By Steven J. Hyman

Marketing is one of the most important aspects of a successful records-management business. As in any other industry, developing and implementing a sales program takes active effort. The most important elements of a good marketing campaign are:

• Fundamental knowledge of the records-management business.
• Knowledge of the market and competitors.
• A professionally designed website and marketing materials.
• Effective advertising.
• Sales appointments, lead tracking and referrals.
• Tradeshows and participation in associations.

Fundamental Knowledge of the Business

Understand and clearly define the services you offer. To successfully market records management and command the best prices, you must know your clients needs, even if they do not. Sell management, not just storage. Records should be organized, indexed in a software program, bar-coded for tracking, and categorized for retention. Once they have been properly cataloged, clients will know what they have and be able to easily locate and request documents.

State-of-the-art features such as web access and digital imaging can dramatically increase sales. Imagine how using these management tools compares to simply storing hundreds or thousands of boxes in a self-storage unit, forcing the client to search through stacks of files. Even when a file is found, there is no way to know if other files contain relevant information.

Be prepared to explain to clients how you can save them money and streamline their operations. Most do not take the time to analyze how much they spend on storing recordsor what they lose in time hunting for them. Knowing the benefits of your business will allow you to demonstrate how records management can greatly improve their businesses without significant increase in cost.

Knowledge of the Market and Competitors

Know what your competition offers. The best way to do this is to survey competitors about their services and prices. You do not have to precisely emulate them, but be aware what information clients are getting when they call around for services in your area. Whenever possible, differentiate yourself by offering services and programs your competitors do not.

A Professional Website and Marketing Materials

If you expect potential clients to perceive you as a quality organization, you must have professional marketing materials. When you contact unfamiliar prospects, they will request information about your company and its offerings. Usually, they want to be directed to your website. Your marketing materials are the first impression a client has of your organization, so they should put you in a positive light and clearly identify how your services benefit customers.

Effective Advertising

Advertising can be an important source of leads, but many companies rely too heavily on the Yellow Pages. While phone directories are a good option, keep in mind most people who fi nd you in a phone book will also be contacting other vendors. Your vehicle signage is actually a great way to drum up business. Some companies have reported success with targeted direct-mail campaigns. Do not overspend on print advertising. Save your funds for more efficient applications.

One of the most effective ways to promote records management is telemarketing. To implement a program, the first step is to identify a list of candidates. Hire a company with a good reputation for obtaining qualified leads, in this case, a list of individuals responsible for handling business records. Your telemarketing company should also have a sound understanding of records-management services and their key benefits.

Sales Appointments, Lead Tracking and Referrals

Once qualified appointments have been scheduled by the telemarketing process, a knowledgeable salesperson meets with prospects and discusses the benefits of a professional records-management program. It is important for the salesperson to understand the scope of work required to satisfy the clients needs. After the meeting, he will submit a proposal that demonstrates his knowledge of the clients requirements and outlines the specific benefits the company can offer.

In almost all cases, the records-management company can show cost savings and improved services. Develop a strong, well-designed template that can be used as a starting point for your proposals. This will ensure a professional, comprehensive proposal can be rapidly submitted to interested parties. Follow up consistently and frequently with leads in a professional manner.

A successful sales program requires a plan and organization, so use a good lead-tracking software. It should be intuitive and easy to use. While some programs will offer lots of bells and whistles, a simple, straightforward program will be used with greater confidence and efficiency.

One of the best places to seek new leads is existing clients. Do not overlook referrals as a great source for new business. Spend time building relationships with customers, and do not fail to express gratitude to those who help you. Consider incentives or a similar reward-based program.

Tradeshows and Participation in Associations

Two potential sources for leads, information and advice are local tradeshows that target businesses and governmental agencies, and trade organizations dedicated to records-management professionals. Most major metropolitan areas have a local chapter for ARMA International, an association for professional records managers. Other popular organizations include PRISM (Professional Records and Information Services Management) International, the Institute of Certified Records Managers and AIIM (Association for Information and Image Management) International.

This article covers the basic concepts of establishing a well-planned records-management marketing program. These concepts can strengthen your sales efforts. A professionally executed strategy can go a long way toward guaranteeing success.

Steven J. Hyman is president of DHS Worldwide, which provides software solutions, including sales and lead tracking, to the global records-management industry. Mr. Hyman has assisted hundreds of companies in developing and implementing records-management operations. He is a frequent speaker at national tradeshows and has published articles in leading trade publications. He can be reached at 904.213.0448 or [email protected].

The Rise of Recreation

The RV industry reaps approximately $12 billion a year. Current statistics from the Recreational Vehicle Association show more then 7 million RVs are on the road, and these numbers are expected to rise 15 percent over the next seven years. A recent poll revealed one of six households intends to purchase some type of recreational vehicle in the near future.

The popularity of RVing has increased in the last decade, as enthusiasts across the generations have experienced its fun and convenience. Baby boomers have led the trend as they retire and invest their extra income into leisure for the first time in their lives. Working parents have decided they want to spend more quality time with their children, enjoying the outdoors together. This became particularly true as traditional family values rejuvenated after the 9/11 tragedy. Last but not least, the energetic Generation Xers have been raised watching shows such as MTV's "Road Rules." To them, RVing is synonymous with adventure, freedom and extreme living.

Ironically, as the popularity of RVs has increased among the public, their acceptance by city planning boards has diminished. Most ordinances prohibit larger vehiclesusually those longer than 22 feetfrom being parked curbside for longer then 72 hours. And today's newer housing developments do not have large side or backyards to accommodate these vehicles. Trends clearly show covered parking for hire is the only storage solution, especially as prolonged exposure to the elements can damage vehicle siding, gaskets, seals and tires and cause interior deterioration.

While most vehicle-storage marketing has been geared toward RV owners, recreational boating is also a booming trend. According to the National Marine Manufacturers Association, the number of recreational boaters has climbed over the last several years. There are an estimated 17.5 million recreational boats in use.

Storage Options

The storage needs of RV and boat owners are similar, though boats have additional options of wet slips and vertical storage. There are six basic storage options for boats:

1. Open marina storage/wet slipsThis is one of the more expensive types of storage. Although it provides boat owners convenience, it also has the potential to cause the greatest amount of damage to watercraft. Boats left docked in an uncovered waterway are susceptible to all weather conditions, such as extreme heat, wind and rain.

