In the Black

In any economy, running your own business can prove daunting. According to a 2005 U.S. Bureau of Labor Statistics report, approximately one-third of business startups won’t survive the first two years; more than half (56%) won’t endure four. The report indicated relatively consistent numbers across 10 industrial segments.

Flash-forward to 2009, when almost everyone’s (bankruptcy attorneys and repo men may be notable exceptions) balance sheet has atrophied. According to statistics tabulated by the Federal Judiciary’s administrative office, more than business 20,000 bankruptcies had been filed through the year’s first six months. The American Bankruptcy Institute indicated slightly more than 43,000 bankruptcies were processed in 2008; by contrast, 2006 witnessed only 19,600 filings.

And, although hand-wringing from cable-news talking heads and financial gurus, regarding the fates of publicly traded companies, abounds, these corporate titans represent a miniscule sliver of the quantity of enterprises. According to Spardata, an appraiser of privately owned companies, the IRS received more than 6.6 million, corporate, income-tax returns. Of those, publicly traded companies total 10,000 – a mere 0.15% of the companies providing tax information!

Moreover, the U.S. Department of Labor reported 75% of all companies employ fewer than 10 people. Also, the Small Business Administration reports privately owned companies generate 58% of all private-sector jobs, 43% of domestic sales and approximately half of the U.S. non-government, gross domestic product. Therefore, small business continues as the backbone of the U.S. economic engine, and most sign companies fall squarely into this prototypical, small-business profile.

Whether it’s embracing new technology and materials, maintaining productive relationships with complementary partners and vendors, or keeping abreast of trends in a local or regional market, many issues confront signshop owners. Several industry experts address factors that impact their businesses and how they’re responding to emerging trends.

Mastering relationships
For many large-scale or high-profile projects, a developer or architect working on behalf of the end user, will hire an environmental-graphic-design (EGD) firm to design signage and architectural graphics, and a fabrication company to build the project. According to Jan Lorenc, co-principal of Roswell, GA-based Lorenc+Yoo, maintaining a hands-on relationship quells many potential landmines.

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“A designer’s relationship to fabricators is one of artist with artisan,” Lorenc said. “We’re very interested in the craft of fabrication. By gaining an understanding of material, construction, installation and lighting possibilities, we can appreciate a fabricator’s capabilities and know whether they’re being honest when they say something can’t be done.”

Lorenc said a design firm should administer construction of an EGD project: “A general contractor [GC] isn’t very interested in the signage. He wants to make sure the building is structurally sound and all systems function. Recently, more end users are leaving control of a property’s sign-construction management to the GC in order to abdicate liability. However, the lack of supervision by design professionals over a property’s environmental graphics too often leads to mediocre design that’s a liability, not an asset, to the property.”

Like most EGD firms, Lorenc+Yoo plies its trade with Macs. It typically delivers renderings as PDF files, which the fabricator reciprocates with AutoCAD-produced shop drawings. For the design process, Lorenc likes Adobe Illustrator with the Hot Doors CAD plug-in because of its details. Depending on functions, he also uses Adobe InDesign, Photoshop and, to create visual sketch studies, Sketch-Up.

“I think Sketch-Up can be beneficial to the fabricator because it’s very amenable to 3-D renderings and helps the fabricator study the best way to build a sign,” he said.
For most projects, Lorenc and his partner, Chung-Youl Yoo, submit a short list of three fabricators they deem qualified (however, the GC sometimes counters with a short list Lorenc deems unqualified). Once the firm commences work with a fabricator, substituting materials becomes common. For example, Lorenc will specify 3Form® patterned or textured plastics, and the fabricator will counter with a less-expensive, homemade, vinyl-backed material. Sometimes, he abides such cost-cutting moves, but Lorenc draws the line at changes that will reduce a sign’s structural integrity.

“We generally specify [0.125-in.-thick] aluminum, and an unscrupulous signshop will change it to 0.090, even 0.060 or 0.040,” he said. “If a shop does this, we won’t work with them again.”

Lorenc also stipulates fabricators produce a dust-free paint finish. To test a fabricator, Lorenc+Yoo asks it to produce and coat an equilateral, metal triangle that measures 12 in. long on each side. He said, “We have a wall of them in our studio. Some are examples of what should be done, others what shouldn’t.”

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Ultimately, Lorenc said mutual respect generates a positive designer-fabricator relationship: “We’re on the same team, and we have to respect one another to create a successful project. The fabricator serves as a mirror of our work. It’s not our beautiful drawings and designs that create our reputation, it’s their finished product.”

William Bloodworth serves as architectural-division VP for Henry Inc. (Decatur, GA), which produces signage, sculptures, light fixtures, canopies and other architectural structures. An approximately 30-year, sign-industry veteran, he frequently works with Lorenc+Yoo, and estimates Henry works with an EGD firm on 75% of its projects. Bloodworth prefers that arrangement.

