Sign Contracting

Despite protests from the old guard, computerization of the sign-making process since the mid-80s has provided a major boost for the industry. Computer-aided sign-making (CAS) technology makes the sign business accessible to a far more diverse group of entrepreneurs than ever before. As a result, our industry continues to attract new people with the requisite management skills for sustained growth.

But this transition from a specialized trade to a generic business opportunity hasn’t been entirely painless. Possessing the technology to manufacture signs doesn’t, by itself, impart a knowledge of how signs can or should be used. It’s obvious from some of the products sold by novice operators that sign-industry newcomers face a significant learning curve. In this business, a strictly over-the-counter approach won’t satisfy the majority of your customers — and it could cost you some profitable business. That’s why America’s most successful sign companies are full-service operations. No matter what the size of your shop, however, developing a contracting capability could be the missing link in your long-term business plan.

Maintaining control

As in other manufacturing enterprises, success in the sign business depends on maintaining a high degree of customer loyalty. Customers expect sign companies to stand behind their products after the sale. This means offering your clients:

• product warranties
• installation
• on-call or scheduled maintenance

If you want to keep your accounts and grow your business, you can’t drop the ball at any stage of the process.

Most CAS-based signshops are located in high-traffic retail centers. The higher costs of store rental and Yellow Pages advertising that distinguish these shops from their back-street forerunners are based on maintaining a high volume of business. Once the customer is in your shop (or on the phone), the last thing you want is to send him to a competitor.

Yet, this is precisely what many shops do when they inform customers that they don’t handle installations or service. Even when you subcontract this work, there’s always the possibility that the installer could wind up with your account. Also, finding reliable subcontractors can be quite difficult, and you can’t always guarantee the quality of workmanship. Although sales and manufacturing are still the fountainheads of the sign business, shops that develop in-house contracting capabilities enjoy important advantages.

Acquiring permits and licenses

It’s surprising how many sign-makers pretend that permits are optional items. Though some operators prefer to ignore it, signs are regulated by municipalities as forms of permanent construction. A primary rule of good business is never to sell your customer a product that he can’t legally use. This might sound absurd, yet it happens every day of the week when unprofessional operators sell signs without first investigating local codes. If you only make indoor signs, you may not have to worry about sign permits — but any outdoor sign requires a permit in most jurisdictions. Temporary outdoor signs and banners, as well as store window signs, are also regulated in most municipalities. Never assume that you don’t need a permit; instead, check with the local building department.

Most municipalities require sign companies to register as contractors before performing any work. Many signshops post their local registration certificates on the walls of their offices. These local registrations range from simple business occupational licenses (Fig. 1) to county or state construction board certificates (Fig. 2) that require proof of previous contracting experience, a competency test, or both. If you haven’t registered as a contractor in the municipality where you’re installing signs, you’re violating the law. You can be fined and, in some cases, your company can be banned from obtaining a license in the future. Therefore, the first step to develop a contracting capability is to register your company in every city, township, borough and other jurisdiction where you expect to operate.

If the vast majority of your jobs are non-illuminated signs, or you don’t have the necessary electrical background, you should inform the local authority that you want to register as a non-electrical sign contractor. Despite the fact that any sign may be illuminated via detached light fixtures (spot or flood lights), signs are considered to be non-electrical under most local codes if the lighting is not integral. Most jurisdictions allow non-electrical sign contractors to pull permits for electrical signs, provided that a registered electrician pulls the electrical permit at approximately the same time. This should not encourage non-electrical contractors to install lighting fixtures or perform any other type of electrical work.

Registering as an electrical sign contractor in most jurisdictions is a much more complicated process that requires proof of competence. If you only handle electric sign projects occasionally, you can subcontract the electrical portions of the jobs to a local, licensed electrician who can obtain the required permits and connect the signs. My experience has been that, in most cases, you don’t need to worry about competition from local electricians, because they rarely bid on sign projects.

Waiting in line at local building departments can be a pain in the neck, but once you’ve obtained the necessary registrations, you’ll have a significant advantage over your unregistered competitor down the street. This is also an important sales aid, because who wants to buy a sign that doesn’t include (or at least quote) the installation? Who wants his sign installed by an unlicensed operator?

You should always keep file copies of the current sign codes for every municipality that you cover. When your customer requests a given size or type of sign, you can advise him right away whether it’s permitted in that district. This is the professional approach to selling signs.

Pulling permits can be time-consuming, so you must include this cost as a separate item in your quote. Given the stiff competition in many areas, some shop owners don’t quote permit costs. On one hand, they don’t install; but on the other, they’re afraid of losing jobs if they add the subcontractor charge. Ignoring permits, however, can cost you much more than lost jobs. That’s why a contracting shop should emphasize that its quotes include installation and all required permits. If your prospect knows that your competition has quoted the job without specifying charges for permits and installation, that’s a compelling reason for him to do business with your full-service shop.

It’s a good practice to estimate an average time period to obtain a sign permit under normal conditions. Three hours (including travel time) is usually adequate time for the majority of simple, "in and out" permits in your local area. For example, if you have estimated a three-hour standard permit charge and your staff time rate is $33 per hour, advise your customer that the permit will cost $100 plus the municipal permit fee. The number of permits required for a busy sign contractor prompts most signshops to designate a member of their staff as the official "permit runner." Each municipality has its own permit fee schedule, which you should keep on file to provide accurate quotes to your customers.

Some customers balk at the cost of permits, particularly in those cases where the permit cost exceeds the cost of their sign. You must be prepared to respond to such complaints in a professional manner. Show the client copies of sign and elevation drawings required by the municipality, and explain that you’ll have a significant amount of time involved in dealing with City Hall. The permit charges for any projects that require engineering, zoning variances or special plans will be significantly higher, and you should quote these separately in advance. Also, if you’re pulling the permit in a big city (with big bureaucracy), your staff time to obtain the permit can easily be eight hours or longer. I’ve obtained several permits during my career that cost more than $1,000, including all related fees. Always remind customers that only registered contractors (like you) can pull sign permits and legally perform installations.

Buying insurance

Either before or after you’ve registered as a contractor, contact your insurance carrier. Once you learn about the finer points of Workman’s Compensation (WC) insurance, you might be discouraged. The exposure factor for sign-contracting work is substantially higher than is true for shop and office employees. Insurance companies employ specialists who travel around, observing the daily operations of their clients to determine risk factors. Naturally, installers who perform much of their work from ladders or aerial lifts are considered higher insurance risks than those who stand firmly on the ground. Employees who work on electricity (like sign servicemen) are judged as still higher risks. WC coverage for sign contracting, therefore, is typically the most expensive portion of your policy.

There are some ways to keep costs down, like ensuring that your personnel punch the time clock between each category of work they perform. This prevents your company from paying a high-exposure rate for low-exposure labor. In recent years, business groups across the nation have protested escalating WC rates, and certain states have granted some relief. In general, however, you’ll have to bite the bullet on WC coverage to develop a contracting operation. What might seem to be a prohibitive expense at the outset becomes more manageable once you’ve developed a profitable contracting business.

You may also need to upgrade your commercial general liability limits to reflect the higher property damage and personal injury risks of a contracting business. In today’s litigious society, a $500,000 aggregate damage limit is probably the bare minimum for even a modest sign installation and service operation. Maintaining adequate insurance coverage certainly isn’t cheap, but it’s a price you must pay to operate a full-service shop.

Conclusion

The substantial effort and expense required to become a full-service sign company underlines the importance of making your contracting operation as efficient and profitable as possible. Once you’ve taken the preliminary steps of registering and obtaining proper insurance, you need a firm grip on the basics of project management.