2. Covered marina storage/wet-slipsThis is the most expensive type of storage. Boats are docked in the marina but are covered with a steel awning for shade. This provides the boat some sun and wind protection, but the boat is still susceptible to water damage.

3. Dry-stack/vertical storageVertical storage is designed for smaller watercraft. Boats are stacked two to five stories high and require a forklift for access. Although this is one of the more affordable types of storage, it is very inconvenient for the boat owner and is simply not an option for larger boats.

4. Open storageUsually, this is little more then a gravel road, chain-link fence and padlock for security. This type of storage provides little to no protection from the elements or vandals.

5. Storage at homeThis option takes up valuable backyard and/or side-yard space and can be an eyesore to neighbors. Many local ordinances prohibit parking in front of homes.

6. Covered dry storageThis is the best type of storage for convenience and protection. Owners can have easy access to their vehicles through locked gates. Boats are protected from sun, wind and water. Successful storage facilities are located close to freeway on-ramps, lakes and other popular boating destinations. Even sites near retirement communities make good locations.

There are three types of covered dry-storage facilities available for boats and RVs:

1. Units with three walls provide upper, side and rear protection. This option provides the best defense for sites with property-line divisions.

2. Covered (fl at or angled) units provide overhead but not side protection. Angled covers generally provide better site coverage and use, resulting in more spaces per acre. These units are similar to a basic carport design.

3. Fully enclosed units, like a large self-storage unit, provide optimum security, privacy and an endless number of optional amenities. Higher-end RV- and boat-storage lots may even provide climate-controlled spaces with running water, electricity, wash bays, dump stations and propane.

Why Invest

There are four reasons to invest in RV and boat storage: easy construction, simple maintenance, an untapped market, and the rising popularity of RVs and boats. To make the most profit, investors need to ride the wave of the vehicle craze and build now. The return on investment can be greater than that of selfstorage, since the building costs are less. Structures are easy to build as there are no moving parts (except in the case of enclosed spaces), and the sites are virtually maintenance-free once operational.

RV- and boat-storage investors need only follow these simple steps to get their project off the ground:

• Locate a property. There are several factors to take into consideration when choosing property for RV and boat storage. Properties near freeway entrances and those visible from the freeway do well. Sites near vacation spots, such as lakes, have an added bonus. Boat owners typically want to park their vessels closest to where they launch. They can actually save money this way, as savings in gas often makes up for storage costs.
• Consider the marketability of the area. Is it a safe area where people would likely want to store their belongings? A few hours on the Internet can sometimes show you the demographics of a location. This is important, since we know the average RV owner is married, owns a home and has a median household income of $56,000. We also know through research that the baby-boomer population is the leading force behind the upswing in the market.
• Find out if market competition is fierce or loose. Don't be discouraged if there is already a facility in town. If the market is right, several facilities can exist at 100 percent occupancy without a problem. In fact, once you begin looking around, you may find several have waiting lists of customers needing storage.
• Look into zoning. The city-planning center or a commercial real estate agency can tell you if a property is zoned for a storage facility.
• Secure financing. You can obtain financing through small-business administrations, banks, personal loans, etc. Some steel companies will lease you the materials needed to build the storage facility, thereby reducing initial start-up costs.
• Choose a design. An RV- and boat-storage professional can suggest the best design based on property size and your budget. He will provide pictures of facilities he has built in the past and work with you one-on-one throughout the design phase.
• Hire an engineer. Many construction companies provide in-house engineering. Engineers will create the blueprints and calculations needed to obtain permits. Unless other arrangements have been made, owners will usually need to pull building permits from the city themselves.
• Build the structure. Construction time will vary depending on the size of a project. Generally speaking, it will take two to three weeks to build 40,000 square feet, once engineering is complete and materials are on site. Construction costs vary depending on the structure. Fully enclosed units will cost between $6.50 and $9.50 per square foot to build; covered units will cost between $3.50 and $6.50 per square foot; and three-walled units will cost between $4.50 and $7.50 per square foot.
• Create a marketing plan. The best advertisement by far is a good location, visible from the freeway or a main street. RV- and boat-storage business owners can market through the Yellow Pages, the Internet, direct mail, etc. Many who hire a professional to create a marketing program are surprised to find they have actually reduced their marketing costs.

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Popular Q&A

Q.

How much rent can you charge for RV-and boat-storage spaces?

A.

Spaces range in price from $45 to $750 per month, depending on the type of structure (the coverage) and amenities offered.

Q.

What happens if a tenant doesn't pay his monthly fee?

A.

Similar to self-storage, liens are the most common remedy for tenants who refuse to pay their rent.

Q.

How much land do you need?

A.

The optimum amount of land is 10 acres. Although you can build a nice facility on 1 acre, it will not leave you any room to expand in the future.

Q.

What kind of coverage can you get per square foot?

A.

You can typically get 40 percent coverage.

Q.

What's the best layout design?

A.

I recommend putting the buildings back-to-back, with spaces on a 60-degree angle. Use 11-by-30-foot spaces with 35-foot driveways. Spaces designed perpendicular would require 50-foot driveways.

Q.

What size spaces do you recommend for the units?

A.

I usually recommend 11-by-30-foot units set back-to-back.

Q.

What additional costs should I anticipate?

A.

The daily operating costs associated with running an RV- and boat-storage facility is minimal. Most storage facilities have an on-site manager residing in an apartment to keep constant surveillance. Insurance fees can be obtained through an agent/broker or self-storage specialty insurance agency. This insurance will cover losses due to theft, etc. The cost of security will vary depending on what you provide. The most desirable storage facilities will have locked gates with keypad entry, security cameras, perimeter fencing and special lighting. Other miscellaneous expenses to keep in mind are property taxes and repairs.

Q.

How can self-storage facilities appeal to boating enthusiasts?

A.

Contact local boating associations, marinas and fishing organizations. Offer to extend their members a special discount. Consider offering amenities such as boat-trailer rental, boat transport and launching services, fueling, boat repair, etc.

