As for dimensional signage (which we defined as routed/carved/sandblasted), two companies are 100% dedicated to it, while nearly one-third (30 of 92) don’t sell any.
As for other flat graphics, magnetic signage’s sales percentage rose from 5.5% to 7.6%, with 79 of 92 companies selling it. One company credits magnetic signage for 60% of its overall sales, while three others rely on it for more than a third of overall sales. Floor graphics remained statistically insignificant, despite increasing from 1.5% to 2.2%. We didn’t get specifics as to what “Other” entails, but it dropped from 21% last year to 16% this year.

Fabrication
Vinyl’s omnipresence continues as all but one of the 101 responding signshops utilize vinyl in their signmaking (Table 8). They report using vinyl in just over two-thirds of all the signs they produce (67.6%) which nearly equates to last year’s figure of 71%. More than three quarters of respondents use vinyl in a majority of the signs they sell. Nine companies state they use vinyl in every sign they sell.
As for digital printing, more than 90% of the responding companies (83 of 91, 91%) use it to decorate signs (Table 9), and it’s used in a majority of all the signs they sell (54.6%). These figures essentially duplicate last year’s results of 90.2% and 53.5%, respectively. The median figure this year is 50%, which further substantiates its validity. Also, a majority of responding shops (56.6%) report selling digitally printed signs they purchased wholesale. This duplicates last year’s 56.5%.
As the sign industry gears up for the historic 40th anniversary Letterhead meet in September, interest in manual artistry should increase: handpainting, pinstriping, carving, gilding, etc. (Go to www.letterheads40.com for very detailed information.) Despite contemporary reliance on computerized signmaking, more than a third (35.7%) of 98 responding shops still handpaint some signs (Table 10). Less so for another venerable signmaking process: screenprinting (Table 11). With upcoming Presidential primaries and the need for election signs, perhaps this will increase. More than a quarter of our respondents still screenprint (28.3%).
Perhaps the demarcation between electric and commercial signshops is blurring. Essentially half of all our respondents sell electric signs (50.5%), and they account for one-sixth of total sales (Table 12). Strangely, however, only 24.2% say they purchase electric signs on a wholesale basis, which means 26.3% fabricate all of their electric signs inhouse.
 

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