Increasing Profits
The University of San Diego conducted a study to determine the economic value of on-premise signage. Table 2 shows the average increase in sales revenue that resulted from signage improvements. [1]
| TABLE 2 |
| Signage Change |
Fast Food |
Pier One Imports |
| Add one monument 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 |
$1,757,486.00 |
| Cost of goods sold |
61.8% |
| Gross Profit Margin |
38.2% |
| Operating expenses (includes other expenses of 1.5%) |
36.0% |
| Income taxes (estimated at 35%) |
0.8% |
| Income after taxes |
1.4% |
| After tax profit ($1,757,486.00 x 1.4% or) |
$24,604.00 |
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% ($1,757,486.00 x .07) |
$123,024.00 |
| Gross Profit from new sales ($123,024.00 x 38.2% Margin Contribution) |
$46,995.00 |
| Net Profit (Assumes 35% taxes) |
$30,547.00 |
| Total Profit (Original Profit $24,604.00 plus New Profit $30,547.00) |
$55,151.00 |
With a small, 7% bump in sales your profit could jump from $24,604 to $55,151.
That’s an increase of over 124%!
Increasing profits is one way that signs improve your bottom line. Another way is by decreasing expenses.
[1] Figures from The Economic Value of On-Premise Signage, a study conducted by the University of San Diego School of Business Administration.
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