Not All “Net Revenue” Is Created Equal

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Not All “Net Revenue” Is Created Equal
A billboard operator offers a property owner 35% of net revenue. Whether that is attractive depends on what gets deducted before the owner’s payment is calculated.

“Net revenue” is a negotiated definition, not a universal industry standard. Some deductions are customary and reasonable. Others shift operating costs and investment risk to the lessor.

SignValue’s View of the Different Definitions
Revenue definition What gets deducted SignValue’s position
Agency-net Actual outside advertising agency commissions Common and acceptable, provided deductions reflect actual commissions attributable to those sales, not an automatic allowance across all revenue.
Net of city development fees City-required development fees, community-benefit payments or municipal revenue sharing Usually acceptable.Confirm the payments are required, documented and not recovered twice.
Sales-cost net Internal sales commissions, brokerage, management or programmatic platform fees Acceptable only with a sufficiently high owner revenue share that compensates for these additional deductions.
Tax-adjusted revenue Taxes deducted from advertising revenue Should be questioned. Identify the specific tax, who owes it and whether it was included in revenue in the first place.
Operating-cost net Electricity, maintenance, insurance, software and other operating expenses Should be questioned. These deductions make the owner participate in the operator’s cost structure.
Capital-recovery net Construction costs, financing costs or replacement reserves Should be questioned when the operator owns the structure. The lessor may effectively fund an asset the operator retains.
Fully loaded net Corporate overhead, affiliate charges and allocated business expenses Not appropriate for a lessor. Rent should not depend on discretionary allocations of the operator’s broader expenses.
For property owners, the issue is not whether an agreement uses “gross” or “net.” It is whether the permitted deductions are reasonable for the revenue share being offered. Actual agency commissions and required city payments may be acceptable, while broader expenses can turn a straightforward lease into a cost-sharing arrangement.

How SignValue’s Role Supports Corporate Landowners:

  • Appraisal: USPAP-compliant valuations with reliable opinions of value
  • Brokerage: Experienced advisors who offer strategic leasing guidance
  • Consulting: Identifying and unlocking asset value
  • Management: Active portfolio oversight to maximize long-term revenue

For a free and confidential consultation with one of our qualified advisors, please contact us at 480-657-8400 or email us at info@signvalue.com.

 

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