What Main Street is Really Saying

October 30th, 2010 October, 2010

Successful Main Street Sign Programs

Smart cities and counties around the country are focusing on creating attractive business districts and promoting healthy commerce within their downtown areas. Signs help generate business within commercial districts and tax revenues for their communities. With planning and thoughtful attention Building Improvement Districts (BIDs) can use wayfinding and commercial signs to direct visitors and residents in efficient and aesthetically pleasing ways.

Branding your downtown area is a smart way to define a business district

Effective Businesses Bring in More Tax Revenue

It’s easy to get bogged down by numbers, but take a look at this research by the University of San Diego that allows us to see the effectiveness of business signage programs. This study, conducted several years ago, gauges the economic value of on-premises signage.

TABLE 2 – Average Increase in Sales Revenue

Signage Change Fast Food Pier One Imports

Add one monument or pylon sign 9.3%

Add large pole sign (144 sq. ft.) 15.6% 8.6%

Add chain identity to plaza identity sign 7.7%

Addition of two new directional signs 8.9%

Replaced storefront wall sign with larger sign 7.7%

Let’s assume you own a typical family clothing store and add a new, better-designed sign to the business. Here’s how it could impact your bottom line:

Your annual sales $1,757,486

Cost of goods sold 61.8%

Gross Profit Margin 38.2%

Operating expenses (includes other expenses of 1.5%) 36%

Income taxes (estimated at 35%) 0.8%

Income after taxes 1.4%

After tax profit ($1,757,486 x 1.4% or) $24,604

A 7% increase in sales created by the addition of a needed sign, without increasing operating expenses, would cause the following change in profit:

New sales at 7% ($1,757, 486 x .07) $123,024

Gross Profit from new sales ($123,024 x 38.2% Margin Contribution) $46,995

Net Profit (Assumes 35% taxes) $30,547

Total Profit (Original Profit $24,604 plus New Profit $30,547) $55,151

With a modest 7% increase in sales, profits more than double. Increasing profits is one way that signs improve your bottom line. Another way is by decreasing expenses.

Signs are a Long Term Investment in Advertising

There have been several surveys conducted to determine the effectiveness of signage measured before and after installation. For example, one study looked at a Los Angeles auto dealership going in where three previous auto dealers had failed. The new owner, Aztec Motors, spent significant time and money improving the building and lot.

After renovations the owner invested $7,400 on one wall sign and one double-faced pole sign. A survey found the new signage, not the renovations or other advertising, was responsible for a minimum of ten new walk-in customers per week, resulting in at least six additional sales per week.

It took less than a month for the new signs to pay for themselves, and the owner was able to reduce his advertising budget from $16,000 to $4,000 per month an annual savings of $144,000.

Getting In the Zone

If a city hopes to make the most of the land it has zoned for retail use, the laws addressing aesthetic issues will affect their success. Appropriate aesthetics for economic vitality need to balance vibrancy, orderliness, attractiveness and the compelling nature of signage. A top-down approach from city planners on design, font, color and size will effectively reduce the ability of businesses to attract customers, and hinder both their ability to make money and generate tax revenue.

Additionally, lit business signs enhance public safety by lighting commercial areas at night. A well-lit street with an attractive appearance at night is an effective deterrent to criminal activity.

This is not to say all signs should be allowed: cluttered signage and wayfinding diminish the effectiveness of the business district. The best way to avoid disorderly clumps of sign confusion is for BIDs and City Planners to consider signs an integral part of their plans from the beginning.

Roy Flahive with CNP Sign & Graphics was joined by Jeff Aaron Legal Counsel for the California Sign Association, in conducting a seminar on “Signs in a Successful Downtown” for the California Downtown Association in Sacramento, on Thursday September 30th 2010.

For more information on wayfinding, zoning regulations or successful Main Street sign programs, contact CNP Signs and Graphics.