Billboard Monthly

October, 1st 2012

Memo From Frank

The number of vacant billboards keeps getting smaller here is southeast Missouri. A few years ago, when the national economy collapsed, there were vacant billboards everywhere – often 4 or 5 in a row. Now there are a rarity. Why is that? If you look at the ads, you will see that the advertisers have transitioned from national accounts to local accounts. Of course the local advertisers pay less, so what has really happened was that the prices have been lowered to the level that local advertisers can afford. This is a very predictable cycle in billboards – signs go from local to national accounts during booms and back to local during busts. So what’s the point? The point is that you should always run your budgets based on local ad rates. That way, when times get tough, you are still on budget. If you build or buy signs based on national rates, you will be under-budget probably half the time. Be conservative and save yourself a lot of grief.

Which Do You Think Would Be Easier?

So you’ve found a legal location to build a billboard, signed up the ground lease, and are ready to start planning construction. But where do you get the money from to build it? This is a problem that every billboard owner has faced, whether it’s Clear Channel or somebody’s first sign. So here’s a rundown of the options out there today: I was looking through a book published by US Today called Retire Happy. In the book, there’s a calculator of how much money you need to retire on. To maintain an income of $50,000 per year, the book says that you need $1,250,000 in the bank. So which do you think would be easier to obtain in order to make $50,000 per year: save $1,250,000 after tax or build 11 wooden billboard signs for about $55,000? If you said save $1,250,000, then my hat is off to you for being an excellent saver. But for most people, by far the easier choice would be to build 11 wooden billboards.

How much would you have to earn to save $1,250,000?

Based on tax rates, you would have to earn about $2,000,000. If you earn $50,000 per year currently, you’d only have to save 100% of your earnings for 40 years – that’s not asking much is it? If you earn $100,000 per year, you’d only have to save 100% of your earnings for 20 years. Sure, that’s not hard to do – you can always just live under a bridge and eat a bowl of ramen a day (of course it’s hard to keep your $50,000 to $100,000 per year job while living under a bridge.

The wooden sign alternative.

Or if you prefer living in a house, driving a car, and having a good quality of life, then maybe you need to look into billboards. For sheer cash flow, nothing beats old-fashioned wooden billboards. And this goal is infinitely easier to reach in a far shorter span of time.

How do wooden billboards work?

The billboard industry began with wooden billboards and the process is simple. You find a legal location in a more rural market – but with enough retail and infrastructure to have an advertising base of businesses – and you negotiate a ground lease and build a billboard out of wooden telephone poles, 2” x 4”s and plywood, for about $5,000. Then you rent the advertising space for around $3,000 per year per side. You install the advertising vinyl and your job is done. Here’s what the economics look like:

Revenue: $6,000 per year

Ground rent: ($900) per year

Insurance: ($250) per year

Property Taxes: ($50) per year

Repair and Maintenance: ($200) per year

Net Income: $ 4,600 per year.

So, basically, your return on investment is nearly 100%

What can go wrong?

Plenty, if you don’t know what you’re doing. The sign has to be in a desirable location – not the middle of nowhere. You need to know how to rent advertising space (and not just put your phone number on the sign and wait for the phone to ring). You’ve got to make sure that the sign is built properly. And you have to be able to find legal locations to build them on. But you can learn all those things a whole lot easier than learning how to save $1,250,000!

Conclusion

Unless you are a genius at saving money, you are better off just to enjoy your life and build 11 wooden billboards for your retirement.

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Billboard Immortalized In Oil

I found this painting in the new Chicago Museum of Modern Art. I always enjoy seeing billboards as a part of American culture. Of course, Chicago is also the start of Route 66 – which began just about a mile down the street – so Chicago itself is a home of many famous billboards (as well as some of the highest rates in the U.S.).

A Billboard Story

When I bought an abandoned billboard on Interstate 45 in Dallas, it had an ad on it for the Earl White Band. I always wondered who Earl White was, so recently I looked him up on Google. The ad on that sign had been on there since 1955. So how can a billboard sit vacant for 35 straight years? It probably was the location. The billboard was in one of the toughest neighborhoods in Dallas, directly behind an old hotel that was the home to drug dealers, hookers and vagrants. When we had to paint the sign, I had to hire a security guard to protect the painter. Even with the security guard, the painter – and the security guard—were robbed at gunpoint one time. But the good news was that the cars passing by didn’t care what was under the sign, just what you could see of the sign.

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   10 ways to always find an advertiser – even in the recession.
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