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2014 Electric-Sign State of the Industry Report

Study resurrected after three-year hiatus

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It’s been awhile. Our last published Electric SOI Report appeared in our July 2011 issue. That survey, as had 15 years or so of predecessors, had been professionally administered by Smyth Marketing Resources. Costs finally brought it and the companion CAS/Commercial SOI Report (which will similarly be revised next month) to an end.
       But I hated the lack of subsequent data, so I decided to revise it. I used Survey Monkey, and we e-mailed all of our subscribers who describe themselves as primarily electric-sign companies. We received 140 total responses, but, as you’ll see, the number of responses for each question varies. Many we discarded because we didn’t want responses from companies who achieved less than 50% of their sales volume from electric signs. Similarly, we discarded responses from companies who sold more than half of their signs on a wholesale basis, because we didn’t want data from wholesalers. That would essentially mean duplicate data.
       Consequently, most of our questions elicited useable responses in the mid 50s. This pales in comparison to the 170 responses we achieved in the last 2011 study. Therefore, this year’s results won’t be compared in table form with those of prior years because the methodologies are completely different, and the data validity is similarly distinct. We won’t pretend this year’s data is as “good” as previous data, but we firmly believe a snapshot from current companies is still significantly better than no data. Because even the federal government doesn’t comprehend the existence of an on-premise sign industry (the closest North American Industrial Classification System [NAICS] code, 339950, is still too distant), we believe it’s important for some entity to produce some statistics.

Sales

Tota respondents: 73

Respondents’ Average Sales:  $4,219,376

Total Sales: $308,014,468

From these 73 responses, we received feedback from companies with an aggregate $308 million in sales, which means the average respondent had $4.2 million in sales in 2013. Seven of the respondents (9.6%) had sales of more than $10 million, with the largest respondent at $41 million. In the last Electric SOI, we had a higher percentage of larger companies, with 17% having sales in excess of $10 million. Thus, the average respondent from the last survey had annual sales roughly 50% higher, at $6.1 million.

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Number of Employees

Respondents: 55

Average Full-Time Staff: 33.4

Average Part-Time Staff: 2

Our 55 respondents have an average of 33 full-time employees and two part-timers. This is roughly similar to the results from the 2011 Electric SOI, in which companies reported an average of 36 employees. The biggest company reported 250 employees, and three others had 100 or more.
       One respondent reported zero employees, which strongly suggests someone who is a sign broker. (Subsequent data will also support this thought.) Ideally, we wouldn’t include someone like that because then all of their sales would theoretically be reported both by the broker and the fabricator. We haven’t always reported on part-time employees, but eight years ago, the average was approximately one (with an average sales volume of $6.5 million), whereas this year’s respondents report an average of two. 
       For the general U.S. economy, one might assume part-time employment has increased as companies strive to avoid the mandates of The Patient Protection and Affordable Care Act. However, the U.S. Bureau of Labor Statistics states that the seasonally adjusted average figure for part-time employment for May 5, 2014, 18.7%, is the lowest since the peak of 20.1% in June 2010.

Sales-Volume Change 2012 to 2013

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Total Respondents: 51

Average Change: 9.65% Growth

Increasing Sales: 34

Unchanged Sales: 8

Declining Sales: 9

Our respondents said 2013 was a good year, as exactly two-thirds said their overall sales had increased from 2012. Only 15% experienced a decline. Thus, overall, the average electric-sign company saw its 2013 sales volume increase by nearly 10%. If this truly represents the on-premise sign industry as a whole, it would be the best average sales increase since the economy went south in September 2007. The Electric SOI for 2006 reported an average sales increase of 12.3%.
       One company reported a 100% increase (doubling) in sales. The next highest reported percentage was 45%. If we don’t use the 100% response, then the average sales increase drops measurably to 7.4%, which would still be a very pleasant result. We didn’t ask how long our respondents had been in business, so it would be relatively easy for a new company to double its sales. This particular company was one of the smallest. Its 2013 sales volume was $380,000, which means its 2012 sales volume would have been $190,000.
       Among only the sign companies whose 2013 sales increased, the average increase was 17.5%. (Again, if we take out the 100%-increase response, this figure is still an impressive 15%.) The eight companies that suffered a 2013 sales decline averaged a 12.9% drop. Consequently, the average increase overshadowed its declining counterpart. In the 2011 Electric SOI, these groups were roughly equal, as 42% experienced sales growth, and 39% contended with declines.