Robert Hayworth is CEO of Baja Construction Inc., which has been at the forefront of the turnkey metal-structure industry for more than 30 years. The company's structure gallery includes self-storage, carports, and RV and boat storage. Baja maintains the highest standards while keeping costs low and construction time to a minimum. For more information about starting a project in your area, call 800.366.9600; visit www.bajacarports.com.

Everything we do has an emotional trigger. No matter how much you hope people are guided by logic and reason, it is often emotion that moves them to act. This is especially true of self-storage customers; so if you know which triggers drive the shopping and decision-making process, you will be much better prepared to create a smooth sales transaction.

What is the state of mind of the self-storage shopper? Storage is usually not a happy purchase. Even if someone just got a great new job in a city he always wanted to live in, the moving process is a pain in the neck. Many people store because of a divorce, a downsized household or income, a death in the family, or some other unpleasant circumstance. Even those who want storage just to clear out the garage are not thrilled to be spending the day moving stuff around.

When you add to this the fact that shopping for a unit is no fun, you have lots of emotions flying around. There are a lot of choices, and finding storage in a convenient location can be a hassle. First, not everyone answering the phone at a storage facility is friendly and helpful. Sometimes callers get busy signals and voicemail messages. Finally, most shoppers dont know much about storage or how to shop for it. This is what you are up against.

Not All Bad

Heres the good news: People in these sensitive states of mind really appreciate someone who can take them by the hand and lead them through the process. If you present yourself as the stress-reducer, storage helper, professional stuff-handler, your prospects will be putty in your hands. They will be glad you know what to do to help them, follow your recommendations and sign on the dotted line.

There are a few phrases that will help people give over their problems so you can move them in:

•  I can take care of that for you.
•  I understand the hassle you are going through.
•  If you let me help, there will be one less thing to worry about.
• What people usually do is...

These phrases demonstrate your empathy for their particular situation, your familiarity with the general situation, and your confidence in the solution. They also help to ease shoppers minds and allow them to relinquish their decision to you. Your ability to fire this emotional trigger means they rent with you and not someone else.

There is an easy way to remember how to use these key phrases. I call it feel, felt, found. It goes something like this: I know how you feel. Many of our other tenants felt that way, too. What they found was storing with us was a good choice. Let people know: their stress is something you understand and relate to; your storage facility was designed to take the anxiety out of a stressful situation; other tenants were distressed when you first talked to them, too; but after allowing you to help them through the process, they found storing with you was a great solution.

Sensitivity Gets the Sale

Im not suggesting you go back to school for a degree in psychology, but you need to be aware of prospects and tenants mindsets. If you are the person with the cure for their ills, you get the business. If you dont offer a solution, they go elsewhere.

A good way to view emotional triggers is to remember storage shoppers are really calling or visiting your facility to see if there is any reason not to store with you. If you demonstrate that you want their business, they will generally rent with you. On the other hand, a good way to chase off people is to be insensitive to their emotional states.

Look beyond the words a prospect or tenant is using and recognize the emotions involved. If you can do so, you will find the trigger that allows him to release the decision and you to close the deal. But you still have to ask for the sale! Say something like:

• Would you like to move in today, or is tomorrow better for you?
•  All I need is a little information to get you started. Whats your last name? (You should have asked for his first name immediately upon meeting.)
• We can take cash, checks or credit cards. Which would you like to use?

If you do not ask for the sale after having fired the emotional trigger, you will leave the prospect hanging in limbo and he will not rent from you. Putting your finger on the trigger means you have to follow through and ask for the rental. Sometimes you have to squeeze just a little, but the prospect will be glad he made the decision to store with you.

Moving forward, look at your job as the finder and igniter of prospects emotional triggers. You will be amazed by the number of people who allow you to walk them through the process and move them into one of your units.

Tron Jordheim is the director of PhoneSmart, which serves the self-storage industry as an off-site sales force that turns missed calls into rentals. This rollover-call service serves as a backup to store managers. Mr. Jordheim has started several successful businesses from scratch, and assisted with acquisitions as general manager of the Mid-Missouri Culligan Bottled Water franchise. For more information call 866.639.1715; e-mail [email protected].

Moving Toward Profit With Boat/RV Marketing

By Fred Gleeck

Whether you offer spaces as part of a self-storage, marina or RV operation, this article will show you ways to rent more spaces at higher prices. There is only one way to calculate your success: Compare how many dollars you spend on getting people to rent from you vs. how much money you make. Track your numbers carefully so you can continue doing those things that work and cease those that dont. First, remember you are a niche marketer. Not everyone owns a boat or RV, so you have to properly target these groupsseparately.

Open Road to Success: Reaching Your RV Market

If youre still in the construction phase of your storage project, look at your competition before building. Try and differentiate yourself from competitors by providing features otherwise absent in the market. For example, in some markets, youll want to offer covered spaces. Although more expensive to build, they can rent for a premium of 25 percent or more. Some facilities set up dump stations for RVs.

Visit any RV dealers in your area and talk to salespeople and general managers. This will not only help you discover what RV owners are looking for in a facility, it will give you an opportunity to win referrals. When I bought my own RV, one of the first questions I asked was, Where can I store this vehicle after I buy it? A smart storage operator will visit dealers and leave them with his promotional literature and some discount coupons.

RV owners are also likely to check with fellow owners before making a decision on where to rent, so give everyone you rent to excellent servicethe word will get around. Consider providing current renters referral coupons to encourage them to tell people about you. You could even offer an incentive such as rental credit. Once you get going, repeat customers will be your bread and butter. Your goal will be to keep these customers until they sell their RVs. That means giving everyone great service and bending over backward for regulars.

Finally, you may want to advertise, particularly in the Yellow Pages. In your ads, dont only say you offer RV storage, but highlight the features that will make owners want to consider renting from you. Before you can sell prospects on your storage site, you need to get them to call and then visit you. This will only be possible if you entice them with the benefits they crave.

First and foremost, address the issue of security in all of your advertising. Customers will want to be sure your facility is safe, as an RV is a major investment. Youll want your site to be well-lit and perhaps offer other amenities, such as computerized gate access and video surveillance. Your ad will read, Yes, we offer RV storage. Underneath, it should state, Safe and well-lighted.

