We all know of people who enjoy the finer things life has to offer. They drive whatever exotic vehicles they want and couldn’t care less that gas is approaching $4 per gallon. They travel on plush private jets to business meetings and long Caribbean vacations. They wear silk, cashmere, linen and organic-cotton clothes while dining on exotic food prepared by world-class chefs.

Not all of these folks are celebrities, captains of industry or public officials. They live in peace with their families and do what they want, when they want. If I listed some names, you wouldn’t recognize a single one. Yet, they live a dream lifestyle that few can even imagine.

How do they do it? They have built multiple businesses using a certain marketing mindset that I’m going to teach you in this article. You’ll have a new view on marketing that will drastically increase the profitability of your self-storage business and any other business venture you might embark on in the future.

The Gift That Keeps on Giving

As a self-storage operator, you have a rare gift that most industries don’t get to enjoy without significant effort, planning and execution: You earn repeat sales automatically when a new tenant rents from you. Most industries must work diligently to create advertising that creates one sale. After that sale, they hope the customer’s experience was good enough to earn a second sale sometime in the future.

But that’s not true for you. If you rent someone a unit, you get the first month’s rent, profit from packing supplies and maybe an extra few dollars from a pay-with-rent tenant insurance sale. And then, one short month later, you get another chunk of revenue from that person. This happens again and again until they move out. Some folks will only stay for a few months, but others will stay for years, paying you rent each month.

It’s a marketer’s dream come true to acquire a customer and automatically earn sales for months or years on end. Most operators take this valuable gift for granted. Imagine if you had to re-sell each customer every month. It wouldn’t be much fun or very profitable.

Once you understand the power of this, you can easily begin to focus your energy toward your most important objective, which is acquiring customers.

Acquiring Customers

Savvy marketers understand that it’s perfectly fine to lose money on the first sale. And if the economics work out, it’s OK to lose money on the first few sales. In other words, if your average tenant brings a net profit of $700, it’s worth it to pay $350 or even more to acquire that renter through a marketing channel.

Smart operators gladly pay $350 for a new tenant rather than hold an excessive inventory of vacant units. They don’t look at a tenant as being worth only $70 because the total value is $700. Further, they understand the importance of building the value of their asset by about $2,450 each time a new customer rents, even if they pay $350 for a new tenant!

Most operators have a flaw in their thinking when it comes to marketing. They believe they need to recover their marketing investment after the first month’s rent is paid by the new tenants generated. In reality, as long as cash flow allows, you can wait for several months to begin profiting from your marketing investment.

To help illustrate this important concept, I’d like to walk you through a few scenarios. In the first, tenants are worth $515 and your cost to acquire each is $350, leaving you with $165 net operating income/cash flow. In the big picture, you’ve added approximately $21,994 to the value of your asset using a cap rate of 7.5 percent. Before looking at the math this new way, most operators would consider such a campaign a dismal failure. Ask yourself how you would’ve reacted before reading this article if you spent $3,500 on a marketing campaign and only saw 10 tenants as a result.

Now, let’s look at another scenario. In this case, tenants are worth $735 and your cost to acquire each of them is only $150. This leaves you with $585 of net operating income/cash flow with a big-picture gain of $77,980! Most operators can relate well with this scenario as $150 is a common cost per acquisition (CPA) and the other contributing numbers are not far off.

Are you starting to understand the power of this kind of thinking? Let’s walk through one more scenario just to be certain. This time, tenants are worth $1,010 and your cost to acquire each is a whopping $750, leaving you with $260 of net operating income/cash flow with a big-picture gain of $6,931!

You might think these numbers are unrealistic. If so, speak with a good broker about this as they deal with these numbers every day.

Obviously, operating expenses need to be considered when determining your net operating income. But, even after considering those expenses, you’ll be wise to think in terms of acquiring customers, CPA, lifetime value and cap rates.

I also realize that cash flow is a huge issue with this type of thinking. In the third scenario, you had to wait 7.5 months to get your initial cash back. In a lease-up situation, dealing with this can be difficult, but it’s absolutely the smartest way to think about increasing the value of your asset, which is why proper financing is crucial because you need the cash to sustain aggressive marketing like this.

Wait and See

Your only other option is to wait and see. If you’re in a fantastic market, you’ll reach stabilization eventually without spending much on marketing. As I see it, two problems exist with this type of thinking. I’ve never been a fan of unpredictable, passive growth strategies. You have no idea when you’ll stabilize and are gambling with fate.

Empty units are worth absolutely no cash flow to you. They’re only worth the land they sit on and the dismal value of used-building materials. During stabilization it’s much better to have a paying tenant in a unit—even if you don’t see a penny of profit for 7.5 months—than it is to have an empty unit. After you reach stabilization, having 5 percent to 10 percent of each unit size empty is essential. But until then, get tenants in those units.

Ideally, you’d profit from new tenants from day one and wouldn’t have to spend a penny on marketing to acquire them. I completely agree with that. However, that’s simply not a reality in competitive markets.