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2013 Profit Margin

Total Respondents: 49

Average Profit Margin: 13.0%

Of course, an increase in sales doesn’t automatically indicate rising profitability. Happily, though, in this report, it does. Our 49 respondents reported an average profit margin of 13%. We strongly suspect this figure is inflated, because the highest figure over the past two decades was 11.8% in 2006. The smaller the sample, the easier it is to have higher averages. One company reported an 85% profit margin, and another said 50%.
        The company that reported the doubling of its 2013 sales reported a 30% profit margin. The most common responses were 5% (6) and 6% (5). A significant limitation of these figures is that they aren’t weighted by the respondent’s sales volume. Thus, a $20 million company’s 7% profit martin is valued equally with the $380,000 company’s 30% profit margin.

2014 Profit Expectations

Respondents: 47

Average Projection: 16.3% Profit Margin

Because all of these responses arrived in late May, companies had a reasonable idea of how their 2014 would be. Thus, it justifies their optimism that their profit margin will increase from last year’s 13% to 16.3% in 2014. The actual figures aren’t as important as the expectation of improvement. The highest expectation is 50%, and everyone anticipates at least 2%, whereas three companies reported a 0% profit margin for 2013. By far, the most common expectation is a 10% profit margin (11 responses). Next are 15% and 30%, with five responses for each. Respondents could identify their profit margin by any whole number from 1-100.

Products Sold

Respondents: 54

Channel Letters: 32.3%

Cabinet Signs: 26.3%

Freestanding Main-ID Signs 19.3%

Electronic Message Centers (EMC): 10.8%

Backlit Awnings: 2.1%

Outline Lighting: 1.6%

Dynamic-digital signage (DS) 0.6%

Other: 6.6%

The next question is, what types of electric signs are they selling? Channel letters account for nearly a third of all electric-sign sales (32.3%), with cabinet signs accounting for more than a quarter of all sales (26.3%). Main-identification, freestanding signs are a fifth of electric-sign sales (19.3%), and electronic message centers (EMC) are half of that (10.8%). Dynamic-digital signage (DS) still hasn’t caught on with electric-sign companies, apparently, as our respondents didn’t even rely on it for 1% of all sales. 
       Every respondent said they sold a cabinet sign and a main-identification, freestanding electric sign in 2013. Only one respondent didn’t sell any channel letters. More than 90% of the respondents sold an EMC. Slightly less than 20% sold a DS project; one company said it accounted for 20% of all sales. The next highest percentage was 6%.
       We hadn’t asked this question since 2008, and some distinctions are noticeable (see ST, July 2009, pp. 68-76). We did change some of the options, but the core categories remained the same. That year, while cabinet-sign sales were essentially the same (25.6%) as this year, channel-letter sales were much less, at 25.3%. EMCs were little more than half (5.7%) of what they are now. Main-identification signs were measurably less (14.4%). “Other” was 16.7% back then. We suspect that, because those figures were from 2008, soon after the economy went south, electric-sign companies were scrambling to generate revenue in any way possible.

Electric-Sign Lightsources

Respondents: 54

LEDs: 58.4%

Fluorescent: 33.4%

Neon: 8%

How were those electric signs illuminated? LEDs’ domination continues to creep forward, as they now light a healthy majority of all electric signs (58.4%), while fluorescents have dropped to only a third (33.4%). Neon refuses to disappear (8.0%), even though neon suppliers have significantly burnt out. Every respondent uses LED and fluorescent light sources, and 20% still sell some neon signs.
       Just since the last Electric SOI report for fiscal 2010, the changes are significant. Then, fluorescent lighting barely outpaced LED lighting (41.3% to 40.1%), and neon held sway at 17.9%.
Earlier this year (see ST, March 2014, p. 76), we published our 2013 Lighting Survey. It asked this same question, but it had fewer responses than this Electric SOI report. Its results were quite different, with LEDs at only 40.9%, fluorescents even lower at 28%, and neon at a healthy 20.1%. We suspect the reality is undoubtedly between these disparate sets of figures, so LEDs are probably half of all electric-sign illumination; fluorescent is probably 30%, and neon should be near 15%. “Other” was 10.9% in the Lighting Survey, which automatically lowered all other percentages, compared to our Electric SOI figures.

