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Business Management

Goodbye From Money Matters!

Revisiting Cost Study 3, plus cost studies from a friend and competitor

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I’ve been writing this column for 34 months, nearly three years. This will be my last column. The original column encouraged sign-business owners to examine their profitability (internally, not externally). I received both questions and advice in response. I also discovered that the columns I simply wrote, not the ones that costed actual jobs, created the most interest.

My intent was never for people to imitate my way, but to encourage readers to review what they do, and, perhaps, share financial techniques. Please continue to do so.

I’ve drafted a company for this final column, and the owner graciously agreed.

Cost Study 3
Some jobs are exciting creations. Some fall short of the creations they replace. When the local Bubba’s franchise ended, it was required to replace the existing sign (created by Mike Jackson) that depicted Bubba’s franchisor in caricature. The Greeley sign code allows an annual change of 50% to the copy on a “legal nonconforming” sign. In order to meet this requirement, we reduced the sign size by 5 sq. ft.

However, the customer wanted to fulfill the contract requirements as cheaply as possible, so he chose to replace the 5 x 10-ft., framed, wooden sign with a standard-sized 4 x 8-ft. panel that reflected his new catering truck. We fabricated and installed this sign for $1,669, but we were given little leeway on design; we merely added a border of pinstriping and dingbats (the corner filigree).

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Costs included two, 4 x 8-in., Alumalite panels ($294), vinyl ($59.76), foil ($1.71) and application tape ($7.80) – all from inventory – for a total of $363.27. This leaves a contribution to overhead (COH) of $1,305.73. Fabrication time (not quite 5½ hours) included layout, two cutting runs (arranged to minimize vinyl use), foil print on the star, weeding and application. Installation time added 1.83 hours. So the COH per hour was $180.10, including labor.

Ever-increasing costs, combined with extra hours devoted to bids, regulation, chasing money and other non-billable activities, force our prices upward each year. This job was invoiced January 17, 2005, when our overhead was $48.39 per hour. Today, many individual costs have risen as much as 30%. Today’s price would be about 25% higher.

Cost studies from a competitor
Biltrite Sign Service (Evans, CO) has, for many years, been our closest competitor. Our shops had been only three blocks apart, and we bid competitively on many jobs. In fact, Cost Study 4 is one we lost to them. We also subcontract to one another when the job and/or the workload calls for it.

The original owner, Neil Clark, was an accomplished neon tubebender, among other talents. He founded Biltrite Sign Service in Greeley, CO in 1962. In 1971, when Kent and I quit teaching schoolchildren and became solely dependent upon our signshop income, Neil helped us tremendously.

In 1972, Neil’s son Lynn joined the business and became president of the newly incorporated Biltrite Sign Service Inc. by 1974. Second-generation sign craftsmen running their own shops, Kent and Lynn are good friends. After I joined Kent at the studio, and Lynn’s wife, Vi, became an integral part of his operation, the four of us raised teenagers as we witnessed the sign industry mature through the introduction of computers and increasing sign regulations.

Of the 17 shops operating in Greeley before the 1990 revision of the city sign code, only five remain. Only Smith Sign Studio and Biltrite Sign Service operate full-service shops and can create custom electrical work. However, we’ve reduced our staff and minimized our crane service, but Biltrite now has a staff of 10 under the leadership of Scott Riley, Lynn and Vi’s son-in-law.

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They are now housed in new, 6,880-sq.-ft. quarters in Evans, CO, a suburb more business-friendly than Greeley. Scott, who has a business degree, has used his marketing education to develop a sales-presentation sheet for the customer. This one-page format shows a photo of the proposed sign and concisely describes the work to be done (including sizes).

Cost Study 4
Simple, straightforward, reverse channel letters spell “Urgent Care.” Biltrite fabricated 10, 18-in.-tall (4-in.-deep) letters in its shop. The aluminum letters, painted brown, incorporate clear, polycarbonate backing and white, GE Illumination LEDs. The letters were installed flat on the building, which has a synthetic stucco finish. (All of this information is included in the presentation sheet.) The simple, affordable sign, which provides identification without overtaxing its budget, is consistent with the nearby Safeway signage.

Because Biltrite is incorporated and pays all employees, even owners, it calculates costing a bit differently from the way I do mine, but the premise is the same. The price for this job, once installed, was $3,496.86. The cost of materials was $550.31. Labor cost $1,213.72. After subtracting these costs and overhead, the resulting profit was $334.09, or 9% of the job.

Cost Study 5
The second sign Biltrite contributed is a bit more complex. Routed Alumalite panels were fabricated into six pieces (with vinyl graphics), which were installed in layers, to create a 3-D effect. The lettered banner was also bent to a slight curve, which heightens the appearance of depth. This type of creation, while simple in actuality, yields an impressive look, appropriate to the upscale Saint Michaels development.

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The total price of $1,349.50 includes the sign ($1,042.50) and the installation ($307). They also charge a $60 permit-procurement fee. Obtaining a permit may take measurable time, so factor that in the cost of labor. Sales taxes and permit fees (paid to the city) were, of course, added to the above total. The shop costs for materials ($166.83) and labor ($252.28) leave a $990.39 COH. After subtracting overhead ($539.80), the resulting profit percentage is 29%.

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