Should Your Sign Shop Convert?

conversion-questions-for-sign-shops

As the sign industry takes on more responsibility, shifts focus and migrates into new technologies, many independent sign shops find that their “clout” and “back office” support seem inadequate to meet today’s marketing and operational demands.  We witnessed the first “vinyl” sign shops take hold in 1985. From there, the growth of “computerized” sign businesses exploded, until today, there are approximately 20,000 sign shops across the US, about 4000 in Canada, and thousands in other countries.  A fair number of these are organized into chains, linked by either contractual arrangements, common ownership, or a license.

Is the Grass Greener?

The first question that must be addressed by any independent sign business when considering membership or shared ownership of the business is, Do the benefits outweigh the costs? To answer this properly, some research study, math, first person interviews and statistics are critical. So let’s break this down, give you some of those resources right now. After this, you will likely not want a franchise for your support, so we have a great free tool at the end of this article for you:

  • The US Small Business Administration has reported loan failure rates for franchises. You can visit this link for Opendata Socrata to view latest statistics published for every brand, and even sort by name or failure rates: SBA Loan Failure Rates by Franchise Brand
  • The Woodrow Wilson Institute for Scholarly Research in Washington, DC, research has shown that independent businesses survive at a greater rate than franchise businesses. Something to think about, yes?
  • But what about all of those claims that franchises do better, in terms of success rates? As it turns out, this was a piece of ancient text that was repopulated, reused, and recirculated by franchise organizations and their brokers for so many years, people started to believe it. But then the recent President of the International Franchise Association said, Stop, not true. The full text of that official IFA statement is here, for your continued research. IFA Statement
  • Let’s do the math. If you pay out 6% of your gross revenue each month as a typical royalty payment, and 2% for a mandatory ad fee, you are giving up roughly 40% of your net income! Here’s how the math works (scroll to bottom of this page): The Royalty Impact
  • But isn’t the “brand name” worth something? As it shakes out, the sign industry is not one of those that sees incremental sales increases attributable to a “brand” name. The sales increases in the business-to-business arena are not measurable, and in fact, in some cases, a bad franchise experience hurts all franchisees as the customer will steer clear of the brand. A recent study by Booz, Allen, Hamilton reinforces this point. They found that only 15% of brand loyalty is generated by up front promotions, while 85% comes from the point of sales contact and beyond. In the B2B market, this means that what your sales teams are saying, the tools they are using to deliver their message and the customer’s total experience with your shop become more important than all the money spent on creating the brand image. Read More.

What does this mean for your business, based on your numbers? Use this Royalty Calculator to find out:

Does this mean there is no hope for an independent sign business that wants deeper resources? If you join the franchise club, you pay a heavy price. If you don’t align with someone, you may fall behind, or at the very least, not have enough resources to tackle everything you want. Rock and a hard place?

The Alternatives

business-decisionsAs a sign company grows, the owner will utilize the resources designed for small business in general – from Chamber of Commerce memberships, to SCORE counselors, and networking groups. These provide some good leads, some solid advice, and enhance the business connection to the community. At a certain point, however, most sign businesses will find they need answers to more intricate questions related to the operation of their business. Here are some examples:  What is the best help-wanted ad to attract the best candidates for hire, and what hoops do we need to go through to be sure we hire the right person? How many dollars in revenue should my graphic designer be able to produce in sign products, per month (without requiring overtime)? What sales benchmarks are right for a new sales consultant I hire?  How do I know I am getting the best price on my materials and inventory?

Those are just a few of the thousands of questions a sign shop owner must answer every year. The demand on time is extraordinary, from beta testing products, to review of vendors, to hiring practices – each must be within a framework of integrated systems.

So what do you do, when you want a model to follow, expertise at hand, group buy discounts? Some questions can be addressed within a sign trade association. With most US-based sign associations today, membership in your local association will give you the resources of the International Sign Association.  USSC offers many benefits as well, for a low cost. Most of these trade associations can also give you group benefits that lower your medical, dental, and vision insurance costs. There you will find statistics and surveys to support your choice of directions. All of that, plus education resources, for about $200 per year, depending on the association. Do your homework: You do not have to join the closest sign trade association if the benefits of another outweigh the local networking opportunities.

But what about industry and marketing resources tailored for entrepreneurs, specifically, tailored for you? There are some organizations that provide support in specific aspects of business. A PEO (Professional Employer Organization) for example, becomes your de facto HR department. A trusted business coach becomes your sounding board. The Chamber of Commerce and the sign trade association may list you as a reputable, go-to source. That becomes a marketing arm, for very low cost.

In order to determine which resources are most important to you, there is a handy, one-page tool to use, available for free from our partner. Simply download, and schedule some time during your next WIP meeting. Or set up a separate meeting with your team. Provide all team members with the checklist, and have everyone determine the level of need for each item on the list. Once you have all of the responses completed, review as a group. The discussions are priceless, and may lead you to conclude you have found a fresh direction as a team.

By channeling the commitment and expertise of your entire organization, you just may find you get to the light at the end of the tunnel. If you decide you want a partner to “do the heavy lifting” – definitely consider an organization like Sign Biz, Inc. There are no royalty payments, and the one time initiation fee provides a lifetime of servicconversion-cost-five-years-abc-sizedes.   To the right is a chart showing the cost over time of membership vs. franchise conversion.

Here is the self-assessment tool – scroll down on the page, click download for your PDF: Conversion Self Assessment Tool.  No email or login required!

Until next time, be your own yardstick!

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