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:
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 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.
There was a time whensomeone could build a self-storage facility and watch it grow without much effort. Rent up would be swift, income would rise, expenses would level out, and in 24 months you could refinance your construction loan and make a nice return. There were no websites, no advanced marketing techniques, and Facebook was still a dorm room project at Harvard. Self-storage facility offices were the size of your first apartment, had no furniture, and if there was coffee it was brought down from the facility manager’s apartment, not brewed in a nice, single serve, Keurig Machine. Competition Studies were easy, because there were only 3 competitors in a 5-Mile radius, instead of 13 in a 3-Mile radius. Security was a scarce, driveways were gravel, and automatic gates were a luxury. You may be reading this, scratching your head,and thinking “I don’t remember it ever being like this”. Well like the time of the dinosaur’s and the British Empire, this era has long since passed. So, now that we are in the 21st century and part of Google’s new online world what do we need to know about our competition? Let’s focus on a few things, identifying your competition, management, amenities and curb appeal, and pricing.
So who are your competitors? How many facilities do you compete against? How far out does your facility reach? Start by identifying your competitors. Use Google, the yellow pages, or an online self-storage site and attain a list of the facilities in your area. Second, map them out. The easiest way to do this is to purchase mapping software. Two programs that have been successful for me in the past are Microsoft Map Point and Google Earth Pro. These programs allow you to “push pin” or identify on a map where each of your competitors are located. Once you have all of the facilities in your area mapped out, use the measurement functions in the software to create a radius around your facility. If you are in Manhattan, NY your market area will be blocks, if you’re in a more rural area it may be 5-10 miles. Most self-storage market areas settle in between 3 miles and 5 miles. Now you can accomplish this on a standard map if it makes you feel more comfortable, but I suggest the mapping software so you can manipulate the data in the future. Once you have this information, now you can identify your competition.
Now that you know who your competitors are, it’s time to make a few visits. First, the most important part of any self-storage operation is the management. If a self-storage facility has great management it can overcome a poor location, low budget, etc. and vice versa, poor management can destroy the best facility in a market. Walk into the facility and inquire about renting a unit. How did the managers treat you? Are they pleasant? Do they have a sense of humor? Were they in the office or did they come out of their onsite apartment? Try to be as objective as possible. Did they offer to show you a unit or did they give you a price and show you the exit? Did they give you gate hours, office hours, pricing, specials, a walk through, etc. Did they explain what makes their facility the best? Would you feel comfortable storing your most prized possessions there?
Next, while you are visiting with the managers, what kind of amenities does the facility offer? What type of access hours does the facility offer and does the access change based on unit type or location? Can you get 24 hour access? What kind of security does the facility have? Does the facility have cameras, door alarms, or a secured gate? Does the facility have an on-site manager? What kind of construction comprises the facility? Is the facility steel, concrete, or wood? Are the walls steel, drywall, wood, or chain link? Is the facility built to be fortress style or is there fencing around the property? If there is fencing, what kind of material was used? Does the facility have climate control, drive up access, large truck access, wine storage, or RV and Boat Storage. Does the facility have a loading area? Does the facility have more than one gate or access point? Does the facility offer moving carts, packing supplies, a coffee area, or bottled water? Curb appeal is equally important in the management of any self-storage facility. Is the facility clean? Do you see roaches or mice running across the hallways? Do the doors and hasps work correctly, or does the facility manager have to fight with each unit door? Are the units clean? These are just a few of the amenities that people want.