“When a design firm is involved, the signage is higher priority, and I’m more confident the architect, end user and GC have been educated about the sign program’s possibilities and limitations,” he said. “If I’m starting from scratch with a sign design, the signage is usually less of a priority, and the customer isn’t as knowledgeable.”
Like Lorenc, Bloodworth believes designers and fabricators should integrate cohesively into projects: “When an owner throws a designer and fabricator together strictly through a bid process, it’s like assembling a new football team for a playoff game. The lack of familiarity hampers productivity.”

He said most projects don’t fail because of poor design; rather, poor fabrication stands as the culprit: “Too many fabricators want to take shortcuts on time or material costs rather than doing what needs to be done to optimize a project. And, they too often expect the designer to manage the project for them. When a designer sends you renderings, your shop drawings shouldn’t be a rubber stamp. A good fabricator needs to know about the site conditions, how the electrical supply’s [junction] boxes are configured, and the timetable of other trades, and he needs to convey these to the designer to help the project progress.”

However, Bloodworth said the economy has spawned two adverse effects. First, end users and GCs have cut their design budgets and increasingly relegated an EGD firm’s role to concept design only. He said, “This trend forces a sign company to engage the project before construction details have been completed. Conceptual bid drawings are often oversimplified, and can mislead a fabricator. Companies that are now bidding on concept drawings make few allowances for the normal modifications required to integrate design intent with actual site conditions.”

Second, budget-obsessed end users or GCs are accepting bids from fabricators that, based on Bloodworth’s knowledge of the companies, aren’t experienced with the proposed work and just make low-ball proposals in order to win a job. He said, “This type of company will charge the customer for a change order on even minute issues, which in the long run isn’t cost-effective.”

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Forward thinking
According to corporate and media spin doctors, every business has gone green and is a steadfast environmental steward. Truth, of course, doesn’t always coincide with rhetoric.

Jeff Rank, president of Large Format Digital (Edgerton, WI), which also operates divisions that fabricate vehicle graphics, wall murals and window coverings that prevent bird collisions, walks the talk. When the company built its new facility, he specified several steps that will save energy and, within a few years, pay for themselves.

The 11-year-old company formerly plied its trade in a 1,500-sq.-ft. Madison, WI-based facility. However, as Large Format Digital grew and diversified, it became apparent the company needed larger quarters. However, Rank didn’t want to pay stratospheric utility bills with its expansion into its current, 20,000-sq.-ft digs. But, he carefully studied available products and their performance claims.

“We wanted our energy-conservation measures to pay themselves off within five years,” Rank said. “Some technologies couldn’t pay off that quickly, and other made claims based on inaccurate projections. We believe in green technology, but we didn’t want to overinvest.”

During the three-year process of planning the move to the new facility, he worked with his architect and Alliant Energy, a large utility in the Great Lakes region, to develop energy-saving measures. As an incentive, Alliant also offered low-interest loans to reduce the financing costs. Rank said green construction increased the initial building cost by approximately 20%.

First, he specified double-wall concrete to better insulate the building. A radiant-heat system usually features pipes installed under the floor that heat a room from the ground up. This saves power consumption, versus forced air, because energy isn’t lost in ductwork. Windows installed near the building’s ceiling, rather than drywall, increase natural light and reduce electrical demand.

Energy is also conserved by using high-efficiency fluorescents for most of the building, and LEDs for emergency-exit signage. Sensors automatically turn off lights when people leave rooms, but Rank took an extra step. The building’s electrical system is set to color-correct the building’s fluorescent illumination to 5,500K. Rank said color proofing can be uniformly performed throughout the building.

Powering the shop’s laminator with a three-step electrical hook-up (its printers have always operated with such a connection) conserves energy. To facilitate vehicle-wrap installation during Wisconsin’s harsh, lengthy winters, he installed overhead, high-efficiency, natural-gas radiant heat over the shop’s installation bays. Installers only turn these on when needed.

Next year, Rank plans to place a mixture of ground polystyrene and soil on the roof to create a “prairie,” which will help insulate the building. He planned to complete the process this past spring, but decided to wait for better economic conditions. He also hopes to install turbines that will harness wind energy to power the radiant-heat system.

Thanks to the company’s conservation measures, Large Format Digital’s energy bills total approximately $1,200 in winter and $800 during summer months – approximately what the company paid in its former cramped quarters in Madison. And, Rank projects the extra construction costs will be recouped in four years – faster than the original five-year plan.

Wood stock
Wood & Wood Signs (Waitsfield, VT) founder Sparky Potter and his wife, Peggy, founded their business in 1972 as an enterprise that specialized in carved, handpainted wood signage. He recalled, “When I was a kid, our nextdoor neighbor was an Italian stonemason, and I learned along with his son how to build a chimney. That passion for craftsmanship rubbed off on me as I got older.”