The bottom line is this: Marketing is an extremely lucrative investment. The wealthiest people in the world realize marketing and innovation are usually the only two things that make you money.

If you don’t have the cash to invest like you should in marketing, beg or borrow to get it; it will be well worth it. After all, this billion-dollar marketing lesson has been working since the beginning of free enterprise and will continue long into the future.

Derek M. Naylor is president of Storage Marketing Solutions, a full-service, results-oriented marketing and advertising agency dedicated to the self-storage industry. For a free subscription to his e-newsletter, call 800.941.4805; e-mail [email protected]; visit www.storagemarketingsolutions.com.

Factbox

“Be passionate about getting more referrals and repeats from existing and former customers. These are the lowest-costs rentals you can get. On the other end of the spectrum are the highest-cost per lease tenants—those garnered through Yellow Pages, newspaper and radio/TV ads.”

—M. Anne Ballard, Universal Management Co., Inside Self-Storage Factbook 2008

“Our best bet for marketing has always been referrals from previous or current customers. We offer a $25 credit or gift card to the tenant passing on the referral and $25 credit to the new renter. We still have referrals coming in from tenants who rented years ago! We love that!”

–Submitted on www.selfstoragetalk.com, the online forum for the self-storage industry

Many developers, investors and operators believe the self-storage industry is recession-proof. However, the weakened economy, fueled by the subprime lending crisis, poor credit market, historically high gas prices and one of the worst housing slumps in history has had a negative impact on the industry.

The question now is: What can a self-storage operator do to improve facility performance?

Teamwork and Training

Having the best operational team and providing the right training is essential for your success. The more your staff knows about your operation and what it takes to be successful, the better the chance of improving your bottom line.

Training can improve product knowledge, which transfers to the customer. It will also maximize the retention of your employees because they will feel more “enriched” in their role within the operation. In addition, it will minimize burnout and frustration, which adds to a more productive environment.

Consistency develops and improves with training, and helps standardize the level of customer service. Plus, if customer service is a cornerstone of your marketing, you need to make sure your employees can live up to it.

Discipline and Expectations

The next step is to create an atmosphere of discipline within the organization to educate the management team on the key elements of the business. Discipline also leads to better understanding of each team member’s job description and company expectations.

Discipline creates benchmarks vital to the operation of any business. Once a self-storage operation sets benchmarks in the key performance areas of the business, it can make adjustments and improve the overall operation. Standards for performance in each critical area of the operation can be established.

Once your employees know these standards and your expectations, you must continually reinforce their awareness in these areas. In addition, there must be effective ways of measuring and tracking results. Tracking helps establish accountability and lets you reset operational benchmarks as improvements are made.

Improve Your Sales Program

The manager of a self-storage operation is the most important asset to the success of the business. However, the phone is the most powerful tool available to managers, enabling them to convert more callers and walk-in customers to renters and maximize the return on each marketing dollar spent.

It’s important to track and measure the important aspects of the sales program to improve on them. In addition, it is critical to know how you stack up against the competition, and to understand the unique features you offer. These special products and services can build value and trust with the customer. Training your staff to market your facility’s features to customers will lead to more units rented and bigger profit.

Maximizing Marketing

If done properly, marketing will also help develop a steady stream of referrals for your facility. The sales program must be developed first to maximize the return on the marketing dollar. It is critical that you identify your various target markets to know where to spend your time, money and energy.

Most self-storage operators are inconsistent with their marketing efforts and don’t establish a well-defined program. There must be consistency and repetition. Once achieved, the marketing plan will work in harmony with an effective sales program to take your operation to a higher level.

Reward High Productivity

Finally, it is vital to reward employees. Rewards improve performance and develop consistency. Proper goal-setting, incentives, contests and bonuses will focus stronger attention on what needs to be accomplished. Establish a formal program to recognize high achievers and motivate them to higher levels.

Brad North is founder of Advantage Business Consulting, which specializes in facility management, feasibility, onsite sales, marketing and operational training for the self-storage industry. He contributes articles to various self-storage publications and is a nationally recognized speaker and consultant within the industry. For more information, call 513.229.0400; visit www.advantagebusinessconsulting.com.

How can the portable-storage industry cope with the challenges posed by the recent economic upheaval? In analyzing any business situation, you should weigh different approaches before choosing the one that works best for you. Let's examine three different strategies portable-storage operators can use to stay competitive even during tough times.

1. Mini-Min. Taking this position would mean minimizing operating expenditures, reducing staff, offering promotions and, perhaps, subletting some warehouse space, trucks or lifts. Selling assets, to a “friendly competitor” in a distant market won't affect your own business, but will generate cash or eliminate the monthly expense of idle assets. In addition, terminating slow-paying and complicated customers reduces time and effort spent on generating marginal income.

The benefit is you collect the current monthly rentals at basically no variable operating costs. The drawback is customers get minimal service, and your market presence is heavily reduced. The business has little or no exposure to the market and new customers may choose a competitor doing more promotions. 

