Signs of the Times - September 2013 - (Page 16)
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
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
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
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
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
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
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
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.
Table of Contents for the Digital Edition of Signs of the Times - September 2013
Signs of the Times - September 2013
Who Uses the Phone Book?
The Moving Message
Technology Review - DGS 3D POP store system
Technology Review - KIP C7800 poster printer
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
Signs of the Times - September 2013