Can records storage be a profitable add-on business for an existing self-storage facility? Absolutely. It offers long-term annuity revenue for low additional capital as well as controllable expenses that are always matched by profitable service income.
Even though we live in a digital age, and computers and cloud-based storage have reduced the amount of paper produced and maintained for business records, companies still output a significant volume of documents. Businesses such as law offices, hotels, engineering firms, auto dealers and many others continue to maintain records in hard-copy format, which are eventually packed in boxes and stored. Why not at your facility?
Revenue Opportunity
Many self-storage operators already have relationships with existing businesses, creating an excellent opportunity to gain records storage without a great deal of sales effort. Onsite office storage is expensive for small enterprises with little real estate. It’s likely that as much as 25 percent of your existing customers are businesses. In fact, several of your units—perhaps as many as half—already contain boxes of business records. By converting these customers to records-management accounts, offering them space by the cubic rather than the square foot, you can generate more revenue from your existing units.
In addition, records storage ensures low customer turnover, as business documents are often kept in storage for many years. Your initial revenue stream is just the beginning, as many customers don’t manage their document creation and destruction processes very well. As these organizations grow, their records volume also expands. Offering this type of storage ensures a lifetime relationship with the customer rather than a simple monthly lease.
Finally, the revenue from records storage is an annuity that never decreases. It becomes permanent revenue with an annual contract, automatic renewal, built-in price increases and penalties for cancellation. You can choose which level of service to offer, which can be limited in scope to simple outsourced tasks. Service revenue always exceeds expenses if the facility operator adjusts his charges annually based on costs.
Ongoing Profitability
Of course, there are some important considerations to ensure the profitability and permanence of your records-storage income. First, you want to use a standard records-storage agreement, which is easily available from market sources. The term should be fixed at a minimum of 12 months, at a set rate, with automatic renewal.
Your prices for storage and any related services will be set using a rate schedule, which should be attached to and referred to in the rental agreement. Descriptions of your various services are generally printed on the reverse side of the price list to ensure customer understanding and compliance with terms. Annual rate increases are usually based on the regional cost-of-living index. Here are a couple of other important items to consider:
- The final retrieval of any box will require a permanent-withdrawal fee, which should be clearly listed in the price schedule.
- Your limitation of liability will always be fixed at $2 per carton, but you can also offer coverage for excess valuation, just as you do for self-storage.
Records storage is a valuable commodity. Beyond the storage income, the contracts have value, and there are ready buyers for them. The beauty of it is, the sale of these contracts doesn’t require the sale of any property or other assets. Each records-storage contract is worth three or four times the annual storage and service revenue it generates, so if you ever decide to exit that side of the business, you can do so easily.
Adding records storage to self-storage can be an excellent business decision. You’ll need an implementation plan and access to resources such as standard industry contracts, operating practices, employee training courses, sales and marketing materials, and simple software. From there, you’ll enjoy a regular income stream that only grows with time.
Cary F. McGovern, aka “FileMan,” has been in the commercial records-management industry for nearly 40 years. He’s helped more than 500 companies in 23 countries enter and excel in this unique business. He offers a no-cost, risk-free consultation on records storage to interested facility operators. To reach him, call 504.669.0559; e-mail [email protected]; visit www.fileman.com.
