New to Sign Industry - Need Advice

[N_I_N]

My first post - and it's a long one. I'm excited to be here. Bear with me please...

I have a background in Enterprise IT. Growing up my dad owned a sign company. He did the old way with 1-Shot and a brush and a boom truck. I was surrounded by the business and loved the creativity it afforded our family. I spent my youth beside my dad in his shop copying him and drawing while he painted beside me. As I grew up, my dad taught me hand lettering. As a teenager, I spent summers hand lettering shrimp boats and yachts for extra money. I would love to bring the family name back to my city. I still notice most every sign along the way and think about what it might have taken to create it. I know a lot has changed since then... but I still love it.

I have become bored with IT, and I'm interested in getting "back to my roots" and using my penchant for technology together with my love of the sign business.

I am looking at buying one of two existing sign companies. One is a locally started family operation - the other a franchise.

Family Company
Does around $400k a year in sales with about $300k of that profit after COGS.

However, it's overhead is around $275k per year. This is with 3 staff including the owner who is taking a salary. The other 2 are design and production respectively. The owner has pretty much checked out, and is unmotivated and not pulling his weight in my opinion.

Printing Equipment is Mimaki 2007 vintage (Printer, Laminator, and separate Cutter) (Mimaki also) and includes a pickup truck as well.

Franchise
Does around $250k a year in sales with about $160k of that profit after COGS

Overhead is around $120k with 2 staff (production and design).

Printing Equipment is Roland with integrated Printer/cutter that's newer 2010-ish? a new-ish laminator is included as well...

------------------------------
BOTH COMPANIES ARE OFFERED AT THE SAME PRICE
------------------------------

One one hand, I like the local place because I would have the freedom of my own brand. The facility is also larger (over twice as large) with an air conditioned garage bay so I might be able to do vehicle wraps as well. But there are no real documented procedures, and it would be a steep learning curve. I would be at the mercy of the two employees and forums like this to help me along. I also worry about the high overhead they are showing on the books. I would need to slim down about $40k per year out of that to get to the same profit ratio of the franchise. But that cold be the owner padding some benefits in the books as well...

On the other hand, the franchise offers structure, processes, and a proven formula for success (I realize my mileage may vary and it's up to me to beat the street). But a facility half the size, that would require moving to expand. Obviously less branding freedom since I would be bound by the rules of the franchisee.


I'm torn... the numbers are better on the Franchise, but I don't know if I will enjoy being in the "box" of the franchise per say. I also wonder if I will be unsatisfied once I get the hang of it and yearn to be outside the box.

But the other has the sales if I can get the overhead down...

What are the questions I should be asking of these guys when I meet with them? Am I crazy for doing this? Will I be in over my head? Being from the technology field, I can learn things very quickly. I tend to "geek out" when I'm immersed in something and just absorb all the knowledge I can about something. I know I can learn this stuff. I just don't know which option to go with.

Any advice is greatly appreciated.

 

[Techman]

I can learn things very quickly. I tend to "geek out" when I'm immersed in something and just absorb all the knowledge I can about something

Both are a waste of time for now.

90% of the sign business is practical knowledge gained over a period of years. You cannot buy yourself a sign job.

 

[AzGene]

Judging by the questions you are asking you are not any where near qualified to own a business. It seems this is an emotional attraction for you rather than a logical financial decision. While this board can offer a wealth of information for those in the business it cannot give you sound advice in this kind of financial matter. What you need here is a CPA and an attorney if you are intent on pursuing this endeavor.

 

[BobM]

You have the "itch". A time in life when you look around to see if "is this what I want to do the rest of my life" question pounding on your brain. There are a lot of "questions" in your post. The two questions you need to answer are 1: Did I learn and retain enough knowledge of my fathers business and skills to be able to design and produce good signage, 2: Do I have enough business knowledge to buy and operate a business. I would recommend that you go this web site about Ted Burbank: http://www.bizbooksoftware.com/AboutTB.htm, and buy any of his books about buying/selling a business. You will learn from him the questions you should be asking, the information you need to have to make a good "business" decision, and how to go about the process of analyzing everything. Ted Burbank's books bring the process down to level that anyone can understand, without the emotions of sales people telling what a great deal it is. Best business investment I ever made was buying his books and gaining an understanding of the buy/sell process and emotions. Good luck with your life changing search.