Location is another important factor RV owners consider when deciding on a facility. They want one close to where they live as well as near a major highway for convenience when they travel.

Smooth Sailing: Targeting Your Boat Market

To win new customers in this market, youll want to focus on two groups: boaters or potential boaters, and those who sell boats and boating supplies. To target storage prospects themselves, its good to have a friendly connection with those who own, operate or manage boating facilities.

When contacting sellers or marina professionals, explain your facilitys features and benefits and provide an incentive for referrals. Chances are some of them own boats themselves. Give them a preferred rateor even a free spaceto get them to store with you personally. When they make sales presentations to potential boat buyers, one of the common concerns they address is storage. Its a great marketing technique if they tell prospects they rent from you.

Also, provide suppliers and marina operators preprinted referral sheets they can distribute to their customers. These should be coded to let you know who is sending business your way. At the end of each month, take care of the folks who took care of you. This might mean doing something as simple as sending a pizza to their office, courtesy of your facility.

Making Waves in Both Markets

An effective marketing technique that works for both markets is a hotline. Set up a separate phone line that plays a dedicated outgoing message for your boat and RV prospects. All you need is voicemail, which will cost peanuts from your local phone provider.

First, personalize the name of your hotline. For example, if your facility is in Osh Kosh, call it The Osh Kosh RV (or Boat) Storage Hotline. Include its name and number in all of your advertising, and emphasize it is available 24/7. People will often prefer to call a hotline number for information because they know there wont be a salesperson on the other end of the line.

When people call the hotline, the corresponding message will list your facilitys features and benefits. It should highlight what makes your facility different from competitors in the area. Dont worry about how long the message isit can never be too long, only too boring.

If youre interested in potential press coverage, set up the hotline as a public-service message that gives out valuable tips about boat or RV storage. In this case, any references to your facility will have to be subtle. Send out press releases about your hotline to local media. If you are in an area where boating or RVing is seasonal, send just before the season begins.

Another effective way to drum up publicity is to join online forums and discussion groups in the marina and RV industries. To fi nd them, visit websites such as www.google.com or www.yahoo.com, which feature links to search for different online organizations. When participating in discussions, you can provide a detailed signature file that explains who you are and what you do, and even includes your hotline number.

Some final things to consider are advertising on the web or in industry publications. The RV and boat industries have trade publications in which you can consider classified or display advertising. Always direct people to your hotline in your ads!

The Rental-Rate Debate

To determine your rental rates, start by finding out what your competition is charging. Set your prices comparatively at first, then increase them based on demand. You never want to be out of spaces when someone calls to rent, so when youre 90 percent occupied, bump up your rates. This way youll always have something to rent and can maximize your profitability.

The RV and boat markets are great niches for storage operators. The key is to target them with your marketing. First concentrate on the least expensive methods for driving traffic to your site. Monitor the results of your marketing to make sure youre not spending foolishly. Follow these suggestions, and youll rent more spaces at higher prices.

Fred Gleeck is a profit-maximization consultant who helps self-storage owners/operators during all phases of the business, from the feasibility study to the creation of an ongoing marketing plan. He is the author of Secrets of Self Storage Marketing SuccessRevealed!, available for purchase at www.selfstoragesuccess.com, as well as the producer of professional training videos on self-storage marketing. To receive a copy of his Seven-Day Self-Storage Marketing Course and storage marketing tips, send an e-mail to [email protected]. For more information, call 800.FGLEECK; e-mail [email protected].

By Michael L. McCune

No, not all of the Beatles are dead. But the handwriting is on the wall for the era of low interest rates. You may be asking, What are the signs of impeding rise in the cost of borrowed money?

• First, the Federal Reserve has raised rates consistently for more than four months, and it says it will continue to do so for some time.
• Interest rates are negativein other words, lower than inflation. If the Fed wants to limit inflation, interest rates will have to go up.
• Interest rates are at their lowest point in 43 years, an extreme condition from an historical standpoint. It should also be mentioned the government ran spending in the hole this year to the tune of $450 billion, and that had to be borrowed. You can imagine what the rate would be if you put that on a credit card!
• Finally, the economy appears to be growing again, if only modestly, and that requires more credit for other purposes. This means rates will likely increase because of supply and demand.

Whoops! I almost forgot that by the time you read this, the elections will be over, and whoever wins wont be trying to keep the rates down because he has four years until he has to answer to voters. In short, there is not a single credible indication that interest rates will go down over the next year and many reasons they will rise.

What Does This Mean for Self-Storage?

It means cap rates and interests are going up. Neither situation is good for self-storage owners or sellers and, frankly, much use to buyers, either. A rise in interest rates almost always means cap rates go up soon after, causing a decrease in the value of a property. (For a better explanation of cap rates, see my column in the November 2004 issue, titled Cap RatesA Mystery Unveiled.) If interest rates are going to increase over an undetermined period of time, owners and prospective buyers need to do some serious thinking about their investment strategies.

Fortunately, they only have three options from which to choose: hold for the period, sell, or buy. The time to make a moneysaving decision is quickly approaching! While the choice is difficult, the cost of delay could be high, unless you have the luxury of waiting for the interest-rate cycle to return. Lets see what we have to do to maximize our returns.

Buyers Opportunities

Buyers might think that with prices going down, they should wait to make a purchase. But when interest rates rise and prices fall, the cash-on-cash return decreases. Since a buyer is really purchasing cash flow and return on investment, in a period of rising rates, he ends up paying more in interest than he saves on price, and by a large margin. For example, a $1 million loan at 8.5 percent costs $480,000 more in interest over 25 years than a 6 percent loan, and the lions share of that interest is paid in the early years. In other words, a buyer has to get a giant discount to make up for a rise in interest rates.

Rates of return work the same way. A project that would have a 15 percent cash-on-cash return on a 6 percent loan would only yield a 9 percent return on an 8.5 percent loan. And dont forget that because loan amounts are inversely tied to value and debt-service coverage, it is unlikely a buyer would be able to borrow as much with prevailing higher interest rates.

Even though prices are high, now is a good time to buy. Buyers waiting for high interest rates and lower prices are usually caught in a losing proposition. Remember, the seller doesnt get the benefit of your loan, and that is where you get your increased cash flow. Sellers, make a note: If it is a good time to buy, it is a good time to find a buyer.