Electric Sign Sales-Volume

Respondents: 63

Average: 77.9%

The adage seems to hold true; inside every electric-sign company, there’s a commercial sign company. We asked what percentage of sales were attributable to electric signs, and the result was 77.9%. We automatically rejected the seven responses that reported a figure of less than 50%, because we wouldn’t consider them as electric-sign companies. If we included the other seven companies, the percentage would have been 73.8%.

Percentage of Signs Sold with Digital Printing
Respondents: 54

Yes: 51

No: 3

Average: 25.8%

If companies are making money from something other than electric signs, they’re probably selling some non-electric (commercial) signs. And if they’re selling some commercial signs, they’re probably incorporating some digital printing, which primarily would mean banners and vehicle graphics. Of course, digital imaging is also used to decorate illuminated signs. Ten companies said they use digital printing on half or more of the signs they sold in 2013.
       Overall, 95% of the respondents sold signs in 2013 that included digital imaging, and more than a quarter of all the signs they sold (25.8%) utilized that technology. The 95% is significantly higher than in previous SOI reports; for 2008 through 2010, the percentages were 72.9%, 75.5% and 78.8%, respectively (see ST, July 2011, page 66, Table 6), so the upward trend has been continuous.

Equipment Inventory and Planned Purchases

Flatbed-Printer Ownership

Respondents: 52

Yes: 45 (86.5%)

No: 7 (13.5%)

Do electric-sign companies own a flatbed printer? Have they opted to skip a step and print directly on thicker substrates? For the most part, no. Only one of every eight respondents owns a flatbed printer. This figure is fairly consistent with the last three Electric SOI reports, which reported figures of 11.2% (2008), 19.6% (2009) and 12.9% (2010).

2014 Planned Equipment Investments

Respondents: 53

Average Investment: $109,644

Total: $5,701,500

Planned equipment investment in 2014 is off the charts compared to previous Electric SOI reports. The average is $109,644, or 3.5% of their overall sales. And this lofty figure includes 10 companies that said they didn’t plan to spend any money for equipment this year. In stark contrast, for the Electric SOIs from 2005-2007, the figures were all between $25,000 and $30,000. In 2007, the $29,000 represented less than 0.02% of sales.

2014 Planned Equipment Purchases

Respondents: 47

Crane/Bucket Truck: 25 (53.2%)

Software: 23 (48.9%)

Metal-Forming Equipment: 14 (29.8%)

Digital Printer: 11 (23.4%)

Router: 9 (19.1%)

Vinyl-Cutting Plotter: 8 (17%)

Laminator: 3 (6.4%)

Other: 23 (48.9%)

More than half of the respondents plan to buy some kind of installation vehicle this year, which certainly increases the average anticipated expenditure amount. Slightly less than half plan to invest in additional software. Three of every 10 respondents plan to purchase some type of metal-forming equipment, which is more than the percentages for such staples as digital printers (23.4%), routers (19.1%) and vinyl-cutting plotters (17%). Surprisingly, although this year’s respondents plan to spend four times as much on equipment, their percentages for types of equipment are very similar to 2007 Electric SOI figures. Cranes were essentially exactly the same at 53.1%. Digital printers and routers were virtually the same as well (23.4% versus 22.9%, and 19.6% versus 19.1%, respectively). Software purchases will be slightly higher (48.9% versus 43.6%).

Buying/Selling Electric Signs

2013 Wholesaler-Purchased Signs Sold Respondents: 72 

Yes: 53

No: 19

Average: 17.2%

Roughly three quarters of our respondents resell signage they purchased from a wholesaler. Wholesale signs purchased account for 17.2% of overall sales. Some figures were quite high (100%, 95%, 90%, 80%), which strongly suggests responses from sign brokers, but these were countered by the 19 companies that didn’t purchase any wholesale signage.

2013 Wholesaling Sales

Respondents: 67

Average: 4.4%

Slightly more than half of the reporting electric-sign companies (57%) wholesale signs at least occasionally. We received responses from companies that said 100%, 95%, 90% and 80% of their sales were wholesale, and we rejected these, because this survey wasn’t meant to include companies that primarily sell wholesale. We would have rejected any that reported more than 50%. Consequently, the average is only 4.4%. Two companies reported that wholesaling accounts for 30% of their sales.

2013 New-Customer Sales

Respondents: 51

Average: 26.9%

This last question is simply something we were curious about. We only asked this once before, in 2008, but we didn’t ask for specific percentages, only ranges. Then, 70% said brand-new customers accounted for 25% or less of their overall sales.

 

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