In the amount of time it takes to read this article, a number of things are in motion. As you contemplate that first sentence, you quickly notice that your computer just made a noise, “Oh look, a new email”. If you have focus you will ignore that email, but a majority of people will run to that email. The email is just a vendor asking you for a conference call to discuss a new product, “Great, now I can get back to that article I was reading”. You scroll your mouse, or finger for you tablet/smart phone users, and try to figure out where in this article you stopped reading. While you are doing that a text comes through, then a Facebook message, someone mentioned you on Twitter, your LinkedIn app just made a noise, oh my another phone call, then 5 more emails. This of course doesn’t count the items on your desk including a stack of papers, 2 month end reports you forgot to read, 3 trade magazines, some random mail, a Diet Coke from yesterday, and a book you may have purchased from Amazon. By the way, you need to pick up milk on your way home tonight. This represents a five minute sub section in the life of today’s self storage managers, investors, and owners.
I just want to start this blog by saying that the details matter in the operation of a self storage facility. They matter so much; your self-storage business depends on them to run smoothly on a day to day basis. Often in our insanely busy lives, a smart phone is beeping, the phone is ringing, or while a family member is talking in the back ground we just miss things. Unfortunately in the extremely litigious society we live in, these distractions can easily come back to haunt us. It’s very easy, while working on 10 things at once, to accidently over lock the wrong unit, miss something on a rental agreement, or send a lien notice to the wrong address. It’s easy to misplace a file, throw out an important paper, or forget to call back a customer. This is just the result of working within a distracting environment.
Back in the late 1970’s to the mid-1980’s Van Halen was one of the most popular rock bands in the world. Over their career they have sold over 86 million records worldwide and have had the most #1 hits in the history of Billboard’s Mainstream Rock Chart. Being a Van Halen fan for many years, I consistently heard of a stipulation they always placed in their concert agreements. The stipulation stated that there was to be a bowl of M&M’s in the dressing room of the concert venue. This bowl of M&M’s was to be free of any brown colored M&M’s. If any brown colored M&M’s were found in this bowl then the band did not have to play and, in addition, they would receive full compensation for the show. Most people, including myself, found this to be a laughable requirement. Everyone assumed that this was just another hilarious stipulation from a band didn’t really want to work. Actually the real reason this stipulation existed was genius.
As we close out the 3rd quarter of 2012, it’s time to start thinking about your self storage facility’s goals and projections for 2013. How close were your projections in 2012? Were you above or below your projections for income, expenses, and NOI? Was your facility’s move ins, move outs, and net units at an acceptable level? Do you believe your facility provides the best customer service and amenities in the area? Are your facility managers fully trained? All of these items can have a dramatic effect on the financial success of your self storage facility. In our never ending quest to increase NOI we must consistently review our facility’s expenses. Here are 6 expense areas you should review on a regular basis:
Below is a recent infographic from Sparefoot, one of the self storage industries largest aggregators. One of the more interesting items on this infographic is the section discussing REIT owned facilities vs. Mom & Pop owned facilities. Out of a total of 50,050 facilities, the five largest self storage companies only comprised about 1% of the total market. Our industry resembles the Pizza industry in many ways. Yes, Pizza Hut, Domino's, and Papa John's are huge companies with extensive marketing budgets, but they still have less market share then independent restaurants.
In addition the section on industry returns is great. Compared to other industries self storage had higher returns, in 2011, then the health care, retail, and even timber industries. It's fairly obvious why the self storage industry has received a flood of institutional money.
(To view the infographic click the READ MORE button)
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Are you an asset manager for a financial institution or investment group? Are you in the process of filing a receivership or have you just completed a foreclosure on a self-storage facility? Do you have FDIC filings and FDIC reimbursement requirements? We can help you. Cutting Edge Self Storage Management has extensive experience working with financial institutions and investors for the purpose of Receiverships and ORE Foreclosures, our company principals have worked with Citi Bank, First Union (Wells Fargo), T. D. Bank, and the RTC.