Pricing can be one of the most dynamic aspects of managing a self-storage facility. In any market in America your facility can be the highest priced facility in the marketing, or the lowest. You can raise rents on your existing tenants or not. You can offer the best move in special; include an administration fee, or adjust your late fees. A few things about pricing are certain. First, if you are 100% occupied you need to raise your facility’s prices because you are losing money. Yes, you may lose some occupancy in the short term, but the remaining units will rent up at a higher street rate and the increase on the remaining tenants will go right to your facility’s NOI. The idea is to maximize revenue above and beyond occupancy. Trust me, electricity isn’t getting any cheaper.Second, do not market or rely strictly on price. Stanford University did a study on what motivatessomeone to purchase a good or service. The results were the following, 17% of people will purchase a good or service at the highest price point, 13% of people will purchase a good or service at the lowest price point, and the remaining 70% of people will purchase a good or service for a reason other than price. Learn to sell your store on VALUE, not price. Last, check prices in your market at least monthly. There is nothing wrong with being the highest priced facility in your market, but be aware of what your competitors are doing. Remember, good management and competitive advantages are two things that will help you control your market. The self-storage facilities that provide the best value for their customers are the ones that will win in any market, regardless of price.
Matthew Van Horn is Vice President of Cutting Edge Self Storage Management and is well known for finding hidden profit centers in self storage operations. For a complimentary “Hidden Profit Discovery Session” please send an email to email@example.com . 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 and on Facebook at Cutting Edge Self Storage Management.
As I was sitting down to watch the Miami Dolphins game a few weeks ago I received a phone call from a very good friend of mine. This friend of mine rented a unit at a local self-storage facility. This particular friend, who knows I work in the self-storage industry, wanted to ask a question in reference to access hours of a particular local facility. Now to preface this story, I live in a small town on the East coast of Florida, with an abundance of self-storage facilities. Like most areas of Florida, competition in the self-storage industry is fierce in my area. We all know that access areas vary greatly in our industry from office hours, to 6AM-10PM, to 24 hour access. Each self-storage facility has their own policy and procedures in regards to this. Even though this is true, I would like to highlight his story. His story goes something like this:
Around 5:50PM, he entered the facility to access his storage unit. While he was entering the facility the manager of the property came out and told him he only had 10 minutes to unload his items. According to the policy of this self storage facility access hours are reserved to office hours only. My friend stated that he only had a few items but it would take a little longer than 10 minutes to unload the items into his unit. The manager proceeded to tell him that the gate would close at 6PM and there was nothing she could do. He proceeded to leave, with his items, and return home. He then called me to vent on the situation and stated he would be looking for a new self-storage facility to utilize.
Now, to make things clear, I started my career in self-storage as a facility manager. I understand the demands, time constraints, and mental exhaustion that can occur from managing a self-storage facility. As a self-storage manager you are typically a bartender without alcohol. You hear about every issue, problem, domestic dispute, jailed family member, etc. In addition, contrary to popular belief, the customer is typically wrong. They either did not read their rental agreement or tuned you out as the facility policies were explained. Now in this particular situation my very good friend is very wrong. He obviously didn’t read the policies of the facility and that is his fault. Although it’s his fault let’s look at this from a business prospective:
When it comes to customer service, I allow all of my facility managers to stay late if the situation involves customer service. In a time when every rental counts, when there are 4 more competitors in your market than there were 3 years ago, and when revenue is being pushed down, customer service is the one area where you can make a difference. Sometimes it only takes 15 minutes.
Over the last 10 years the self storage industry has grown to new heights. No longer are self storage facilities just two buildings on an unpaved road. Today’s self storage facilities are built better; they have new technological advancements available, and cater to a customer’s every need. With reasonable interest rates and quality returns, the self storage industry has become an intriguing real estate investment. The lure of these returns has spawned a new generation of self storage owners. With the emergence of this remodeled industry the question becomes “what is the best way to manage this new self storage asset?” Often people forget that the self storage industry is a business unto itself. Success in other business ventures, such as apartment complexes, restaurants, or construction, does not guarantee you success in the self storage industry. Allowing your facility to succeed in the current environment takes skilled and knowledgeable professionals. What is the best time to bring in a Management Company to handle your asset and help the facility reach its true potential? Often times owners look to an established management company when they are new to the self storage industry, would like to take a break from the self storage industry, when the storage facility is outside of the owner’s other business interests, or the facility’s business environment has changed in which an outside perspective would help.
