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Welcome to the Billboard Mastery Podcast, where you will learn the correct way to identify, evaluate, negotiate, perform diligence on, select the construction type, build, rent the ad space and operate billboard signs. And now here is your host – the guy that built from scratch the largest privately-owned billboard company in Dallas/Ft. Worth – Frank Rolfe.
When I sold my billboard business, the guy I sold to had a big sign on his wall, his favorite motto was, "No one ever went broke taking a profit." This is Frank Rolfe with Billboard Mastery Podcast. We're gonna talk about when you should take that profit, when you should sell that billboard. Because a lot of people are so focused on trying to buy a billboard or build a billboard, they start to lose focus on the big goal. And the big goal, of course, is to make money. And sometimes the best thing you can do with that sign that you bought or build, is to go ahead and sell it to somebody else.
But if that is true, then what is the methodology to making that decision? How do you know when to sell, and when to hold it? Well, look no further than Warren Buffett, the Oracle of Omaha, America's greatest stock investor. And Warren Buffet has had many quotes regarding this, and one of his best is that if you get offered a price and you don't take it, you just bought it back at that same price. He tells a story of a strip center he owns across from New York University, that he gets offers on frequently to sell. And every time he gets an offer, he thinks about it and he decides, "Would I pay that much for that strip center?" And the day that his answer is, "No, I wouldn't", then he should sell. Because if he did this as though he just bought the strip center back at that price because that was his option. He could have the strip center or the money, and if he elects not to take the money, then it's like he just bought it.
You see, every asset out there, really does have a value on it. There are some things that you should never value, such as your family, and maybe some sentimental items. But certainly a billboard is, really, just an income generator, and you can attain the value of what that stream of income is. So if you look at how much that billboard is generating for you, and you add on to that what you might be able to sell it for in the future, you can come up with a pretty good estimate of what you think that sign is worth, using a system called present value. And I urge you to look online and you can see the formula to attain present value calculations, and they're pretty lofty. They're kind of complicated.
But if you just read up on it, you can get just a general sense of what things that our stream of income are worth today. And many times when someone comes to you wanting to buy your billboard, buy your ground lease, buy your permit, they're going to give you one lump price right now. And that one lump price, you can, through some basic math, figure out whether or not that's a good thing or a bad thing. Which is the bigger pile of money, holding on or selling. It's also important, you input the risk when looking at holding on to things. If someone buys something from you, gives you the cash upfront, you have no concerns with such issues as weather events, lease terminations, sign being blocked. But you have all of those things if you hold on, and then what's the value for not having that risk? It has to have some degree of value assigned to it, right?
So if I have a sign and if I were to sell it, never again have to worry about, for example, a big storm coming through and ripping that sign, or maybe breaking it off at the base. There is some advantage to that. You can't say, "Well, that insurance policy, that's free," because it's not. So if you look at the future of that, you also ought to look at the future of the market. None of us really know what the market will be 5 or 10 years hence, in order when you really know what the rents will be. So again, you have some degree of uncertainty when you hold on to assets.
Now also however, sometimes holding on to assets can be beneficial. Do you ever have tried to build a big portfolio of signs? If you have the only signs in a certain market and you sell one of them, well, you no longer have the only signs in that market. As a result now, you may have somebody else who undercuts your pricing, and may drive your other pricing down. So sometimes there're strategic reasons that you don't wanna sell. And then sometimes there's lender reasons, because you've got maybe a sign that's together in a big loan with some other signs, and if you were to go ahead and sell that sign, how would the bank look at all the others? How would they come up with a release price of just that sign versus all the other signs in that portfolio.
The bottom line to it is that when everyone brings you an offer, you must give it serious consideration. Only a fool says, "No, it's not for sale at any price." I like to collect antiques and all the time you'll see at some antique malls, certain items that have NFS written on the price tag, and that means Not For Sale. That is crazy to me. Why would anything not be for sale? Everything has a price. I at least, I would wanna know if I had any asset in an antique mall, I would have some price on it, even if I think I might never get it. Just in case someone came along who found that to be an important item to them.
But you need to always listen to every offer and seriously think about what the value is of that offer, versus your current stream of income. And additionally, what is the value of those other items which are harder to quantify, such as market changes, vacancy, rents, storms, blockage and termination. Because there's nothing wrong with selling billboards, nothing wrong with liquidating items. There's no better way to make sure that you don't ever have financial problems than taking a profit.
This is Frank Rolfe, Billboard Mastery Podcast. Hope you enjoyed this. Talk to you again soon.