1. PAYROLL: Payroll is one of the largest expenses in any self storage operation. Between a manager’s salary, bonuses, insurance benefits, payroll burden, payroll services, allowances, and workman’s comp; the costs can add up very quickly. Are your manager’s compensated correctly and at the market rate? Have you reviewed multiple vendors for your insurance and benefit costs? Is your facility’s bonus program based on real and measurable metrics such as an actual increase in NOI? Are the allowances you pay, such as a cellular phone or mileage, at an acceptable rate? Have you reviewed multiple vendors for your payroll services? Does your insurance company have your employees coded correctly for workman’s comp? While reviewing these costs, keep one thing in mind. The success of a self-storage facility depends greatly on the manager in the office. If you have a great manager then consider that variable when you review your payroll costs. Great managers are hard to find, even in this economy.
2. MARKETING: Marketing is a very intriguing expense for the self storage industry as a whole. Self storage operators are usually in one of two camps when it comes to marketing expenses. Operators usually budget extensively for marketing or budget nothing at all. If your self storage facility does not have a marketing budget then this section may not apply to you. If your self storage facility is not doing any active marketing then I guarantee this lack of active marketing is affecting your facility’s revenue. Remember having a marketing plan is not the same as advertising. A marketing plan is a consistent and well thought out plan of action that takes into account available marketing campaigns, the timing of these campaigns, related expenses, and return on investment (ROI).
The best way to measure the success of your self storage facility’s marketing plan is to calculate the ROI of each individual campaign. One example of this would be the costs associated with a website. Let’s assume that the expenses for your facility’s website are $500.00 per month. Let’s also assume that your facility averages 5 rentals per month from your website, the facility has an average price per unit of $100.00, and your customers stay an average of 10 months. In this scenario the cost to acquire each customer is $100 or $500 (total cost of website) / 5 (# of rentals). The profit on these customers should average about $900.00 each or $100 (average price per unit) x10 (average time of stay) = $1000 - $100 (acquisition cost) = $900.00. This is a very easy way to calculate the ROI on each campaign. There are other variables that could affect these numbers, but overall it will be pretty close. Review this scenario on each of your marketing campaigns to decide what marketing campaigns your facility needs to keep and which campaigns your facility needs to discontinue.
3. UTILITIES: Each year the utility costs at your self-storage facility rise. If your facility has air conditioned/climate controlled units, then you know the pain of a summer electric bill. Review your facility’s electric bill on a regular basis. If the bill is increases, check to see if the electric company has raised its rates. Make sure your indoor lights are on automatic timers and check to see if customers are closing the entrance doors to all air conditioned/climate controlled buildings. In addition, if you have lights around the property, check to see if the lights are turning off during the day. Internet and Phone Service are two services a facility should bid out on a regular basis. Many times a bundle pack or a multi-year agreement can reduce your phone and internet costs by 20% or more.
4. PROFESSIONAL SERVICES: All of the professional services should be reviewed regularly. Lawn care, pest control, security monitoring, snow plowing, and maintenance contracts are all services that can be put out to bid.
5. INSURANCE: It is not uncommon for a self-storage property insurance policy to increase 20% over the previous year. Try to find a broker that has multiple carrier contacts in order to find the best priced policy. If you have multiple properties, consider leveraging those facilities together into a single policy. Often times, there are significant discounts for this type of multi property policy.
6. OFFICE EXPENSES: Office expenses are one of those hidden expenses. Office expenses may seem tame once you finish reviewing insurance or utilities, but they add up quickly. Look around your office; do you have 7 different colors of post it notes, 25 types of pens, 8 different colored highlighters, 6 different types of candy on the counter, and a gum ball machine that you don’t remember ordering? Set standards for office supplies. Consider setting up an account with an office retailer like Staples or Office Depot and limit the office supplies your facility’s staff can order. It may seem like a small expense, but you can often save hundreds of dollars per year.
2013 is coming very quickly. Even though our industry has been very successful over the last few years we, as operators, must monitor expenses regularly. This simple exercise can add thousands of dollars to the value of your self storage facility.
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” and a free White Paper please send an email to firstname.lastname@example.org. 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.