Memo From Frank
The Holiday Season is here again. What do the holidays mean to you? Probably a chance to be with friends and family, as well as to shower them with gifts. But what if there was a way to spend more quality time with your family the rest of the year, as well as provide them financial gits year-round? That’s what having an extra income stream can mean, and billboards are a great way to create that additional piece of financial security. Just ten billboards can create around $25,000 to $100,000 of income to you per year, and that can make or break your ability to pay for college, buy a bigger house, and go on higher-quality vacations. So maybe what you should wish from Santa this year is the start of your billboard portfolio?
How To Turn This Ugly Thing Into Your Kid’s College Tuition
Most Americans look at something like this and think “what an eyesore – why don’t they take that down?” But the truth is that the rusting piece of metal and wood that you are looking at is a very valuable room-mount billboard, built circa 1960. And, in the right hands, this piece of junk has the ability to pay your kid’s college tuition. How is that possible?
Basic economics of a billboard sign
Most signs have two sides. A sign inside a major city can rent for $5,000 per month down to around $1,000, and one in the country can rent for $500 per month down to about $200. This sign on a roof, shown in the photo, is located inside downtown St. Louis. It would rent for probably around $1,000 per month per side. The expenses on a sign include ground rent, installation of the advertisement, electricity, insurance, property tax, and repair and maintenance – which is typically around 40% of revenue. So, in this example, the sign would have $24,000 of revenue and a net income of around $14,400 per year. That’s a huge income stream from just one sign.
Low initial investment
This abandoned sign on the roof could be bought for probably $5,000. Some abandoned signs can be taken over for free if you start paying the landowner rent (that’s because when a billboard has not paid rent, the landowner can often make it theirs through abandoned property law). You can also build wooden signs are a few thousand dollars, and you can buy old steel 8-sheets for $1,000 or less. There is no other thing you can invest in that has that low an entry point.
Huge upside potential
In this example, the sign on the roof has a 300% per year annual return on investment. CDs, by comparison, pay 1% on your money. That means that the billboard could produce 300 years of income in one year as compared to the Certificate of Deposit. And, on top of that, billboard rents have been rising across America an average of 10% per year. So the net income of billboards, in most markets, goes up each year simply through rising rents.
Easy to understand rules
There is no lower-tech industry than billboards. The business model has remained unchanged for over 100 years. The business is all about finding legal billboard locations – or signs to acquire – and then matching those locations up with the right advertisers. It’s a win/win business in which the landowner, advertiser and sign owner all succeed.
And the business model is protected by the Federal Government
Few Americans realize that the billboard industry is one of the last ones regulated by the Federal Government. Stemming from the Highway Beautification Act under LBJ, the U.S. government oversees the permitting of billboard locations throughout all 50 states. This has two positive effects. One is that it keeps the supply restricted, so billboard rents and values always remain high. The second is that it offers legal protections for sign owners against state or city aggression in trying to get signs removed. The only other major industries that have been regulated by the government are airlines and trucking.
While the average person sees no value in a rusted sheet of metal and wood on a roof, a smart investor sees potential to make significant money. The billboard industry remains unknown to about 99% of Americans – and that’s a good thing if you are in it.
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How Many Crazy Things Can You Spot In This Photo?
This billboard has a number of unusual features, most of which would be missed by anyone who is not in the billboard business. So how many crazy things can you spot in this photo? And why is it like that?
The first one is pretty obvious – the advertisement is upside down. But why would an advertiser do that? The answer is that, years ago, there was research on how to make a customer read a billboard and one method was to put the ad upside down. You still see that, in most cities, in the form of the Kwik Wash Laundry signs. The big problem with this concept, of course, is that it’s really hard to read an upside-down sign.
Fake greenery attached to pole
What is that strange vine growing up the billboard pole? That’s not a real vine. Nothing in nature grows like that, and certainly can’t adhere to a metal pole. Instead, the billboard company has glued that vine to the pole to block the ugliness of the structure when seen from the ground. This is a common area of focus for many sign companies: how to make the billboard pole blend in better with nature. Some people paint them brown or green, others encase them in brick or stone, and still others do things like plant shrubs at the base or even glue fake veins to the pole.
3 lights instead of 1
A typical 12’ x 24’ sign like this would have only one light fixture on it. But this one has three. Why? Evidently, the sign company is trying to make the ad extra bright, probably to maneuver a high amount of ambient light in the area, or to compete with other signs that are equally over-illuminated. All signs battle to “keep up with the Jones” and have to modulate their brightness to that of their competitors. The problem with three lights means three times the power bill.
The average person would see nothing unusual in this photo. But a billboard person would see lots of strange items to discuss.
How Combining Advertisers Can Create Powerful Ad Revenue For Your Sign
You typically expect to see one advertiser on each side of a billboard. But sometimes that’s not the best way to rent the ad space, or maximize the value for the advertiser. So what can make “combining” advertisers a good idea?
Reduces monthly cost
When you put two advertisers on one sign, you have effectively reduced their cost by 50%. This is a huge item for every advertiser, as money spent on a single billboard is money that is not there for other advertising options. When you drop the rent by 50% to the advertiser, the demand goes up phenomenally, and it is much easier to rent a billboard for $500 rather than $1,000 per month. Clearly, this is a no-brainer.
Enhances value to the advertiser
Every marketing cost is carefully scrutinized by the advertiser, and to make sense of spending money on a billboard, the sign must pay for itself by selling enough product to more than cover the cost. By having a lower price, there is a commensurate lower hurdle for the sign to perform, making your job much easier, and the advertiser’s retention much higher. Some businesses have great difficulty making sense of spending big money on a sign, but can make the numbers work at half that cost. It definitely increases the potential sea of users.
Sometimes the sum is more powerful than the pieces
In certain cases, the sum of two advertisers is more powerful than one. The best example is combining a gas station and a restaurant on a sign. Typically, when travelers need to get gas, they also stop to eat. By combining these two, you make motorists more likely to exit, since they can get both issues solved at one exit. The most common combinations that have extra power are a gas station and restaurant, a motel and a restaurant, a tourist destination and a restaurant, and two tourist destinations.
But make sure they share a common exit
One of the most important components to a successful “combo” sign are that both advertisers share a common exit. It’s simply too difficult for the driver to remember two divergent exit directions. By placing both advertisers at the same exit number, it eliminates any such problem.
And don’t get more than three on there
But don’t be thinking that the key to filling any sign is to simply put 10 advertisers on there for $100 per month. These type of signs don’t work with more than three. The reason? You can only get three logos on one sign and have them still big enough to be legible. So while this is a great idea, it definitely does have limitations.
Sometimes the best things you can do to get a sign rented and renewed every year by happy advertisers, is to put more than one on a single sign. These “combo” signs often have a power all to themselves that is greater than a standard billboard.