Should You Hold?

Self-storage is a good business with a long-term, bright future. If you are certain you want to stick with your current facility for the next five to 10 years, you are a holder. In this case, you must have a loan with a low interest rate or get one ASAP, otherwise your project may have trouble being competitive in difficult times.

Lock in a fixed interest rate for as long as possible, usually limited to 10 years. Playing around with variable interest rates in a rising market is a dangerous and tricky business. If you were that good at guessing rates, you would be on your yacht, not in the self-storage business! If you arent sure youre a holder, read on.

Are You a Seller?

This is really a series of questions, because few people believe they are sellers until they seriously ask themselves about the future. Most owners love being in the self-storage business and believe in its possibilities. They dont really like to think about selling. In the last decade, it didnt matter if you thought about it, because anytime you wanted to sell, you could, and on fairly favorable terms.

With interest rates rising and the upward trend likely to last for some time, selling is going to become less profitable and more difficult. The math behind buying a property doesnt work as well in a period of rising rates, which means there are fewer buyers and they have more leverage. Now is the time to decide if you are a seller, because the opportunities are going to change. To wait and sell at a later date could mean forgone profits or diminished price.

Let me describe what has happened over the last year because of falling cap rates. The roughly 1 percent drop (largely due to low interest rates) has increased the value of an average project by about 11 percent and the equity by a whopping 44 percent. This is without any improvement in net operating income. Unfortunately, this can also happen in reverse if interest and cap rates go up.

There are many reasons people want to sell their facilities, and many are uncontrollable. Some selling events include retirement, illness, desire to move, estate planning, divorce, need for cash, partnership breakup, a death in the family, an uncompetitive site, and overbuilding in an area. If you believe one of these reasons (or another) is likely to affect you in the next five years, consider selling now. If you wait to sell during the next period of rising rates, the terms, timing and price of the sale will be less favorable than those currently available.

The next few months are probably the last time for at least two or three yearsor even longerthat we will have a sellers market. It will also be the last time you can be sure to control the timing of a sale and the value you receive. Now is the time to make a valuation for yourself.

Michael L. McCune has been actively involved in commercial real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In 1994, he created the Argus Self Storage Real Estate Network, now the nations largest network of independent commercial real estate brokers dedicated to buying and selling self-storage facilities. For more information, call 800.55.STORE or visit www.selfstorage.com.

The fundamental difference between self-storage and records storage lies in the extent of what they offer customers. Self-storage offers space. Records-storage offers space as well as management, tracking and servicing of inventory. Service can add an additional 45 percent in revenue to a records-storage business annually, but to properly track and bill, you need software.

Traditionally, software is viewed as a cost. But if you consider the efficiencies software brings to an operation, including its ability to automate your business and ensure you get paid for everything you do, you quickly find it pays for itself over and over again. Invest in software on day one, and you will have a solid foundation for your business. Purchase software later, and you will pay three times: once for the software, once for the conversion, and a third time in lost revenue.

Tracking

In a records center, software is your tracking device. It tells you the location of every record in your facility, giving you control. Place barcodes on containers and shelves, associate the two with a scanner, and you can fi nd an item in seconds with 100 percent accuracy. Try to accomplish this with manual tracking and you’ll lose boxes and fi les, which will guarantee lost business. Let’s look at a real-life example.

FACS Record Center in Phoenix was tracking more than 130,000 boxes with its own system. It used a four-part transmittal form that contained a unique box number and handwritten location number. Part one of the form was returned to the customer so he could request his box when he needed it. Part two was used for data entry. Part three was adhered to the box, and part four was archived. The system worked—or so the staff thought until they became truly automated with barcodes.

With the FACS system, the entire box-accession process took about four minutes. With the new automated system, the per-box time was reduced to 45 seconds. “The old system, although functional, was time-consuming and left us open for errors. This was dangerous,” says Chuck Doucet, general manager.

Billing

Automation makes sense for tracking boxes, fi les and locations. But in a service business, it is equally important to automate the process for billing. If your customer-service personnel manually tracks boxes, data and supplies, you have opened the door for human error and, more important, lost revenue.

Following are typical records-center charges. This list refers to boxes, but you would charge similarly for files and tapes:

• Charge to store boxes
• Charge to deliver boxes
• Charge for rapid delivery of boxes
• Charge the customer to access his boxes at your facility
• Charge to destroy boxes
• Charge to pull boxes from shelves
• Charge to pick up boxes from a customer’s location
• Charge to put boxes back on shelves
• Charge to enter data or index information about boxes
• Charge for printed reports that itemize indexed information
• Charge for supplies, e.g., box sales

With software, these basic services, as well as many others, are automatically billed whenever a work order is issued. At the end of the month, an operator simply prints his invoices, which are populated with service totals. Human error is removed, accuracy is increased, and profits are secured.

Once FACS Record Center automated its system, boxes were discovered that had never been billed. “With our old system, a customer called in a box by location and box number per his transmittal sheet,” says Doucet. “If the data-entry sheet had been misplaced on our end, we may have never entered the box into the system, even though it was physically present. We could pull the box from the shelf, but we were not billing storage. It was only during the move and scanning that we realized a portion of our inventory had never been billed.”

Labor

Software automation and wireless scanning ability streamline an operation. Employees can complete more work in less time with greater accuracy. ArchivesOne, a multi-site records center, charted its revenue increases when it implemented a newer records-storage software package with wireless scanning, point-to-point tracking and other features. (See table below.) Its success demonstrates an increase in labor efficiencies as well as bottom-line profit.

Software is a necessary part of a records-storage operation. The right package will increase your profits and help secure long-term success. Doucet’s facility experiences average growth of about 20 percent per year without dedicated salespeople, and that is the industry average.

From tracking to billing to labor, this tool will affect every area of your business. Don’t start a records center today and implement an automated system tomorrow; that error that will cost you many times over. Invest in the software and buy your last system first. Then sit back and enjoy the additional revenue service will bring.