The company has carved a vibrant niche within the hospitality and resort market. Potter, a former ski patroller, has found particularly fertile ground creating environmental graphics for mountain resorts. Wood & Wood produces signage and environmental graphics for properties throughout the Northeast, as well as Utah, Montana, New Mexico, Florida and other tourist havens. Working for clients who reside in such diverse climates requires knowledge of appropriate materials.

“I try to source materials that are local to the area,” Potter said. “In Florida, cypress would be a good choice; in Montana, pine. In high-altitude regions, you have to use more resilient coatings because higher UV exposure will break down coatings and substrates more quickly in these areas.”

With skill, knowledge and experimentation, he’s perfected mixing such diverse media as wood or HDU, metals, plastics, PVC, glass and stone. For example, Potter’s trial and error has shown that PVC tends to turn brittle in cold weather, so any outdoor sign that incorporates PVC backing must comprise a panel at least ½ in. thick. And, to prevent wood warping, he’s learned metal rods, inserted within the face, work quite well.

Potter likes to test material worthiness through shop experimentation. He exposed substrate and coatings to water, heat, UV and other possible contaminants, and he often affixes the results to a shop wall. Potter can then better discuss material options with would-be customers.

He noted, “A lot of customers assume you have to use a synthetic material to render an effective sign. HDU and other synthetic products can be effective, but with the right substrate, coating and fabrication, a wood sign often lasts equally long. We don’t try to steer a customer toward a particular solution; we openly discuss a material’s strengths and weaknesses and try to help the customer make an informed decision.”

Potter describes his shop’s philosophy as “one foot in the old world, and one in the new.” Wood & Wood still handcarves many signs, but Potter has continually invested in software upgrades (Adobe’s Creative Suite and Gerber Omega are particular favorites). He said, “Good design sells good signs.”

He insists on creating full-size design layouts because “scale drawings often don’t present kerning, layout, dimension and color as accurately as a full-size depiction.” The company fabricates with Graphtec and Gerber plotters, but outsources CNC routing, laser engraving and digital printing because of the space such machines require and the technologies’ frequent updates.

Potter also keeps abreast of “green” materials and trends; he assigns one staff member to devote one day every month to conducting research into potential, environmentally friendly substrates. The shop recently fabricated signage for Jackson Hole (WY)’s Hotel Terra, a LEED Platinum-rated facility. Wood & Wood contracted for the fabrication of stainless-steel, waterjet-cut letters, which the shop affixed to a cork background. Potter selected cork because it’s an easily produced, very recyclable material. Then, he mounted the panels to cold-rolled steel.

Potter also likes to use glass because it offers a high “R” energy-efficiency rating; he often uses flooring materials, such as ceramic tile, because of their durability. He’s even found, in certain environments, leather provides an effective sign substrate.
Like many small businesses, he’s found payment collection increasingly difficult in the past year. Potter said, “We used to wait until 60 days after completion to call regarding payment; now, we start contact at 30 days. After 90 days, sometimes you just have to settle for a certain amount. Often, the customer who appears the most reliable is the most delinquent with payment. We’ve reinstituted our former terms; for any project valued at more than $10,000, we ask for half up front, another quarter during the process, and the final quarter at completion.”

Sunflower State success
Miracle Signs (Wichita, KS) produces channel letters, electronic message centers, marquees and various types of electric signage and graphics. According to Luke Luttrell, the company’s vice president and general manager, sales to the company’s larger, regional accounts has diminished somewhat, but sales to smaller, one- or two-location customers has remained relatively stable. Despite opportunities to pursue wholesale signage, he said the company has avoided it.

“Sticking with custom work has helped us retain a strong identity,” Luttrell said. “Wholesale work focuses on hitting a price point. There are much larger shops that dedicate their work to wholesale production. We’d just be another fish in the sea in that market.”

However, the economy has forced them to accept smaller jobs, such as banners and other digital-printing and banner projects. Miracle outsources most digital-printing projects, but operates an HP DesignJet 130 and Vytek cutting plotter for smaller projects.

Luttrell said, until recently, the shop wouldn’t accept jobs valued under $2,000 except for regular customers. However, conditions have forced a policy amendment.
Also, lean times have forced Miracle to adapt its processes. Luttrell said the shop has decreased its material inventory by approximately 60%.

“We haven’t formally pursued Six Sigma procedures or lean-manufacturing standards, but we’ve made closer integration between our sales, design and production teams a much higher priority,” Luttrell said. “For instance, we’ve begun using Maya and SolidWorks™ 3-D software, among others, to create more sophisticated renderings, and this has become a vital sales tool for us. We also strive to be proactive in developing value-engineered solutions for our customers.”

