Setting The Scene

I live in a really beautiful part of the country — near Asheville, North Carolina — on a relatively rural road with gorgeous views of the backside of the mountains in Bent Creek that I can see from my bedroom window every morning. The other day, I was heading out to the grocery store when I passed a coroplast sign in the front yard of a small home.

The Sign Said: “$20 Signs”

Pretty ironic that sign would be in the yard of a house just a quarter-mile from the home of the guy who wrote EstiMate! Needless to say, I was stunned.

It’s really tempting to stop and talk to them about profitability, but I fear it would fall on deaf ears. I’ve found over the years that people really think cash in hand is the same as profits. I suspect this guy got hold of a vinyl plotter, a few rolls of vinyl, some coroplast blanks, some stakes, and set himself up to make some money. Granted, his cost on those signs is probably in the neighborhood of $8 apiece — or, he might think it’s $3 if he wants to believe some of the people out there shouting “get into the sign business now — it’s a gold mine!”  But, his $12 profit won’t get him very far except as funny money on the side.

It amazes me that even in our industry, a solid industry of hard workers, intelligent people, with a long track record of advertising businesses around the country and making them more profitable, we have hawkers setting people like this up with false expectations and high hopes. There is a lot of money to be made in this business, but it’s not by undercutting and devaluing the industry as a whole. We have to stand up for ourselves, and make a fair profit on our work, or there’s no point in us being in business at all.

If I sound like I’m on a soapbox, I am. This one issue is the one I’m most passionate about and long after I’m gone, I hope the impact I have on the sign industry is to help raise the floor for everybody and bring us all to a for-profit mentality. There is no reason in the world that we shouldn’t be able to sell coroplast signs for $50 and charge for the stake as well.

Why are we in this business anyway?

1. We love it! We eat sleep and breathe signs, we love beauty in advertising, and we’re passionate about this.
2. We want to be our own boss.
3. We want to make better money than if we had a “J.O.B.” — “Just Over Broke.”

Number 3 is where the profitability piece comes in. Neglecting profitability, and undercharging for work, hurts us, hurts the industry, and hurts our futures. Being in business for ourselves gives us the opportunity to retire early, and were throwing it away when we undercharge. Every time we undersell our work, we are incrementally giving away our retirement, our health care, our vacations, and our futures.

As promised, here’s the math

OK, so you’re selling a 4′ x 8′ sign with basic vinyl lettering on it for about $250. You should be making about 100 bucks on this sign, if you’re pricing your work correctly. Now let’s play with the price.

If you cut your price down to $200, yes, you’ll be more likely to get the job. However, that customer is going to come back and expect the same sign for the same $200. If you raise your price, you’ll lose the customer — not because you are too expensive, but because you set their expectations too low the first time you sold them a sign. So now you’re stuck making half the profits you should be, which leads you to work the classic 10 to 14 hours a day in the sign business!

Think about it. By cutting your profits in half — remember, profits are really the only money you’re making — you now have to make twice as many signs to make the same money! You’ve doubled your workload for the security of getting that job.

Now let’s go the other way. If you raise your price to $350 you’ve done the opposite. You now have to make half as many signs (read: get half as many jobs) to make the same amount of money, freeing up gobs of time to chase down more profitable work and really bank some profits. So now, instead of being completely snowed under by work and unable to spend any time with friends and family, you’re spending your time chasing down valuable work and going home at five o’clock. There are thousands of sign makers out there doing this every day who will back me up.  Not getting every bid is a good thing.  Actually, here’s a rule of thumb: for every bid you win, you should lose one too.  If you get more than half the jobs you quote for new customers, you’re too cheap.  If you get less than half, improve your sales skills — your prices are good.

An EstiMate Success Story

My friend and longtime EstiMate user, Glenn Taylor, told me a story nine years ago — this was in 2001, so think about what signs were selling for then — about selling the 4′ x 8′ sign described above for $750. That is not a typo. It was a basic 4′ x 8′ vinyl sign, and he sold it for $750. What expectations did HE set in the customer’s mind? Using the math above, he made about $600 profit on that one job.

That’s the kind of money we should all be making on our work. I grew up in my mother’s sign shop, and I remember her selling signs in the 1980s for the same prices they are being sold for today. According to the measuring worth website $250 in 1985 dollars should be worth $500 at minimum today. Yet we are still selling 4′ x 8′ signs for $250.

It’s really time for a wake-up call and for us to start standing up and charging what our work is worth.

From now on, whenever you hear me use the word “profitability,” just insert this entire article instead of that word. This is what I’m really talking about.

Please Comment

I really welcome your thoughts on this and would love to have this evolve into a profitability discussion.  Please leave your thoughts below.

Now go out and make the rest of 2009 the most profitable year ever!