Anne Sommi Edmonson is the director of marketing for O’Neil Software Inc., which provides records-storage software and full-featured, commercial and corporate record-center tools, including the company’s newest software product, RS-SQL. O’Neil supplies barcodes, laser scanners, printers, industry education and more. For more information, or to read more about FACS Record Center and ArchivesOne, visit www.oneilsoft.com.

By Pamela Alton

Its already time to think about your marketing plan for 2005. With new facilities being built almost daily, competition for tenants will surely play a major role in maintaining or increasing occupancy levels at some facilities. What is your plan to achieve these goals? By designing a cost-effective program now, you can achieve the results you need.

The term marketing has been a buzzword in this industry for years. It refers to the advertising and selling of goods and servicesin our case, self-storage units. Although the idea of marketing has become commonplace, the execution requires effort. It is a long-term proposition and requires a strong commitment of time, energy and expense to be successful.

Create a Plan

The first logical step is to set up a marketing plan. Without a plan, you plan to fail! Those who fail to develop a strategy will be only reactive to the marketplace and end up spending more to advertise in costly, one-time media promotions. Prepare a proposal for the upcoming year, and you can determine in advance what money will be spent and set your expectations accordingly.

To design an effective marketing program, you need to begin with a goal. Do you want more commercial tenants? Do you have a certain unit size you need to promote and rent? No matter the objective, it is usually obtainable through hard work, commitment and, of course, sufficient funds.

Next, you need to research the cost for the type of marketing you want to use. Get quotes from several vendors and compare the services they provide. Once you have done this, you will have a good idea what your annual budget for outside marketing will be. Keep in mind those times when advertising outlets will offer deals that can work to your advantage, for example, the offer of a discount to renew your Yellow Pages ad.

Once youve gathered all your information and sketched out a reasonable budget, you want to identify a daily, weekly and monthly program to keep you focused on what you need and want to do. Schedule your monthly shoe leather marketing (off-site marketing, such as visiting other facilities or businesses in the area) for when you know your site is least likely to be busy because of a rental due date or the distribution of late letters.

Many national self-storage companies employ a director of marketing to help with their plans. Some hire outside professionals such as an advertising agent to assist in the design and preparation of brochures and media and print materials. You only have one chance to make a first impression, so even if you are a smaller owner, you should have professional-looking literature. And remember that everything you use to market your facility should contain your facility name, address and telephone number along with a map showing the site in relation to something people in the area would recognize.

Making Friends

Successful marketing also involves establishing relationships within the community. Being friendly with managers at local apartment complexes, mobile-home parks, retirement homes, marinas, colleges, military bases and real estate offi ces is a fantastic way to earn residential referrals. Making regular visits to businesses in your area can win you essential commercial tenants.

Commercial storage could make up more than 50 percent of your clientele. Business customers are usually good paying tenants and seem to store longer than residential users. Besides the normal avenues of advertising, you can do several things to attract businesses customers. Consider mailing a flier or postcard promoting storage for records or excess office items and inventory to accountants, doctors/dentists, retail stores, attorneys, hospitals, computer companies, restaurants, etc. They are likely to use your smaller 5-by-5 and 10-by-10 units. You can also target local electricians, landscapers, plumbers, handymen, contractors or construction companies. They will use your larger 10-by-15, 10-by-20 or 10-by-30 units.

After your initial contact with a referral or commercial prospect, follow up regularly. Continual contact is part of a successful marketing program. When you make follow-up visits, have a reason, such as replacing fliers you have stacked on a counter or filling the candy dish you provided (which, of course, has your facility name on it!).

Finally, consider using promotional items and incentives. These could be free gifts in the form of magnets, pens, key chains, letter openers, etc. They can also be used for trade fairs, door-to-door sales, chamber of commerce mailings and welcome wagon gifts. They can cost as little as 25 cents a piece or as much as $5 an item. The important thing is to keep your facility name fresh in the minds of prospective customers.

Consistency Is Key

Marketing is a program of consistency, especially when it comes to flier or postcard distribution. You cannot do it once and expect a return. If you keep your face and name in the public eye, when people need storage, you will be the one they call.

Create a marketing checklist to keep you focused. Include the names, addresses and phone number of your contacts, when you saw them, what marketing tactic you used, and when you need to follow up with them again. When someone does rent from you, find out how they heard about your facility. Tracking your marketing efforts is extremely important. You need to know which ones are working and which you can do without.

Pamela Alton is the owner of Mini-Management, a nationwide manager-placement service. Mini-Management also offers full-service and operations only facility management, training manuals, inspections and audits, feasibility studies, consulting and training seminars. For more information, call 800.646.4648.

Some regular readers of the magazine and attendees of ISS expos already know this, since the preliminary event took place at our tradeshow in New Orleans last fall. But many do not and, ideally, you only enjoy such an occasion once, so here it is: Im getting hitched at the end of October.

That being said, those who have been through the process may well remember the crazy, out-of-the-blue questions your future spouse leveled at you during the frenzied months leading up to the ceremony. Most of them are innocent inquiries stemming from bizarre dreams or advice proffered by family and friends. The conversations run the gamut from names for potential offspring and the true story behind past loves, to the ultimate importance of ones physical appearance and whether macaroni and cheese constitutes an acceptable dinner.

But the real coup de grace, the question of all questions, is the one that goes something like this: Sixty-some-odd years is a long time, sweetie (honey, sugar, babe, etc.), and there are a lot of attractive men (women) out there. Are you sure youll still love me when Im old? You wont start looking around for a younger (better, etc.) model? A negative or uncertain response incites the expected hysteria. But even an appropriate answer, accompanied with the right assurances, gets you a raised eyebrow and the retort: How can you possibly know what you will feel (think, do, etc.) in 20 (30, 40, etc.) years?

Unlike marriage, there are situations in which it is perfectly acceptable, even encouraged, to get something going on the side, and that is in matters of business. When it comes to offering products or services to customers, there is nothing objectionable about venturing into unfamiliar territory and expanding the menu.

In self-storage, the most popular mistresses are merchandising, records storage, boat/RV storage, wine storage and truck rental. Now rivaling these are new beauties: high-security, upscale storage of valuables, small-business and postal services, moving services, and add-on businesses such as car washes and coffee stands. Pay the proper attention to these eye-catchers, and the savvy operator stands to satisfy customers and his own bottom line.