 

[John Butto]

The franchise, they will help you out with training and learning the sign trade. Go for it and good luck.
On a side note, one guy on here posted last week he is selling his sign business and moving out to the woods with his family and everyone gave him kudos for trying a new lifestyle. You on the other hand want to jump in the fray and come out of the woods and they give you roadblocks. Maybe that tells you a little something about the sign industry.

 

[N_I_N]

Thanks for some great answers. BobM, I will check out the books you suggested. Techman, I have news for you; people buy businesses every day (even sign businesses) with no experience in that field and succeed and thrive. I'm no stranger to business ownership. I've been in IT since 1998. But I started an IT consulting firm from scratch, years later I sold it for $500k. I've been sitting on that money for a few years (which is where I'm getting the cash for this business) while working for the man. I've lived on my own since I was in the 10th grade and I worked for everything I have - nothing has ever been given to me - I had to work for it. I am a driven individual to my core. Everything I know about IT has been self taught - not a single day of college. I'm currently responsible for a highly available 24/7 data center that runs the infrastructure to a nationally known business chain.

My wife is a Commercial Banker, and deals with valuing businesses all day long during the underwriting process. The numbers are tangible and easy to run to get the better option. But business is not always about numbers - there are intangible things that make a difference. What I hoped to gather from this forum is what are the intangibles I'm not considering?

While we are recommending books - I liked the E-Myth (http://www.amazon.com/books/dp/0887307280) - it changed my whole perspective on owning a business. If you have not read it - BUY IT TODAY. It's only a few hundred pages and I finished it in a few days.

I have no doubts about my business acumen, nor do I have a doubt about succeeding in this endeavour - I would not risk it if I weren't pretty sure about that. What I had hoped was for some answers from folks in a franchise situation (or experience in). As well as those on their own about the benefits and drawbacks of each possibly that I'm not thinking of. I included as much info as possible to give an overall picture of both situations -but in a forum situation there is a fine line between giving enough info and writing so much that nobody will bother to read the post and I had to balance that.

Thanks again for your time.

 

[striper14]

I'd go for the family one..sounds like you have the talent for brushwork ( not one of mine unfortunately ) & you are 'puter savvy so it shouldn't take you long to get it figured out & you've got 2 staff to help you. But I'm not a franchise fan so i'm probably a bit one eyed..

 

[studebaker]

Please, don't fall for the franchise business... Too many hidden fees and irritating "Do it our way" or else threats.

The family business with the owner not pulling his weight, has people that can handle just about anything from experience.

PS Give them a raise when you buy the company! It'll double productivity.

 

[Gino]

Welcome from PA........................

 

[AceSignsOnline]

I say screw any negativity you might hear from these forums and dive right in. It's your money. Your dreams. As long as you're making the most informed decision you can make, then you should go for it.

If it were me, I'd go for the family business. Then again, I'm not one to be bound by any rules or protocols other than the ones we set for ourselves. Plus you can cut corners or expand how you see fit. Not to mention, you could probably talk them down another $100k. At least I would.

Also, a lot of people in this industry like to pretend that there is some magical art to making your typical signage these days. But it's pretty damn simple, and don't let anyone tell you otherwise. Obviously, there will always be things that are only learned with experience, so it would probably be a good idea to meet with the current staff and do your best to gauge their worth in that regard.

Just make sure to take some common sense with you. Best of luck!

 

[signguy 55]

Unfortunately, you don't need to know the sign business to be in the sign business. The franchises know this. Does the Subway owner make the sandwiches? No, he or she hires good managers and good employees and many own several locations. All they are concerned with is the bottom line and can tell you how much each sandwich costs them to make, down to the penny.

I know of a husband and wife that bought a sign franchise, they had no idea what a piece of coroplast was. He had been in construction. The franchise guy stayed with them for about 2 weeks and then left it with them and some overworked employees. If the corporate guys don't care about sign talent that speaks volumes. All they care about is the business doing it "their way" and paying the franchise fees. You could turn out crap for signs and they wouldn't care.

