Signs of the Times - September 2013 - (Page 16)

VINYL APPS Dale is co-owner of Media1 Signs/Wrap This! (Longwood, FL). By Dale Salamacha Minding Your Money, Part 2 Dale delves deeper into managing finances. Continuing dig deeper and address July’s discussion of finances, let’s specific financial aspects of your business. We received several questions from readers; we’ll address those individually later. To answer questions, I’ve recruited our CFO, Sam Ahwal, to help. Sam has managed business finances for nearly 20 years; past clients include Budget Rent-A-Car, Enterprise Rent-A-Car and California Café. He first consulted for Media 1, then he became partner/ CFO three years ago. He’s made a huge impact on our functionality and profitability. P&L 101 A profit-and-loss statement (P&L) and balance sheet are the two most important profitability indicators, yet they are the most misunderstood – especially by small businesses. The P&L indicates how well a company buys and sells its services in order to make a profit. The bottom line is: Revenue - Expenses = Profit. A careful P&L analysis reveals cashflow available to reinvest in, or expand, the business. A balance sheet involves three main parts: Assets, Equity and Liabilities. Assets are what the company owns; liabilities are what the company owes. What’s left after subtracting liabilities is equity. The balance sheet is very crucial when you attempt to borrow money. It shows the lender your business’ health, and whether you’re a good financial risk. Essentially, the balance sheet presents a snapshot of a company’s financial well-being at a specific time, and a P&L shows the results of financial functions over time. These reports should be reviewed weekly, monthly, quarterly, semi-annually and at year’s end. We’ve got answers Q. Should you buy or lease equipment? A. I’ve always insisted on the best equipment and technology. Ultimately, buying equipment is preferable. “Once you’ve bought something, it’s hard to lose it,” Ahwal said. “If you finance it, you can write off depreciation, but it also creates a liability for the company. You want Here, a Wrap This! installer works on a boat wrap for Jeff Duncan, a competitive fisherman that the shop sponsors. Dale says a shop should play to its strengths and support its core, most profitable activities. For example, a shop that focuses on wraps shouldn’t take on electric-sign installation unless it has the financial and logistical ability to readily accommodate it. 16 SIGNS OF THE TIMES / SEPTEMBER 2013 / www.signweb.com more assets, not liabilities.” If you finance equipment, it belongs to the lender until you make that final payment. And, where technology is concerned, once you’ve made that last payment, you may already need to upgrade. If you aren’t in a position to buy it outright, do a thorough cost/benefit analysis of that particular item. That’s fancy CFO talk, but it means comparing the cost to how much business it will generate. Remember, that doesn’t mean how much you think you can sell. It means how it will benefit production for jobs already on your books. For example, we operate two, HP L25500 latex-ink printers. They generate roughly 25,000 sq. ft. of prints monthly. However, HP only rates them for 5,000 to 8,000 sq. ft. of monthly production. I went to Sam to discuss buying an HP LX850, which prints dual rolls up to 60 in. wide simultaneously, with greater speed than the L25500. Its listed capacity of 50,000 sq. ft. per month meets our needs, so I have to have one, right? Sam reminded me it would require a $200,000 investment. Moreover, he said, when we start selling more than 35,000 sq. ft. per month, buying one will be financially justified. I’ve oversimplified it a bit, but you get the idea. Q. Have you stopped offering products that weren’t cost-effective? A. Absolutely! All shops should frequently review their product offerings to make sure they’re profitable. We made a significant change 10 years ago, when we moved our shop from a main highway with good exposure to a warehouse setting. We wanted to reduce walk-in customers who’d order windshield strips, magnetic signs and banners, which aren’t our focus. http://www.signweb.com

Table of Contents for the Digital Edition of Signs of the Times - September 2013

Signs of the Times - September 2013
Contents
ST Update
Technology Update
Who Uses the Phone Book?
Vinyl Apps
Strictly Commercial
Lighting Techniques
The Moving Message
Technology Review - DGS 3D POP store system
Technology Review - KIP C7800 poster printer
Design Matters
New Products
When the Cheering Starts
Enter the ST Intl. Sign Contest!
Starting at the Bottom
LED Lamps for Box/Cabinet Signs
The Aria’s 260-ft. Pylon Sign
Industry News
Advertising index
Editorially speaking

Signs of the Times - September 2013