In past issues, weve included substantial articles on records, vehicle, wine and mobile storage, as well as truck rental and business-related services. You can find them in our online article archive at www.insideselfstorage.com. Also check out this editions add-on business overview, which highlights the pros, cons and pitfalls of popular ancillary options. In addition, this issue takes an in-depth look at car-wash operations, a venture operators like Sherman Self Storage Center in Coeur DAlene, Idaho, have found remarkably successful.

To whichever ancillary offering your particular eye wanders, always investigate potential partners and use caution before investing to avoid regrets. In self-storage, a little something on the side can be the difference between contentment and bliss. Just dont forget your true love in the process!

Best wishes,

Teri L. Lanza
Editorial Director
[email protected]

By Michael L. McCune

This month, I gathered real estate experts to discuss the state of self-storage in the North-Central United States. Lets hear what they have to say about their respective cities and regions. Our panel of brokers includes: Bruce Bahrmasel and Matt Libman, The Preferred Realty Group, Lincolnwood, Il.; Larry Goldman, Prudential CRES Commercial, Kansas City, Mo.; Peter Hitler, Investment Real Estate Specialists, Mequon, Wis.; and Robert Off, Coldwell Banker Commercial, Cincinnati. These are interesting times, so I wanted to ask our brokers straightforward questions every owner and potential buyer will find pertinent.

1. Is this a good time to sell self-storage?

Bahrmasel: Now is an excellent time. Cap rates in self-storage are generally more favorable to investors than those in apartment buildings and other investment properties. In addition, low interest rates have continued to buoy the market.

Goldman: Yes, though there are some fundamental changes in the business some owners may not want to confront. Specifically, increased competition has made responsive, effective management far more critical. The inevitable rise in interest rates in the near future brings an increased urgency to sellers who are planning their short-term exit strategy.

Hitler: Storage facilities are still selling at all-time-high prices. If an owner has good reason to sell, such as a health issue or retirement, the time could not be better. If a seller is trying to reproduce his income in the stock market or other investments, it probably is not a good time to sell, as alternative investments do not offer good returns at this time.

Off: I think now is an excellent time to consider the sale of your self-storage facility. The economy is, by almost all accounts, on the rise. Sales prices have never been higher and capitalization rates more favorable. The housing market continues to be strong despite a bump or two. Vacancy rates remain at generally acceptable levels, even with high levels of new construction. Money and loans are still available on favorable terms and at low rates. What could be better? Unfortunately, everything has its time, and all real estate has its cycles. As the old Wall Street proverb suggests, Buy low and sell high. Or as Obi Wan Kenobi said to Luke Skywalker, Sell now, and may the cycle be with you.

Heres an example to demonstrate what the change in cap rates has done for you in the past year. If your project generates $100,000 of net operating income annually, your property value went up $150,000, or approximately 15 percent, just based on the change in cap rate. And if you had the property financed at 75 percent, your equity went up 75 percent. Is it time to sell? You tell me!

2. Why should potential investors buy self-storage at this time?

Goldman: Storage is still a favored product type because of its relative ease of management and diversifi cation of risk, despite overbuilding.

Hitler: The reason to buy is the same as why a seller may not want to sell. Self-storage is offering very good returns when other investments are not.

Libman: Self-storage has an overall better return on investment than alternative real estate investments.

Off: Having just said now is an appropriate time to consider selling, I also think its a great time to buyprovided you are buying for the right reasons and at a price that makes economic sense for your specifi c business. A few reasons buying today might make sense are you can: 1) leverage your operating experience by turning around an existing facility or one which is still in the development stage; 2) round out your market/territory by filling in particular market hole/ void; 3) increase your advertising, financing, expense and management efficiencies; 4) eliminate competition, thereby possibly increasing rental rates in your market; and 5) quickly break into a new marketplace.

The reason to buy is the low interest rates make your investment work harder for you. This very positive leverage will increase cash-on-cash yields dramatically. It is clear the interest- rate environment is quickly evaporating, so not only is now a good time, it may be the last time for a while.

3. Are other types of real estate underperforming and driving buyers to self-storage?

Bahrmasel: Yes.

Goldman: Most product types, including self-storage, are producing far lower returns than in the past. Some product types, such as offi ce buildings and distribution facilities, are perceived to be riskier, due to corporate downsizing, bankruptcies and, in the case of industrial properties, inventory controls.

Hitler: Some other types of real estate are underperforming. Industrial and office properties are still soft. The apartment market in the Milwaukee area is getting better. I have had many apartment owners look at buying self-storage because they are tired of the management problems of residential real estate. The condo market is very strong in this area.

Off: Without a doubt, all other types of commercial real estate seem to be operating in a marketplace where owners are chasing fewer and fewer rent-paying tenants. Making those traditional real estate product types work today is worse than playing a zero sum game.

Many other real estate types are experiencing high vacancies and declining rents that make the underlying stability of the income less secure than well-located and operated selfstorage facilities.

4. Are buyers having diffi culty getting loans for self-storage?

Bahrmasel: No, buyers in Illinois have not been having any difficulty getting loans.

Goldman: Lenders are still very eager to lend on compelling self-storage transactions. They just may not be as willing to accept overly optimistic projections in their underwriting as they may have been in the past.

Hitler: There is plenty of money available, although rates are creeping up a bit.

Off: No, the money is out there for the taking. Lenders are happy to talk with buyers with a good story, particularly if they are experienced in self-storage.

Not only is money available, but it is the cheapest it has been in 40 years.

5. Are cap rates dropping in your market? What impact does this have on buying and selling self-storage properties?

Goldman: Ironically, as the economic fundamentals have weakened, cap rates have also dropped dramatically. This more than offsets the drop in value due to the deteriorating performancefor now. As interest rates (hence cap rates) increase while the fundamentals continue to decline or stagnate, valuations will very possibly decline.

Hitler: Cap rates continue to fall in the Wisconsin market. I would say properties are on the market longer, but they still seem to sell. Sellers are tougher on their price, and buyers dont have a lot of alternatives because of the lack of available properties.