One reason an individual would seek advice from an established management company is if they are new to the self storage industry. Again, the self storage industry is a business unto itself and as in any business venture experienced consultation is helpful and often necessary. An established management company can help a new owner review current operations including budgets, software, managers, marketing techniques, competition, unit mix, and other important areas vital to the success of a new or existing facility. An established management company can also help set policy and procedures along with providing the necessary forms for the self storage facility’s day to day operations. In addition, and one of the most important factors, a management company can help a new self storage owner keep a facility stable while keeping high standards of customer service during an existing self storage facility acquisition or a grand opening. Along with helping with operations, an established management company will give you the peace of mind knowing that your self storage investment is being guided in the right direction by people who have years of experience in the self storage industry.
Another reason a self storage owner would consider contracting an established management company is if the self storage owner would like to step away from the day to day operations of the storage investment. Often many self storage owners have other personal and business interests or are not in a position to extensively monitor their self storage investment’s day to day operations. Many owners live long distances away from their self storage investment’s and, along with the travel time spent to visit their investment and the consistent monitoring of the self storage facility, too much time is taken away from other preferred activities. An established management company will allow the owner to be as involved or uninvolved as the owner wishes. An established management company will keep the owner informed on any major changes to the status of the facility while keeping the non essential items away from the owner, freeing the owner to pursue other endeavors. Contracting an established management company can take the day to day worries away from a self storage owner while allowing the self storage investment to continue to reach operational targets under the guidance of the management company.
Most self storage owners did not start out in the self storage industry. Self Storage owners come from many different walks of life. They may come from the banking industry, real estate industry, construction industry, health care industry, or a combination of many industries. Typically self storage owners have business investments in industries other than self storage. Often a self storage facility was acquired or built as an additional investment vehicle, not as the owner’s day to day business. As stated before, the self storage industry is an industry unto itself. It is different from every other industry. Regardless whether you have managed apartment complexes, warehouses, or parking garages, the self storage industry is different. The self storage industry is regulated by the laws of the state that the facility resides. Along with the number of different state laws a self storage facility must follow a self storage facility has its own budgetary items, marketing plans, and industry jargon. An established management company will help facilitate an owner into the world of the self storage industry. Most people would not let a cashier at a local super market to perform surgery on them, or ask their CPA for a haircut, yet many owners and potential owners will attempt to run or purchase a self storage facility without any professional advice. An established management company will help the self storage owner develop the facility into the investment vehicle they desire.
Over time a self storage facility’s management style sometimes becomes stale. Operational strategies that worked previously are not producing the returns a self storage owner expects or needs in order to continue to operate the self storage investment. In this situation a different perspective on facility operations could have a positive effect on the facility’s income. At this point contacting an established management company could have a profound impact on the competitiveness and overall success of a self storage investment. Established management companies typically stay well informed with the changes of a dynamic self storage market. Established management companies read trade magazines, attend seminars, speak with other self storage professionals, and constantly check and track which operational items are consistently providing rentals to the sites they are contracted to manage. Established management companies also continually reevaluate marketing budgets and continually monitor the marketing they have actively placed in the local self storage market in order to keep from funding items that no longer have a positive effect on the self storage facility and are a drag on the self storage facility’s bottom line. If a self storage owner feels that an operational change may need to take place or would like to be updated on the status of the current self storage market an established management company could be the right move. Every established management company is staffed with people who would be glad to help a facility owner reach their investment goals in the timeliest manner possible.
Overall the decision to work with an established management company will be different for each self storage owner. When looking for a self storage management company, attempt to find a company that fits your style of business. These are just a few of the questions you should ask yourself when looking for a management company to handle your investment. Is the management company experienced? Does the management company have references from other self storage owners or industry professionals? Does the management company handle items in a timely manager? Does the management company communicate well? Do you feel comfortable with the staff of the management company? The answers to these questions should help guide you to a team of professionals that can help guide your self storage investment. Whether a self storage owner is new to the industry, experienced in the industry, needs a break, or just needs an operational tune up, an established management company can help you reach your facility’s true potential.
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 Stephan Ross or Tammy Ross at 801.273.1267 or visit our website at www.cuttingedgeselfstorage.com