Sign & Digital Graphics

March '20

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7 4 • M A R C H 2 0 2 0 • S I G N & D I G I T A L G R A P H I C S Once you have a total for Variable Expenses, divide that amount by the Total Income or Gross Sales Revenue to come up with the Variable Expense Percentage. Let's say the variable expense total, for the same example above, is $180,000. The Variable Expense Percentage would be 15 percent or 0.15 ($180,000 / $1,200,000). Finally, if the Fixed Expenses totaled $400,000, the Break Even Volume would be $923,788 ($400,000 / 0.583-0.15 or 0.433). It is at this point that a smart busi- ness owner can play "What if?," provided only one factor is changed at a time. What if? Let's suppose the above example describes a successful sign and digi- tal graphics shop that will, in eight months, see its lease expire and face a rent increase of 75 percent because of new ownership. That's a situation where the business owner has no choice but to begin exploring options. Using the Break Even Formula will definitely help. If the increase in rent causes Fixed Expenses to climb to $450,000, then the new Break Even Volume becomes $1,039,261—an increase of 12.5 percent. The next most logical question posed is: "Can the business remain in its cur- rent location with the same equipment and people and sell 12.5 percent more stuff just to cover the rent increase?" Some business owners might reach the inevitable conclusion: "It's time to move elsewhere." The beauty of the Break Even Formula is how clearly it indicates the effect of any change to the organization—hiring a new salaried employee, buying or leasing a new piece of equipment, moving into a new facility, whatever. Movin' On Up In an ideal world, a company's deci- sion to change its physical location should be an integral part of its busi- ness strategy. For the brave, a move can trigger a radical cultural change in the business and how it is perceived by all others—customers, employees, vendors, the new neighbors and new community. Unfortunately, many business own- ers don't have the time, objectivity and resources to thoroughly research and analyze their situation—that is, for each option, reveal every direct and hidden cost associated with such a move—in order to improve their chances of mak- ing the best decision, the one with the most pluses and the smallest downside. Even if you are not considering relo- cation any time soon, try some of the following exercises: Create a diagram of your current office and production area. Be sure to include measurement of each room or area, the location and size of equipment and furniture, and the position and capacity of all utilities—electrical, water, gas, and the like. Indicate with arrows how the work flows through the shop— where supplies are received and stored, the path along which the production process begins, continues and ends, and where finished jobs are staged, packed and shipped. Look for bottlenecks and other inefficient practices and eliminate them, if you can. Solicit the help of a commercial real- estate professional and identify several available industrial spaces or parcels that could identically replicate—or accom- modate some growth in—your current operation. That is, the approximate same or slightly more square footage, available utilities and work flow. Take note of how far away they are from your present loca- tion. Now, make a list of advantages and disadvantages of the new places com- pared to where your business is today. How would a move affect your employ- ee's travel time to work? Will your cus- tomers think the new place is easier to find, or will the move predictably result in some lost business? Do the new loca- tions make you more or less accessible to your vendor's and shipping carrier's trucks? Be sure to record the rent prices, length of leases and any differences in utility or tax rates for each option. Many businesses totally overlook the great opportunities that are gained from moving into a bigger location or into tailor-made premises. In this current economy, there are bargains to be had as property management companies may be motivated to lease larger spaces and offer incentives for custom build-out modifi- cations at less than market value prices. You could continue to work with a com- mercial real-estate agent, entertain the notion of buying an undeveloped parcel of properly-zoned land and build your own place, as well. Keep in mind how you would improve on your current opera- tions in a larger facility. You cannot get too detailed when it comes to specifica- tions for a new location. Remember, you probably aren't going to (or won't want to) move again any time soon. Expand Outside the Lines If you aren't totally spent from the aforementioned mental gymnastics, here are even more ways you may want to expand the business without relocating: Offer your business model as a franchise or business opportunity. Sure, there are hundreds of sign and digital graphics businesses in the United States, but perhaps the unique way your company meets and exceeds the expecta- tions of a particular clientele could con- vince another budding entrepreneur to duplicate your concept and leverage the name-brand recognition. How do you think founders of Subway or The UPS Store got started and became rich? It will require you sharing your expertise in get- ting your franchisees up and running and making money quickly; but remember, you are getting paid a royalty for your good name and reputation and it didn't cost you a dime. Form or join an alliance or buy- ing group. Aligning your company Many businesses totally overlook the great opportunities that are gained from moving into a bigger location or into tailor-made premises.

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