Libman: Yes, cap rates have dropped in the Illinois and Indiana markets. However, cap rates for alternative real estate investments are significantly lower than what we are seeing in storage. With this in mind, self-storage remains a very good buy.

Off: The lower the cap, the higher the price. The higher the price relative to the net income of the facility, the more buyer resistance increases. The higher the buyer resistance, the slower the market becomes. Sad, but true!

All things being equal, lower cap rates mean higher values. It appears that in some places, not all things are equal. Its just like your mother told you, Life isnt always fair.

Michael L. McCune has been actively involved in commercial real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In 1994, he created the Argus Self Storage Real Estate Network, now the nations largest network of independent commercial real estate brokers dedicated to buying and selling self-storage facilities. For more information, call 800.55.STORE or visit www.selfstorage.com.

By Jeffrey Greenberger

Ten years ago, people who wanted to store vehicles at self-storage facilities found themselves relegated to a grassy or muddy lot along the back fence or had to place their vehicles in a standard storage unit. These days, however, vehicle storage is big business, with buildings constructed solely for the purpose of storing large RVs, boats, antique cars and more.

Over the years, self-storage owners have expanded their operations to make them more attractive to customers. Those who store boats and RVs now offer all sorts of services, including vehicle maintenance, repair and restoration; oil changes; chemical-toilet cleaning and washing; and boat launching and retrieving. Some offer to gas up vehicles as well as stock them with food and beverages. But while offering these customer conveniences may seem smart, they change the nature of your relationship with customers.

The Danger of Creating a Bailment

Providing additional services for RVs and boats through your storage operation can put you in a valet-type arrangement, making you a bailee of stored vehicles. Having a bailment means you have control over what happens to an item while it is in your care. In a typical selfstorage arrangement, operators seek to avoid bailmentsthat is, they rent space and, for all intents and purposes, what happens to what is stored there is the business of the occupant only.

This sort of freedom can also be the case in RV, boat and vehicle storage if you simply let tenants park and lock. However, if you have additional control, i.e., you hold the keys or park or rack vehicles for tenants, you have a greater degree of responsibility for the care, custody and control of stored vehicles.

Typically, the duty you assume is that of ordinary care. It is similar to that of a valet at a restaurant or shopping center, for example. People expect a valet to carefully park their cars somewhere reasonably safe and return them in the same condition in which they left them. Otherwise, they expect him to be responsible for his own negligence. Obviously, if the valet willfully damaged a car, he would be liable. Conversely, he would generally not be liable for extraordinary or unexpected events, such as a car being stolen from its safe parking space. In short, as a bailee, you are solely liable for ordinary and foreseeable damage.

Lets say you keep keys so you can park vehicles or have them pulled up, warmed up or cooled off for tenants when they arrive at your facility. During storage and delivery, you have an ordinary duty to take all caution and avoid damaging the vehicle. Normal damage that occurs on your watch is your responsibility.

Similarly, if you gas up the vehicle, you are liable if you use the wrong type of gasoline. If you undertake to have repairs or restoration made to the vehicle, you are responsible if they are not made properly. In a far more extreme case, if you stock a vehicles refrigerator with food or beverages for a customer, and someone takes ill or has an allergic reaction, you could possibly be held accountable.

Fear of Finger-Pointing

In general, you are liable for any damages or dissatisfaction a customer has with the services you provide. Sometimes, however, you become the victim of things that arent your fault, as in the case of a vehicle owner who blames you for damage he inflicted himself. For example, a tenant backs his RV into a tree or a bollard, causing $10,000 in damage to the vehicle. He then pulls the RV into his space and parks it. You have a key because of services you provide, so you have a bailment. The owner comes into your office a week later and asks how his vehicle got damaged, attempting to hold you accountable for his blunder.

In this case, there are several simple steps you can take to minimize your liability exposure. First, you must have the appropriate insurance, in adequate amounts, to cover you for losses arising from your bailment. Remember, RVs and boats can cost upward of $500,000. Having regular self-storage insurance is not enough, since that policy presumes you are not assuming care, custody or control of tenants property.

Second, having digital video cameras that record the comings and goings around your vehicle-storage area is critical. If you can show proof a vehicle was damaged prior to being parked in your spaceor have the incident in question on filma tenant will be less likely to succeed in his claim that you caused the damage (or theft or vandalism or whatever it is causing the dispute).

Third, make sure the rent you charge is commensurate with the value of services you provide so you can afford the liability you accept. Do not take on a bailment gratuitously. If you are going to provide a gas service in which one of your employees drives vehicles to a gas station to fill them up for tenants, make sure your charge reflects all of the additional costs of insurance and liability.

If your employee is hit by a drunk driver on the way to the gas station, his injuries (in most states) will count against your workers- compensation rating, and the damage to the tenants vehicle will apply to your insurance. If the driver who hit your employee is insured, you may make a recovery; but you must price your services to recognize the risks.

Fourth, form separate entities to perform certain types of services. That is, while you store a vehicle as ABC Self-Storage, subcontract the repair or moving functions to ABC Transportation Co., a separately owned LLC or corporation responsible for the moving of vehicles. That way, if there is a catastrophic loss or you are not adequately insured, you may still be able to protect your investment in the facility.

Releases of Liability

People often ask whether they can have tenants sign a release of liability to absolve them of responsibility in the event of a vehicle-storage incident. Generally, these releases are ineffective in the case of a bailment. If they worked, every valet-parking service in the world would have you sign a two-page release before they took your car. The case law usually holds you cannot be released from this type of liability because you are undertaking the bailment for a charge. If you assume the bailment, you are liable for the ordinary and normal consequences if damage occurs.

While you may include releases in your self-storage contracts (and I still recommend doing so), do not rely on a release as your sole protection. Remember that while all of your services represent a benefit to your tenants and make wonderful marketing statements, you must be aware of the liability you assume and be ready for it in advance.

This article is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.

Jeffrey Greenberger practices with the law firm of Katz, Greenberger & Norton LLP in Cincinnati, which primarily represents owners and operators of commercial real estate, including self-storage. Mr. Greenberger is licensed to practice in the states of Ohio and Kentucky, and is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association. He is a regular contributor to Inside Self-Storage magazine and the tradeshows it sponsors. For more information, call 513.721.5151.