Remember, the self storage industry is an industry unto itself. The self storage industry is not the hospitality industry, office space industry, medical supply industry, or the restaurant industry. The self storage industry has its own laws, verbiage, nuances, and operational standards. The importance of hiring a management company that specializes in the self storage industry cannot be overstated. Do not try to “go at it alone” or “learn on the fly”. We are here to help you. Contact us at 801.273.1267 for a free consultation. Download our Corporate Resume/Statement of Qualifications.
Are you looking for Self Storage Management in the State of Florida? Cutting Edge Self Storage Management has a self storage management Florida office located on the Treasure Coast of Florida in the city of Port St. Lucie, FL. Whether your facility is located in Palm Beach, Ft. Lauderdale/Miami, Naples, Ft Myers, Tampa, Orlando, Daytona, Jacksonville, Gainesville, or the Pan Handle, our self-storage management professionals can help you.
The benefits of working with a management company, in the state in which your self-storage facility is located, are numerous. Why work with someone that has to learn your Florida specific market? Cutting Edge Self Storage has extensive experience working within the State of Florida. WE WILL COME TO YOU. Contact us today for a free consultation and schedule an onsite visit with one of our self-storage management professionals.
As a manager, business owner, and entrepreneur I am constantly looking for interesting things to read and new ways to motivate my team. I really enjoy fiction, Game of Thrones at the moment, but some of the most interesting and motivating things you can read are often biographies. The other day I was reading a story about Bruce Lee. For those of you who don’t know, Bruce Lee was an actor, martial arts instructor, philosopher, film director, screenwriter, and founder of the Jeet Kune Do Martial Arts Movement. He was widely considered to be the most influential marital artist of the 20th century. Suffice to say, Lee was obsessed with pushing himself both physically and mentally.
Over the last 30 years technology has infiltrated every aspect of our lives. This major change started for consumers in the mid-1980s with the adoption of the personal computer. Fast forward 30 years and now technology is the epicenter of our daily lives. No longer are people forced to carry a cell phone that is the size of a brick or use a computer the size of a file cabinet. Consumers can now buy a refrigerator with internet access and HI FI speakers or control their home’s thermostat with a smart phone. In addition, communication is now almost instantaneous and that new smart phone in the store has more processing power then a personal computer had just 10 years ago. This new technology will open more doors for the self-storage industry than ever before. The ability to be in constant contact with customers, existing or potential, is an almost overwhelming wave of potential. The changes in customer service will revolve around three items, product quality, communication, and information storage.
Over the last few weeks you have probably heard about the Self-Storage Aggregator issue that has been burning through our industry. First I would like to acknowledge Randy Smith for the solid white paper he wrote on the issue. You can review this white paper at http://www.nostorageaggregators.com. I would also like to say that he isn’t wrong about the threat. Quoting one of my industry colleagues “he’s probably about 3-5 years early”, which is great because as a society we tend to let small problems become larger problems before we address them. I have used a few different aggregators in my self-storage operations and have mixed feelings about them. The aggregator issue is not the cause of our industry’s problem but just a symptom of a larger problem that looms in the self-storage industry.
Well it’s that time of year again. It’s time to get your 2012 budget finalized. The New Year will be here before you know it. Now is the perfect time to review your facility’s financial position as we move into 2012. For some, this will be used only as a metric to gauge your facility’s financial progression or financial regression. For others, this is imperative for your facility’s financial well-being in regards to a potential sale or refinance. The only way to improve on something is to track everything. How much did you spend on office supplies this year? How about in 2010? What were your utility bills this year? How much did they increase or decrease over 2010? What percentage of your facility’s total expenses is paid out in utility costs? Do you still need that yellow page advertisement for 2012? How many calls did you receive on the yellow page advertisement this year? It’s imperative that you project your income, expenses, and NOI for the coming year. Here are some line times you should take into consideration when preparing a budget:
In the current market as a self storage owner, investor, or operations manager you are facing a number of obstacles: a battered economy, a weak real estate market, an increase in delinquencies, decreased occupancy, decreased NOI, and more competition than ever before. As in years past most of this is cyclical and the strength of our regional areas will recovery, in some areas this recovery has already begun. While the economy is in recovery, there is still need to set a positive and inviting tone with our customers as well as with our facility managers. One of the obstacles in dealing with lackluster economic conditions is keeping facility managers motivated without letting complacency take over. Motivation starts with hiring the right manager, setting the right goals, along with having positive leadership and rewarding your employees when they go above and beyond the scope of their position.
