By Cary McGovern
Improving Your Cash Flow
Records management and storage can yield 2.5 to 3.3 times the gross storage revenue on any storage unit larger than a 10-by-10 for records storage at the carton level. Yield can also be improved up to 4.5 times the gross revenue when implementing open-shelf file storage, such as medical-records management. In order to achieve these results you must implement a strategic plan that addresses each of the following issues:
- Optimum shelving design
- Inventory control
- Management training
- Operating practices
- Marketing
Selecting Self-Storage Units for Records Management
The foremost determinant of cash-flow maximization is the selection of the largest storage unit(s) that you have available to begin your records storage operation. It is correct to say that the larger the unit, the higher the yield percentage--up to a point--then it levels off. It is also correct to say that the higher the ceiling height, the more the revenue increases. Most self-storage facilities have fixed ceiling heights of 8 feet or 9 feet, so ceiling height-maximization is not a requirement using this model.
It also is best to select several units that are in close proximity to one another. Although this is not imperative, it can help in the logistics of your operation. Once your units have been chosen, the selection of racking that creates the highest cubic footage yield is important. Considerations should be given to floor-space layout, equipment and its use of space, handling, access, aisles and passageways.
Racking Alternatives
You can choose either box-storage racking or open-shelf-file racking. In a self-storage facility, it is not wise to mix these two within the same storage units. Space optimization is usually best accomplished by placing box storage in whole units. The same holds true with open-shelf filing. Shelving configurations can change storage density yields significantly.
Your marketing plan should have identified if you intend to market horizontally or vertically. Vertical markets such as healthcare are excellent revenue producers.
Controlling Your Start-Up Cost
Traditional start ups can cost hundreds of thousands of dollars, but some methods can cost very little out-of-pocket expense. Of course there are some initial costs, but the goal is to limit them first, and then spread them over several years.
So, what are the costs? Since you may have decided to use an existing self-storage facility with extant units, there is little new cost related to the facilities. There may be some amount of remodeling expense if you need to take out separating walls between adjacent units.
Racking can be purchased or leased from the shelving supplier one unit at a time. Most self-storage facilities have existing customers with units that contain business records. These customers should be your first prospecting market. Since they are already storing records in passive units, it's likely that you can convince them that records management is to their advantage. You can document the cost savings for your customers and use it as the primary tool for justifying the costs in a switch to records management over passive storage.
Records management does require both computer hardware and industry-specific records-management software. This software in a traditional operation can cost more than $25,000 just to get started. Of course, you can purchase it and add that cost to the equipment lease over several years. FileMan has developed an alternative that allows you to rent the software on a transaction-by-transaction basis. This method is sometimes referred to as "metered" software. It is actually not much different than the "time-sharing" software concept and uses the Internet to make the cost of this option quite attractive. You will need only a PC, Internet access and inexpensive, bar-code, portable readers. These costs also can be loaded into the lease.
Your immediate goal should be to fill half of your first unit designated for records management. This portion of the first unit should offset all of your start-up costs amortized over the term of the lease. From then on, the only additional costs are related to shelving for each new unit that you convert to records management. Keep in mind that shelving cost should equal approximately the first seven to 10 months of storage revenue. Once shelving is paid for, then your storage revenue and yield should grow substantially.
Other costs to consider relate to other products and services that you may provide, such as shredding and destruction services and new cartons for customer storage.
This model presumes that you will develop a working partnership with a local courier company. As I wrote in the January issue of Inside Self-Storage, the split for pick-up and delivery may vary, but you should expect to receive as much as 40 percent of the gross courier fee. Retrieval revenue should add an additional yield equal to about 40 percent of the total storage revenue for box storage and sometimes even higher for open-shelf, medical-record storage. The more products and services that you offer your customers, the more your yield per unit will increase. There are also electronic billing services for your customers and direct deposit of your net revenue with no personnel cost related to monthly billing while you use the metered Internet service.
The key to optimization of your revenue per unit is low start-up cost spread over several years, with a minimum amount of added work for your existing management team. Additionally, your customers have access to their records-index information from their own PC in their office. They can request pick-up and delivery service through the Internet without talking directly to a manager, and you can receive an e-mail immediately as a transmittal order and delivery receipt. To reduce management time further, you may want to negotiate with your courier to perform the actual retrievals for your manager.
Training and Marketing
There are two very important issues that remain: management training and marketing. The training issue is actually a two-part situation. The first part regards basic training in records storage and retrieval practices. This training can be accomplished using video and audiocassette programs designed specifically to get you off to a fast start. The second part is relative to software training. If you choose the traditional software method, the software vendor will provide the training as part of your start-up cost. If you choose the Internet metered software, you will have interactive CD-ROM training, operating manuals and access to a help desk for personal coaching. As far as marketing, your strategy should be guided by your business plan.
Regular columnist Cary F. McGovern is a certified records manager and owner of File Managers Inc., a records-management consulting firm that also provides outsourcing services, file-room management and litigation support services for the legal industry. For more information about records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, Abita Springs, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected] or Web: www.fileman.com.