Frank,
What net profit % should I target in developing a billboard sign? I have a situation where the ground rent at a potential location is very attractive but the stiff permit fee in this municipality could make it a little painful.
I’m thinking that if I cannot keep 50% of revenues (20% if the sign is financed), then its time to look for another location. What are your thoughts?
The typical industry expense ratio is 40%, but that’s based on a 20% ground rent amount.
The big number to watch is ground rent, as your exit strategy diminishes gigantically for every percent you go over 20%.
Remember that the overall % of expense (other than ground rent) is completely based on your rental amount, as most of the costs are fixed (vinyl, electricity, etc.). You can still have a successful sign at a 60% expense rate, as long as you are sure that rental amounts will increase in the future due to more cars, development, etc.