The easiest type of manager to motivate is a manager who is motivated intrinsically. The standard definition of intrinsic motivation is simply motivation that comes from inside a person rather than any outside reward such as a bonus. Typically, this type of facility manager is motivated by the satisfaction of completing a job well rather than a bonus on the amount of units rented or inventory sales. An intrinsically motivated storage manager will take “ownership” of their facility. For example you may have a facility manager that consistently creates and implements new marketing ideas without direct solicitation, keeps the grounds around the facility in impeccable condition, makes the rental office a calm and inviting place for customers, decorates the office for the holidays, always has a bright and positive attitude, and gives the facility their personal touch. The drive to succeed is not typically something that is trainable, a manager usually has this motivation or not. During interviews, look for managers that are motivated internally. Often potential managers will provide letters of recommendation along references. These should be used to gauge not only the qualifications of a potential candidate, but to find out what kind of facility manager they will be overall. Look for potential managers that have been in a position where intrinsic motivation is expected such as a former business owner, former military, or an apartment manager. Remember, an intrinsically motive manager is one of the best types of managers you can hire.
One of the easiest ways to motivate a facility manager is to provide goals that are clear, concise, and realistic. In my previous life in the corporate world, I would regularly get financial and customer oriented goals. Often times I would know right away whether a goal was attainable or a complete work of fiction. Nothing will demotivate a manager faster than looking at a set of goals, whether they are financial or customer oriented, and knowing they have no possible way to attain them. This does not mean to lower operating standards or allow a facility manager to talk you out of a goal that is attainable but difficult; it means to keep your perspective in the present economy. Each facility manager should be given a list of goals and an operating budget, which should be reviewed regularly. As an operations manager, work with your facility managers and discuss the goals of the facility. Allow your facility managers to work with you as 2010 operating budgets are completed. How much of an occupancy or NOI increase do you expect for 2010? How much do you expect in inventory sales? What kind of closing percentage for customer leads are you expecting? What percentage do you expect to decrease expenses? Is your payroll going to increase or decrease? How much will your marketing budget increase or decrease? Allowing facility managers to work with you in creating their goals will give them a sense of responsibility towards attaining those goals. This works especially well if a facility manager’s bonus structure is tied to the goals you have both agreed.
The current economic situation we face as operation managers is tough. Not only does it affect our facilities in terms of income, delinquencies, NOI, and other facility metrics, it affects the performance of our facility managers. We all know as the economy struggles, so do our customers and facility managers. Our facility managers are very much like “bartenders” without the alcohol. They hear every customer’s problems from the domestic disputes, to customers moving because of foreclosure, the family member that did something wrong, and the story of another customer being laid off. Mix these issues along with the fact that most facilities are not performing as many people had hoped; it can psychologically overwhelm a person quickly. As an operations manager your job is to keep moral and motivation high. Even with tight budgets you should be taking care of the managers that do a great job for you and treat them well. During one of your visits, take your manager to lunch, point out the items that your manager has excelled on, maybe cover the facility one day and give your manager a paid day off, or give them a gift card to a local restaurant or store. Different types of motivation work for different people. Small acknowledgements, whether monetary or not, will go a long way in keeping your managers spirits high during a difficult economic time.
As we move into 2010, none of us will soon forget the challenges of 2009. Motivating our facility managers will continue to be a challenge. If you are hiring a new facility manager this year, look for one that is intrinsically motivated to get things done around your facility. Work with your managers on realistic goals for the coming year; allow them to be a part of the budgeting process. Lastly, provide the moral support and leadership skills needed to keep your manager’s upbeat, their spirits high, and on track for a strong finish this year. Motivate your facility managers correctly and you might be surprised with the long term success of your facility.
Matthew Van Horn is Vice President of Cutting Edge Self Storage Management. Cutting Edge Self Storage Management is a full service management company specializing in Management, Feasibility Studies, Consulting, and Joint Ventures within the self storage industry. For more information, contact our main office at 866.970.EDGE or visit our website at www.cuttingedgeselfstorage.com. Follow us on Twitter at Cuttingedgemgt.