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04/29/2008

Barter Companies Help Maintain 100% Occupancy On Your Billboards

By Frank Rolfe

Editor�s note: Frank Rolfe started his billboard empire from his coffee table, as a fresh graduate from Stanford University. It began as a resume builder for graduate school applications, and ended with a sale to a public company 14 years later.

Using unique strategies he developed from desperate competition with much larger adversaries, Rolfe eventually owned more billboard units than any private individual in the Dallas/Ft. Worth area. He has authored the book Big Bucks from Big Signs, available at www.outdoorbillboard.com.

Is 100% occupancy on billboards a realistic expectation, or an impossible fantasy? Using the methods I am going to describe, you will find that 100% occupancy is a fully attainable goal, and a minimum performance benchmark for the future.

I developed these techniques from trial and error on hundreds of billboards I rented over more than a decade. Once you have learned the technique, you can rapidly put the systems in place on every billboard in your inventory.

The key to maintaining 100% occupancy on a billboard is to have multiple layers of advertisers in place for the billboard space.

The first layer is the regular, retail advertiser. This is your bread and butter, and there is no substitute for this advertiser. This is the one that pays the bills and makes the budgets work. However, try as hard as you will, this layer will always have some degree of vacancy.

Every time the advertiser does not renew, there will normally be some lag time before you can find a replacement. That being said, you should normally start re-leasing a billboard sixty days before it becomes vacant, if the existing advertiser will give you that much lead time in the form of notice of non-renewal. Start pushing the advertiser to renew at least 60 days before lease expiration.

The second layer is an advertiser who would like that advertising space, but does not want to pay the retail rate. He is happy to get some time on the sign at a reduced rate, even if it is only for a few months in between the retail advertiser. You will find this advertiser as a byproduct of looking for the retail advertiser. This person will tell you that they really like to sign, but cannot afford the price. So we ask them if they would like to be on the sign now and then for a cheap price.

Often the price is only 50% of the retail rate. You print this ad on a sheet of vinyl, and have it at the ready to put up the minute the retail advertiser has expired. You send them a letter the day their ad goes up, and a letter the day it comes down, and bill them for the period at an already agreed to daily rate. Even at 50% of retail price, this advertiser offers needed cash-flow to pay the ground rent when otherwise the sign would sit vacant.

The third layer is an advertiser that wants generic coverage throughout your inventory. Its role is to make up for a missing second layer advertiser. It might be a radio station, or someone selling something like Mary Kay. They just want to reach raw traffic, regardless of where it is. This layer should also pay about 50% of the retail price, or slightly lower than that. Just like the second layer, you should document the start and end date in writing, and bill them a per day rate.

In some cases, you might have to take trade or barter credits instead of cash for this tier advertiser, often through a barter exchange firm. A barter exchange works like an intermediary for the advertiser and billboard company, with the advertiser paying in goods or services that he produces, and receiving trade �credits� for those items. You should call some barter exchanges (AKA trade exchanges) to learn which advertisers are already members in the exchange.

Sometimes you will want to add a fourth layer, which would be public service messages and the like. Normally, this tier of advertiser will not pay cash, but will give you the possibility of a tax write-off (talk to your CPA). Potential advertisers from this group include non-profit agencies, such as the American Heart Association.

Using this layering method, you should never again have a vacancy in your inventory. In addition, you should never have a sign that is not at least cash flowing. Banish vacancy and loss of income from your budgets using this system, and you will be miles ahead of the competition, especially when the recession hits.

One footnote to this article: I received a call from my banker during the savings and loan crisis of the late 1980s. The bank examiners were questioning my financial statements and occupancy reports, since I was showing 100% occupancy, which they believed was impossible.

Convinced that I was cheating, to audit me, they asked me to drive them by all my signs right then. We drove for about eight hours straight, by hundreds of billboard faces, and not one was blank. They were extremely disappointed that they had wasted a day looking at billboards, and were unable to catch me in any type of fraud. If only they had managed their bank as well as I was managing my signs�they failed a few months later and were taken over by the FDIC.


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