In high school, I was introduced to the concept of sign manufacturing. Today, the sign manufacturing industry is healthy and continues to see a steady increase in valuation year-over-year. Reason being, advertising expenditure and commercial construction spending continues to grow. Over the past five years, the industry has increased revenue at an annualized rate of 3.7%, leading up to December 2018.
There are currently 32,000 sign manufacturing companies in the United States. Each company employs approximately 3-5 individuals and has an average net margin of about 6.2%. With the current market, there has been an uptick in transactions in 2018. Most of the transactions have taken place in heavily populated states (i.e. California, Texas, Florida and New York). Due to the low concentration of any one company in this industry, small sign manufacturing companies tend to compete well, especially in niche products and services. As such, the total investment for starting a signage company or buying into a franchise is relatively low.
If you currently own a sign manufacturing company, consider the possibility of selling. The first step to selling your business is obtaining a business valuation. Over the past five years, I have provided business valuations for several sign manufacturing businesses across the country. To give you an idea of each of those engagements, I will list out some of the key factors used in valuing a sign manufacturing business. Keep in mind that the factors listed below are only a guide.
Market Multiples for Sign Manufacturing:
- 45.0% – 70.0% of annual sales
- 2.0x – 3.5x Sellers Discretionary Earnings
- 3.5x – 4.7x EBITDA
With a clearer understanding of what your business is worth, you can begin taking steps to increase the value of your sign manufacturing business prior to a potential sell. I will touch on 4 ways in which you can increase the value of your business. There are many factors to take into consideration, but this will provide you with the basis of what your company is worth and a few ideas to increase your company’s value.
If you are searching for a more extensive valuation, reach out to a valuation professional like myself.
1. Ability to Attract Local Support
Due to increased transportation costs for many of the industry’s product and services, most manufacturers draw their business from local businesses. Strong connections with local businesses help ensure continual support for your business.
I recently had the opportunity of attending a Business Networking International (BNI) meeting. There are over 240,000 members worldwide and local chapters near you. A local chapter like the one I attended helps members increase their business through a structured positive and professional referral marketing program that enables long-term, meaningful relationships with other local businesses. Such meetups can greatly benefit your business and lower your transportation and customer acquisition costs.
2. Product and Service Offerings
Sign manufacturing companies offer a variety of products and services. Through expanding to new products and services, you may potentially increase the value of your company. In order to expand your offerings, you can analyze the competition and research higher margin products and services that leaders in your market or neighboring market offer. You might also want to consider larger ticket items. However, if you are unable to offer additional products and services, you have the option to increase your service radius and compete in neighboring markets. By expanding a few extra miles and spending extra on marketing efforts, you may increase the number of engagements your company sees.
3. Train Employees
Sign manufacturing companies require employees to be efficient and precise. Employees are valuable to any business, but for sign manufacturing companies, employees are among the greatest asset. My brother once worked at a sign manufacturing company and realized he was not meant to work in such an environment. It is vital to hire qualified employees who express the desire to learn because it often takes time to train them properly. You can also cross train them in different products and servicing offerings. If anything, the investment made in your employees will move the business forward and may even result in a potential buyer being an employee.
4. Social Media Presence
A website provides the basis of an online footprint, but a majority of new customers rely on social media to inform their decisions. Knowing where to begin is easier said than done. Word of mouth is a great referral source, but business reviews on Yelp, Google and Facebook report on the quality of service provided. This builds your authority and credibility in your line of business. There are several robust online review software programs, designed to help local interaction. One of the services I recommend is Podium. Podium helps your business to stand out in the local SEO search by increasing exposure to your business through reviews, webchat and messaging. If you would like an introduction, feel free to contact me and I will introduce you.
Social media marketing is the ultimate way to building and maintaining relationships with your current and future customers. Not only can individuals talk about your products or services, but they can ask questions and write reviews. You in turn can recognize and show appreciation to the people who have helped you and supported you in business.
Understanding the value of your sign manufacturing business is important, regardless of any near future transactions. Even if you have not thought about selling your business, consider the future of your business; it is never too early to start planning. The first step in that process is a business valuation, which we are happy to provide you with.