Most billboard companies fail to account for sign replacement expenses in their projections. This is not a big issues with static boards which last 40 years. It matters however, with digital signs because they have a useful life of 100,000 hours or 11.5 years. If you exclude replacement costs you will be overstate your projected cashflow.
I am beginning to see digital sign replacement costs incorporated into land leases. If you must make a payment equal to a % of collections then deduct a monthly amount sufficient to replace your digital sign within 10 years. For example, if you are installing a $350,000 digital sign and you must pay 20% of net revenue to the landlord then define net revenue as collected cash less $2,916/month which is an amount sufficient to create a reserve to replace your sign within 10 years.
