Five Questions for Frank Rolfe

Franks Rolfe is a successful billboard entrepreneur and educator.  From 1982 to 1996 Frank built the largest privately owned billboard company in Dallas.   Frank sold this company to Universal Outdoor (predecessor to Clear Channel) and subsequently owned a billboard company in Los Angeles which he successfully sold to Heywood Outdoor.  Frank runs the OutdoorBillboard.com  website (www.OutdoorBillboard.com) which is a great forum and news source for small billboard companies.  Frank also operates Outdoor Billboard University (www.OurdoorBillboardUniversity.com) which sells training materials and conducts the outdoor boot camp.  I highly recommend that you bookmark Frank’s websites if you are interested in learning about the industry.    

What made you start OutdoorBillboard.com?

I didn’t start OutdoorBillboard.com, Dave Reynolds did. Dave started that site at a time when the Internet was just starting up, and he thought a listing service of billboards for sale would be of value. I started OutdoorBillboardUniversity.com along with Dave. That’s the website that’s dedicated to teaching people about the billboard industry. We started it because Dave noticed that there are no books or courses in existence on the industry, so he urged me to write one. It was fun thinking back about everything I learned about billboards and putting it down on paper and CDs.

What’s the biggest change you’ve seen in the outdoor business in the past 20 years? 

The invention of printed vinyl. Back in the 1980s and early 1990s, virtually all billboards were painted by hand. This was expensive, slow and dangerous. In addition, we could not paint by hand the amazing graphics that vinyl allows – just painting a human face was hard and seldom photo-quality. Vinyl has allowed for photos as large as the sign face – in 100% accuracy and color – as well as the elimination of having to wait for weather conducive to paint on location to install the ad. When I owned my billboard company, the biggest focus of all was on the paint shop. It didn’t matter what you sold, you could not get paid if the ad was not up, and the painters had you over a barrel. A week of rain or freezing temperatures meant no ads could go up, and no revenue in the door. Times are much better with the invention of vinyl. It’s a win/win for everyone – except the sign painters!

What the best advice you can give someone who’s just starting out?

My advice would be to think small and grow into something big. I started with one billboard and ended up with over 300. The nice thing about billboards is that you can take manageable small steps to hit your goal, as opposed to businesses that require a leap of faith. That’s how WalMart was built – it grew from just one small town store – as did Bass Pro Shops.  It’s a lot easier to take action when you are not gambling your entire life savings.

What’s the biggest mistake people make in the billboard business?

Not being realistic on their numbers. If all the signs on the highway rent for $500 per month, you’re probably not going to get $650. And if the note payment is X, and the rent less expenses is Y, and X is bigger than Y, you’re not going to cash flow positive. I remember doing some due diligence on some billboards in Las Vegas in which the ground rent alone was higher than the gross revenue. Those kind of deals only work in fantasy land, and fantasy land is very expensive and depressing in real life. If the numbers don’t work, then move on to the next deal.

What’s your opinion on the merits of the billboard business versus the 8 sheet business?

The biggest hurdle to being an 8-sheet operator is the sheer volume of units you have to own to have the critical mass to make a full-time job of it anymore.  Back when I was blowing and going in the 1980’s, the 8-sheet operators were my heroes, as they were making a fortune by renting 400 signs at a time to Camel or Colt 45, and had the fanciest offices in Dallas. I went to one 8-sheet operator’s office, and it was filled with auction-quality antique outdoor posters of Coke and Dr. Pepper and leather furniture, looking out over downtown Dallas. Fast-forward to the voluntary withdrawal of tobacco advertising from billboards, and the same owner is dead of a heart attack and his kid offices out of a run-down industrial building.  You can make money with many different types of outdoor billboards, but there’s no question that larger units make significantly more money. You can make a handsome full-time living off 10 full-size signs, but it’s hard with 8-sheets unless you have a bunch of them.

Keeping Track of Your Billboard Company Financials

You used to have to pay an accountant to keep track of your billboard company financials or spend several hundred dollars for accounting software which would only run on a single computer.  If your accountant was on vacation or your computer crashed you had no access to financials.  Those days are no more.

I recommend  Quickbooks by Intuit to keep track of your billboard financials.  I use it for my lending companies as well as my billboard company and highly recommend it.  Here are the benefits.

• The service is cheap ($10-25/month depending on the number of users).  
• You can give your accountant free access to quickbooks at tax time which limits the number of info requests you'll have to field at tax or audit time.
• The service is on Intuit's servers which means you can conveiniently access financials from any internet connection.
• The service is secure and reliable.  I cannot remember a service outage apart from normal maintenance as long as I have been a customer.
• You can set up recurring invoices for long term outdoor clients.
• The system can process credit card as well as cash or check payments.
• The service can also handle payroll accounting issues which frees up your time for more important matters.

Does a Digital Billboard Make Sense?

I have seen strong demand on the part of clients for digital billboard financing.  Digital billboards make sense for good locations.  A digital billboard, however, will not make a bad location good.  Here are the pros and cons of digital billboard.

Digital Billboard Pros

Extra revenue.  Instead of getting $1,500/month in revenue for a 14 by 48 billboard you can get $6,000-8,000/month by renting 6-8 flips at approximately $1,000/month.

Remote management.  You can change copy via the computer instead of having to pay $350 to put up vinyl each time you change an ad.  You can also monitor the boards performance via the computer instead of having to physically inspect the sign.

Public Service Ads.  A digital board can help you create goodwill in your community by running amber alert ads or using unused inventory for public service ads.  You can change copy easily and cheaply.

Digital Billboard Cons

Extra Capital Cost - A digital billboard will cost $200,000-250,000 to purchase and install.  That's approx 6 times the cost of a regular billboard.  The extra cost means you should only convert your best locations to digital.  

Obsolesence - You should assume that a digital billboard will have a 10-15 year useful life.  By the end of that time you will probably need to replace it because it will be technologically out of date.  Think about how poor the digital signs which are 15 years old look versus the current generation of signs.  

Extra electricity - A digital sign will be more expensive to light than a regular billboard.

   

Outdoor Revenue up 4.5% during first quarter 2013.

Outdoor ad revenue rose 4.5% to $1.4 billion in the first quarter of 2012 according to the Outdoor Advertising Association of America.  The outdoor sector's improvement exceeded US radio revenues (flat for the first quarter according to Radio Advertising Bureau).  Outdoor revenues also grew faster than the 1.1% growth in US GDP during the same time period.

Why Do You Like The Billboard Business?

The billboard business is my favorite lending sector.  Here's why.

First, there are barriers to entry in the form of restrictive building codes which keep competitiors out.

Second, the billboard business is less cyclical than other forms of media.  US billboard revenues declined 18% during the 2008-2009 recession versus a 30% decline in radio revenue and a 44% decline in daily newspaper revenue during the same period.  Billboard revenues are location based (McDonalds next exit) rather than brand based (e.g. Nike).  Brand advertising gets cut severely during recessions.

Third, the business has low technology risk.  Radio stations face competition from the internet and ipods.  Newspapers face internet competition.  Signs aren't impacted by the internet.  People still drive to work.

Fourth, the business is simple.  You need someone to pay bills and someone to sell.  Radio stations need on-air personnel and talented technical personnel.  Newpapers need printers and writers.