Whether you are planning your retirement or are interested in pursuing other business ventures, selling a billboard advertising company can quickly become a stressful process. This guide helps alleviate some anxiety involved with the sales process by providing an in-depth review of how to value your billboard advertising company and the sales process, along with insights into how a business broker can assist you with the transaction.
About The Billboard Advertising Industry
The billboard advertising industry primarily engages in the design, creation, and display of public billboards for advertising purposes. This primarily includes large outdoor billboards (either digital or print), although it may also include indoor billboard advertisements as a part of the business model. The billboard advertisement industry data includes:
- There are approximately 13,730 billboard advertising companies in the U.S.
- There was a -0.4% annual growth for the billboard advertising industry from 2018 to 2023
- The billboard advertising industry generates $8.1 billion in annual revenue
- The annual profit for the billboard advertising industry is $950.6 million
- Experts predict a slight increase in annual growth (0.9%) from 2023 to 2028
Despite a slight decline in recent years, the industry remains strong. There is a strong industry demand and limited competition within this industry, creating an excellent opportunity for well-established companies. There is also a high barrier to entry due to restrictions on new permits. This creates an excellent opportunity for licensed billboard advertising companies as they do not have to fear new competition entering the market.
A Business Valuation for Your Billboard Advertising Company
Your business broker will use a market approach to determine the value of your billboard advertising company. This involves the determination of fair market value, which is the amount that is considered a reasonable sale price for your company. To calculate this, you will need your seller’s discretionary earnings (SDE). Your SDE is applied to rule of thumb data for the billboard advertising industry, which is as follows:
- Billboard advertising companies sold for approximately 2.36 times the Seller’s Discretionary Earnings (SDE)
- Billboard advertising companies sold for approximately 4.11 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Billboard advertising companies sold between 0.94 and 2.39 times the annual net sales
Additional factors that may influence your value include your location, growth potential, and the diversity of your sale (among other possible considerations). Be sure to choose a broker who sees the entire value of your company, rather than simply looks at your financials without considering intrinsic value that may not show up in financial reports.
5 Stages of Selling a Billboard Advertising Company
It helps to break the sales process down into stages. This ensures a more organized and successful experience. The most common stages include:
- The valuation stage
- The planning stage
- The marketing stage
- The due diligence stage
- The closing stage
There are complexities within each stage, which we discussed below. However, for more personalized information and recommendations, we encourage you to speak with a qualified business broker.
The Valuation Stage
You must first understand your billboard advertising company’s fair market value. As discussed, your business broker can help you determine this value based on a market approach, which reviews previous sales data, industry multiples, and your company’s financial (and non-financial) information.
The Planning Stage
Once you understand your fair market value, you can plan your sales strategy, goals, and timeline. Here at Sigma Mergers and Acquisitions, we do not recommend all of our clients go to market immediately, and you should find the time that is most favorable to sell your company. During the planning and preparation stage, we also prepare your sales memo and asking price.
You should also collect your financial and legal documents during the planning stage. This includes (but may not be limited to) your tax returns, profit and loss statements, balance sheets, cash flow statements, inventory list, list of customers, list of employees (designers, printers, etc.), and insurance policy.
The Marketing Stage
Although much of the work happens upfront before you market your company for sale, this stage is when it all comes together and the magic happens. Your broker will leverage their resources (connections, contacts, databases, networks, etc.) to find prospective buyers in a confidential manner. They also screen offers as they come in and negotiate on your behalf, keeping you informed and involved throughout the process. Once you negotiate a deal with the buyer that allows you to reach your goals the best, the process is completed with a signed letter of intent (LOI).
The Due Diligence Stage
Due diligence is not always the most pleasurable experience for sellers. However, it is an essential step for buyers as they use this time between the letter of intent and the purchase agreement to verify financial information and gain a feel for your billboard advertising company overall. During due diligence, you expect the following:
- The buyer reviews your financial information (tax returns, etc.)
- The buyer sends a list of questions for clarification
- The buyer requests a walk-through to learn more about daily operations
- The buyer meets with your business partners and top employees
The Closing Stage
Last but not least, you must close the sale. It is imperative to remain focused during this stage as deals can still fall through or setbacks can occur. Your broker, attorney, and CPA may guide you through closing, detailing which documents you need to collect and bring with you to the closing table. Your attorney may also conduct a final review of the purchase agreement at closing.
The final signatures are attained during closing. The payment for your billboard advertising company is then transferred to your account. You will also need to transfer ownership. This may involve updating legal information, transferring ownership of any existing insurance and lease policies, and notifying employees.
Contact Sigma Mergers
Sigma Mergers and Acquisitions helps you determine your fair market value and provides brokerage and consultancy services throughout the sales process. If you are interested in learning more and desire a no-cost and no-obligation market-based valuation, schedule a consultation with us today.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!