Job costing has also become a greater priority. For most jobs, the company implements QuickBooks with some slight inhouse customization for the sign business.

“When you’re working on a $200,000 project, there are so many variables to account for,” he said. “But, it’s important to be proactive in anticipating these costs.”
In the past year, the company has made two significant equipment purchases. The company purchased a new Elliott crane truck to bolster its installation efficiency, and it also purchased a MultiCam 3000 CNC router to eliminate outsourcing. Luttrell estimates inhouse fabrication in 2009 has saved approximately $20,000.
“The machine will pay for itself quickly,” Luttrell said.

The company is increasingly focusing on electronic message centers as an electric-sign component. They provide a dynamic element that customers appreciate, and Luttrell views them as an opportunity to separate Miracle from the competition. In Wichita and its immediate environs, laissez-faire regulation allows the boards, but some municipalities where Miracle works, such as Kansas City and Amarillo, TX, have bans or stringent restrictions against them.

Luttrell said the shop is also pursuing awnings as a potential market. He noted a significant demand for them in his market. Undertaking such work required minimal equipment investment because the shop successfully refurbished an old pipebender to fabricate such projects.

The shop hasn’t hired a new employee for approximately six months, but may soon. Although several regional, small-aircraft manufacturers, such as Boeing, Cessna and Bombardier, have laid off staff, he said such workers aren’t necessarily a good match for a signshop.

“Workers in those types of plants are used to doing specific, specialized work,” he said. “Employment in a signshop requires a lot of cross-training, which they usually aren’t used to.”

Adapting through adversity
Architectural Design & Sign (AD/S) Corona, CA, which primarily fabricates wayfinding, ADA graphics, and pylon signs, employs approximately 65 workers at two facilities. Its main, 28,000-sq.-ft. facility handles digital printing, vinyl production and electric-sign fabrication. The smaller, 10,000-sq.-ft facility handles architectural metalworking, sandblasting, screenprinting and photopolymer-sign production, among other tasks.

The company works throughout the Golden State and also holds licenses in Arizona and Nevada. According to Kevin Farrell, the company’s vice president, AD/S divides its work between the healthcare, institutional and retail markets. Some of its larger forthcoming projects include signage programs for the Las Vegas City Center project, which is slated for completion later this year, and a wayfinding program for Terminal 3 at Las Vegas’ McCarran International Airport, which will be finished in mid-2010.

Farrell said, “The retail market has taken a significant hit. Work for healthcare facilities has been more stable. Because retail and healthcare clients have such diverse needs, knowledgeable, proactive project management is essential. We use Microsoft Project for scheduling and to help determine necessary resources.”

He noted the company fabricates approximately 90% of its projects in house. The company outsources processes more prone to OSHA scrutiny, such as chemical etching, as well as glass lamination and tempering, and out-of-town installations.
AD/S wins many of its larger jobs through the bid process. Given economic conditions, the competition has tightened – Farrell said 10 bidders isn’t uncommon – and the company must bid more competitively.

Also, given the many defaults GCs have endured amidst the real-estate crunch, virtually every project the company produces whose value exceeds $100,000 requires an insurance bond.

Farrell said, until recently, retail pylon signs comprised a large share of the company’s work. However, as the retail market crashed, environmental graphics for police stations, libraries and other governmental entities represent an increasing portion of the company’s product mix. The company has also produced more environmental graphics programs for the hospitality market, which, in part due to heavy discounts to keep conventioneers and tourists returning, has remained relatively solid.

The company has invested significantly in CNC routers. It owns two MultiCams – a 5 x 12-ft. machine and a 2 x 2-ft. model – and a 3 x 4-ft. Gerber Dimension. AD/S also obtained a Mimaki JFX-1631, a UV-ink, flatbed printer, to directly print onto glass, veneers and acrylics. Farrell said, “This machine has enabled us to be less dependent on our screenprinting equipment, and it offers better production efficiency.”

Whether AD/S customers wish to reduce energy bills, diminish their carbon footprint or earn LEED certification, many are requesting “green” materials for their sign programs. Consequently, the company frequently specifies high-efficiency LEDs for electric signs. Also, the company has minimized use of any veneers that include formaldehyde, almost exclusively specs low-VOC coatings and, as mentioned before, prints with low-VOC inks. AD/S contracts Safety-Kleen to recycle its surplus paints, and also recycles surplus metals and broken fluorescent and neon tubes.

Farrell found professional inspiration from an unusual source – the e3 gaming tradeshow. He said, “This show featured some of the most innovative tradeshow booths I’ve seen. Their use of electronic message centers and lightboxes with color-changing LEDs are among the most impressive exhibits I’ve seen. We’d like to grow our presence in the tradeshow market, and it’s great to work with customers like that who think out of the box.”