Even if you wanted to be hands on, at some point your business would hopefully be big enough you couldn't do it all yourself. Mentally you would be mush if you tried. (Don't even think about free time or family time) At that point all you may get to do is approve everything that goes out the door. I guess that would mean you're "successful". Now you're a owner / manager, not a production worker. Good luck.

 

[N_I_N]

"a lot of people in this industry like to pretend that there is some magical art to making your typical signage these days. But it's pretty damn simple, and don't let anyone tell you otherwise.

I completely agree in many cases. Obviously we would all like to put out signs that are considered art but it's not realistic - nor is it what I imagine the client wants in all cases. They might just want a sign that says FOR SALE. I think for me I see the challenge will be doing a FOR SALE sign that looks like something I would be willing to pay for. A sign that stands out from other FOR SALE signs, and would make the customer say, "If they can do that with a simple FOR SALE sign, what could they do with this other sign I'm thinking about.


Also, something I learned from my consulting company - never underestimate the power of follow through. I cannot tell you the amount of repeat customers (as well as loyal customers) that have told me that one of the things they value most, is that if I say I'm going to do something - I do it without them having to remind me. If they send me an email or call me, I respond or call them back THAT DAY.


I cant tell you how often I heard, "The company I'm with now is great - if I can ever get them to call me back."

 

[Gino]

I completely agree in many cases. Obviously we would all like to put out signs that are considered art but it's not realistic - nor is it what I imagine the client wants in all cases. They might just want a sign that says FOR SALE. I think for me I see the challenge will be doing a FOR SALE sign that looks like something I would be willing to pay for. A sign that stands out from other FOR SALE signs, and would make the customer say, "If they can do that with a simple FOR SALE sign, what could they do with this other sign I'm thinking about.


Also, something I learned from my consulting company - never underestimate the power of follow through. I cannot tell you the amount of repeat customers (as well as loyal customers) that have told me that one of the things they value most, is that if I say I'm going to do something - I do it without them having to remind me. If they send me an email or call me, I respond or call them back THAT DAY.


I cant tell you how often I heard, "The company I'm with now is great - if I can ever get them to call me back."

You're serious, huh ??

You want to re-invent a For Sale sign ?? So, it brings in work down the road ??
Do your best job each and every time and you'll bring in all the work you can handle.

Learning a basic rule in any business or just in plain life cannot... and should not be considered something your learned in some office as a sudden burst of good thought.

You either know your business or you don't. Customers will very quickly see through any pretending on your part, no matter how quickly you get back to them.

Did you ever stop to think, if you get back to them so quickly and give them all your attention, they just might...... ju-st might think you don't have much else going on ??

I have a saying and most of our customers know me for this one...... Someone is always gonna be first and someone is always gonna be last. I'll try to get back to you as quickly as I can in the middle somewhere. You can't be any more honest than that. Some people will wait a few hours and some wait a few days. I don't have a secretary to do this and none of our customers expect any better treatment than another. It's a first come first serve kinda deal. Some things like codes officers or Police departments will get some special treatment, but that's about all. If customers can't wait a small amount of time, then I guess they didn't plan their schedule all that well and waited til THEIR last minute. That's on them and I don't feel very much like saving people's butts all the time. I want good paying customers and that kinda eliminates last minuters.

 

[HDvinyl]

I don't have a secretary to do this

Wait, your secretary doesn't type your posts for you??

 

[Gino]

Wait, your secretary doesn't type your posts for you??

Nah........ we had to fire her cause she was always looking at porn and asking the customers embarrassing questions.

 

[N_I_N]

You're serious, huh ??

You want to re-invent a For Sale sign ?? So, it brings in work down the road ??

Obviously I was using a FOR SALE sign as an example. My point was to treat every job as an opportunity to please the customer and stand out from the crowd.

As far as callbacks go - in the IT business it's a top priority. Why? When somebody's server goes down - in most of my customer's cases their businesses stop functioning.

We typically had 4 hour support on all customer servers. That means that when a part breaks - there is somebody there (with the replacement part in hand) within 4 hours. When you are down - it cannot come soon enough.

