People have been making big money with billboard signs for over half-a-century. Owning a billboard – in many cities and towns – is like a license to make money. This significant stream of income has been used to build empires as well as college funds and cash for luxuries. So why do billboards so regularly make money?
The true reason why billboards are profitable to begin with
Billboards did not really become that profitable until the Highway Beautification Act of 1965. That’s when the government decided to regulate billboards, and the net effect (contrary to what they hoped for) was for billboards to automatically be valuable and proliferate. The government was hoping that by regulating signs they could reduce their number. But it backfired and they are stuck in that position until the end of time. A pretty ironic ending.
Understanding these laws
When the government regulated signs, they demanded billboard be at certain spacings and zonings. Today, all signs have to adhere to Federal and state laws on the topics of spacing, zoning, size and height. But despite how narrow that sounds, there are around 500,000+ billboards that have been built since the Act became law. Understanding these regulations is the key to success in the sign business.
Understanding how the numbers work
Billboards are an extremely simple business model. You rent the advertising space, deduct the land rent, installation, electricity (if any), maintenance, insurance and taxes and the net income is yours. It’s definitely not trying to build and sell a smartphone. The normal profit margin of a billboard is somewhere between 50% and 100%. That’s incredibly high.
The options to making money
Billboards are also incredibly adaptable. There is not just one way to make money, but many. These include:
• Static billboards along highways and secondary streets.
• LED billboards where the advertising space is sold by the second.
• Mobile billboards where the sign itself can be moved.
• Transit advertising in which the ads are on transit stops or vehicles.
• Mall advertising or anyplace else where you can place ads.
The importance of scale
One of the key attractions to the billboard business is the ability to get into it on a small scale and then build it up to whatever size you want to make it. This allows you to custom craft your portfolio of billboards fit your time and wallet. Even the largest billboard companies began with just one sign and then built up from there. Since we learn as you go, you also improve as you go, and the speed you find signs to build and buy also increases.
Conclusion
Billboards are a lightning rod of profitability for a number of very solid reasons. It’s been this way for over 50 years and is unlikely to ever change. While many business models fall by the wayside, billboards have a simple model that always seems to work.