Billboard Mastery Podcast: Episode 88

Forging The Correct Advertising Lease Length

One month is too short and a century is too long. So what is the correct lease length for your advertiser? In this Billboard Mastery podcast we’re going to review how the length of lease can vary with the type of advertiser and what is required to make the sale.

Episode 88: Forging The Correct Advertising Lease Length Transcript

Every advertiser is different, and you have to be flexible on their lease length. This is Frank Rolfe from the Billboard Mastery Podcast. We're going to talk about an advertising lease and how long the advertising lease needs to last. Because often, the length of that lease can predetermine whether that person will rent that sign, but it also will predetermine how often you have to go out and find a new advertiser. Now, in a perfect world, every billboard lease would be a decade or something, because that way we would only have to go out and rent the sign one time and then never even think about it again for 10 years. But clearly that's not going to work, because most advertisers will not commit to 10 years.

So then how much is the typical lease that most advertisers anticipate having to sign? And normally that's about a year. And yet some will not want to have a commitment more than six months. So the typical range of an advertising lease is six months to a year. However, there are some other things you need to remember. The first thing is, if you can get them to go longer than a year, it's a real winner for you as the billboard company. So it doesn't hurt to try to say, "Hey, I'll give you a discount if you go for two years or three years." I've done many three-year billboard leases, and it's great. It's empowering. It means you don't have to go out and try and find a new advertiser for almost the length of an entire presidential term. Also I find when people are on a sign for that long, for a three-year lease, often it becomes kind of an extension of their business. So it's much easier to get them to renew because, heck, they've been on there for three solid years, for over 1000 days.

But that's not always realistic for every advertiser to go for more than one year. Because many advertisers, they plan, they budget their marketing budgets a year at a time. So as a result, if you were to demand it, if you said, "Well, you have to sign up for two years or forget it," then you might not be able to get very many advertisers. At the other end of the spectrum, you really don't want anyone less than six months, because it's too much effort to find the advertiser and do the artwork and get it up on the sign for a period that is less than six months. So how do you get someone who wants to go shorter than six months to six months? Well, give them the option perhaps to cancel, but put some kind of hook in it. Like to cancel, they have to give you advance notice for 60 days or 90 days. And that means if they don't cancel for the first three months, well, they're in for the whole six months, which I've definitely done that before. That's one way to get someone who's never experimented with a billboard to at least give it a try.

So if someone says, "I can't do six months because I don't know if it's going to work for me or not, but I'll go for three." Okay, well, then you can maybe do three, but try and slide in. They have to give you some kind of advance notice that lasts for at least 60, 90 days, because that will typically get you to six months. And on the one year deal, try and make sure that it renews automatically month to month at the end of the year. Because many advertisers, once they get in the habit of paying that bill every month, they kind of forget about it. So you can often get a one year lease to run for two years or three years or longer.

Now, it's also important to remember that your key job as the billboard owner is to find someone who's ideal match for that sign. Someone who will prosper from it, someone who will sell enough goods and services to pay for the billboard. So if you match the right advertiser on there, they should last a long time. You don't have to force them to stay on. You don't really want to have a position where the advertiser says, "I don't want to be on your sign, it doesn't sell anything." And yet you say, "Well, you're stuck on there for 24 more months." That's never a good situation. Typically, when that happens, they're not going to pay you. So a good advertiser, well placed by the billboard company, can typically stay on a sign for a lifetime, potentially.

There are many billboards out there that have had the same advertiser on them for decades. There's a cavern called Carlsbad Cavern in New Mexico. They were on some billboards for about 50 years, renewing annually. They didn't sign initially 50 year commitments, but the signs did so well to bring tourists into Carlsbad Caverns, they just kept renewing them year after year after year. I talked to Carlsbad Caverns once. I was trying to get them to come off a billboard they were on and move over to my billboard, and they said to me, "No, we're not going to move over because here's the deal. When the guy that founded Carlsbad Caverns died, we left everything exactly as it was because it was doing so well. So we have no interest in canceling any of the signs. We're going to renew all of those forever. We're never going to move a sign, never going to drop a sign. We're just going to always keep those going."

So I guess the moral to it all is if you do a good job of finding the right advertiser, if you do a good job of coming up with good artwork that pulls a lot of customers, you do a good job of servicing the account and making sure that the lights are all working, if it's a lighted sign, then renewal should just come naturally based on the success of the sign. So you don't really have to obsess about how long that lease is. But yet there is one more component you do need to worry about. Typically, when you go out to build a billboard from scratch, you have to get financing. And often the bank is going to want to see a lengthy lease to feel good about loaning you the money, particularly in situations where you have to pre-sell the ad space to get the loan. In those cases, you need to probably get at least a one-year lease. Having somebody sign a month-to-month lease, even though they may stay on the sign forever, that's not going to work for the lender who looks at that and says, "Oh, well, I only have a one-month commitment, so I have no guarantee that this person will be able to make their note payment."

But work with advertisers. Try and get them the length of lease that they need. Feel welcome to go shorter if you need to get someone to test it out. Again, billboards work really well for most advertisers. They go up on them. They're happy with them. They're happy about the low cost. They're happy about the exit now feature. And as a result, most advertisers will stay on the signs for very long periods of time, regardless of what the lease may say. This is Frank Rolfe, the Billboard Mastery Podcast. Hope you enjoyed this. Talk to you again soon.