Obviously in the sign business things are not that desperate - but as a customer I can tell you, I have never once felt like a vendor does not have much going on because they call me back quickly. I consider that good service plain and simple. I think most people would agree.

That desperation is actually one of the reasons I'm leaving IT. As I type this I'm looking at one of my monitoring screens that has a ticker that starts counting the dollars it's costing the company when an outage starts. It goes up in $1000 increments every second we have a full failure of service. I'm looking forward to a life where a failed hard drive does not cause my phone to rattle at 3am.

Thanks again guys for all your input. I do appreciate it. I look forward to being able to help YOU guys out too on the technology front.

 

[rfulford]

Forget about the equipment and employees and unless the building is for sale with the business, I would forget about that too. You are buying the client list, the name and the reputation of the company. Since neither business is raking in the dollars, I think you would be better off to start from scratch. You can start with new equipment and with as much or little overhead as you want. Seems to me like you already have a name and reputation that can be revived.

If you would prefer to start with employees and clients in your pocket, The family business seems stronger to me since they are selling the jobs at a 75% gross margin whereas the franchise is selling at 64%. You will need to analyze where most of the overhead is going and adjust accordingly. Are you planing on keeping the owner around? Sounds to me like he needs to go and his salary subtracted from your overhead. The franchise looks stronger because they have a 16% net margin vs the 6.25% net margin of the privately owned company. Lets assume however that the owner pays himself $50k a year. Without the owner, the net margin for the larger location jumps up to 18.75%.

 

[N_I_N]

Forget about the equipment and employees and unless the building is for sale with the business, I would forget about that too. You are buying the client list, the name and the reputation of the company. Since neither business is raking in the dollars, I think you would be better off to start from scratch. You can start with new equipment and with as much or little overhead as you want. Seems to me like you already have a name and reputation that can be revived.

If you would prefer to start with employees and clients in your pocket, The family business seems stronger to me since they are selling the jobs at a 75% gross margin whereas the franchise is selling at 64%. You will need to analyze where most of the overhead is going and adjust accordingly. Are you planing on keeping the owner around? Sounds to me like he needs to go and his salary subtracted from your overhead. The franchise looks stronger because they have a 16% net margin vs the 6.25% net margin of the privately owned company. Lets assume however that the owner pays himself $50k a year. Without the owner, the net margin for the larger location jumps up to 18.75%.

Yes the owner (and his salary) would be going after 4 weeks. I did see the numbers you referenced even out by removing his salary when I was running them. I thought about starting from scratch, but they have been around 15+ years and have a huge client list. Also they are top 5 in a Google Search for a large metro area they are in. I know from starting my last company from scratch - it's not easy to get on the front page with really basic keywords like "[cityname] signs" or "[cityname] wraps" etc. and those results will keep the phone ringing which is much of the battle.

I think at this point I'm just going to have to see which one is willing to negotiate more - but I prefer the family one myself but only if the price is right.

 

[AceSignsOnline]

Obviously I was using a FOR SALE sign as an example. My point was to treat every job as an opportunity to please the customer and stand out from the crowd

It isn't rare for me to have to remind the folks in our graphics department that they can be artists on their own time, because they often drag their feet on getting layouts and file prep done. But I also understand what it means to be proud of your work and present an attractive product. It's hard to define where that fine line is. Fortunately, most of our clients provide their own artwork and it's a non-issue, although I'm never surprised when their submitted artwork is a JPEG pulled out of their website header. Bottom line is that time is money, and it's important to charge accordingly without pricing yourself out of jobs.

 

[Techman]

I have news for you; people buy businesses every day (even sign businesses) with no experience in that field and succeed and thrive

Yes some purchase a business and thrive. But only under one condition. The condition is they have the capitol to maintain themselves until they can thrive.
And, I have news for you.. 25% of businesses fail in the first year while 80% of all businesses fail in the first 2 years.

And more. Many of us have been around operating as a business for decades and can spot certain profiles that will succeed and those who need more time.

This poster asks questions that leads one to think he needs more time to understand a business, evaluate a business plan and how to evaluate potentials other than using the opinions from the posters off a website. Nowhere did he mention reading the existing business plan or asking about one. Or if in fact the existing business even has a plan.