2. Mini-Max. This strategy is more of “let’s go with the flow,” in which you don’t invest in new containers, trucks, lift or warehouses. Still, you should maintain customer service and promotions at current levels while being thrifty. By offering incentives for longer rentals, you can support the use and stability of the business. Offering free delivery/pickup is a common incentive, but can backfire. It is a direct expense and, with current high fuel costs, it means cash out but no cash in. Offering free months is not an additional cash layout, and is a preferred form of discount over free delivery.

A sales-oriented portable-storage operator doesn’t want to reduce promotions, but must review advertising to ensure it is efficient and provides the best value for money spent. Reducing ad size may not affect the number of new customer calls, but saves money. Doing a geographic overlay of the customer base and the promotional efforts is a good way to measure the effectiveness of various advertising campaigns. The best example is to look at the local Yellow Pages’ areas and compare them to your customers’ geographical locations.

Be sure your company name and information is on your containers so potential customers can see them loaded/unloaded or transported in their neighborhoods. This can be a great marketing tool.

Having a concentrated customer base is another valuable strategy. By operating in a smaller geographical area, you may obtain better economics overall. Being closer to your customers makes it is easier to provide good service, which is the best form of promotion. Good service means referrals, and translates into more business at no additional cost.

3. Maxi-Max. In this scenario, a portable-storage operator takes advantage of a market’s weakness. During a soft economy, suppliers often rely on rebates to add oomph to sales. Look for deals in all the right places. Another marketing strategy is getting involved in your community, which can lead to local media exposure. For example, offer a free container for highly visible locations such as schools, sports arenas or municipal offices for a limited time. This gets your name seen in a charitable fashion.

Finally, the most aggressive position is to look to your competitors for opportunities. They may be interested in selling equipment, containers, trucks, lifts, or even the company. They may have customers who are difficult to service because of location or specific demands. It may be an opportunity for you to buy these containers with the attached rental agreements at a discounted price. Obviously, this strategy poses additional risks, so timing and prudence are important.

Beware, though, a prolonged downturn may mean your aggressive actions don’t pay off as quickly as projected, which may cause an unnecessary squeeze on cash flow. To take advantage of existing opportunities, you need available capital. Stay in touch with your funding sources—banks, finance companies and private investors—at all times. 

Stay Flexible

The best approach to the changing environment differs between companies, but a skillful entrepreneur finds ways to adjust and adapt to new conditions. Change may even bring bigger opportunities.
 
Anders Norlin is the owner and managing member of Box Credit LLC. He has more than 15 years experience in the container-leasing and portable-storage industry. Box Credit specializes in financing portable-storage and self-storage businesses as well as providing financial consulting and brokerage services. For more information, call 415.381.8542; visit www.boxcredit.com.

The Self-Storage Training Institute, owned and operated by Inside Self-Storage (ISS), has launched a new Qualified Storage Manager (QSM) training program that allows facility employees to take classes on the Web. The complete curriculum contains 26 courses taught by top experts of the self-storage industry and covers essential management skills including phone techniques, marketing, customer service, pricing strategies, sales, collections, site maintenance, legal issues and others.

Students can complete all 26 courses, earning a QSM designation and receiving a certificate in honor of their achievement, or they can take classes a la carte to focus on specific areas of interest. All courses come in webinar format, so they can be bought and experienced at the participant's convenience.

Classes range in price from $29.95 to $44.95 and can be purchased in any combination. The complete QSM curriculum can also be obtained in a single package at a more than $100 savings off the standard list price.

The QSM program was created in partnership with industry veterans Jim Chiswell and Mel Holsinger, former owners of the Self Storage Education Network. Chiswell is the owner and president of Chiswell & Associates LLC, which provides feasibility studies, acquisition due diligence and customized manager training for the storage industry. Holsinger is president of Professional Self-Storage Management, which offers facility management, consulting and development services.

Information about the QSM program including instructor biographies, course descriptions and enrollment details can be found at www.selfstorageeducation.com. Interested parties can also inquire at the ISS booth (#416) at the Inside Self-Storage Expo in Nashville, Tenn., Oct. 7-10, 2008. Visit www.insideselfstorageexpo.com for show details.

In addition to its online training institute, ISS (www.insideselfstorage.com) provides a monthly magazine, bi-annual expos, free webinars and e-books, a weekly newsletter, and other informational resources for the self-storage industry. The magazine was launched 17 years ago by Publisher Troy Bix.

Canadian Mini-Warehouse Properties Co., a partner of Public Storage Canadian Properties, purchased a 10.6-acre vacant lot in Ottawa, Ontario, Canada for $889,000 to build a self-storage facility. The company plans to spend $7 million to develop the property, Public Storage's first foray into Ottawa, a suburb of Orleans. The company has one location on Rue Edmonton in Gatineau in addition to 47 other locations in Canada. The facility will be managed by Canadian Mini-Warehouse Properties Co., the manager of the partnership's other properties. For more information, visit www.publicstoragecanda.com.

Most managers first come to self-storage thinking, How hard is it to rent an empty space to people? But all who land the job discover rapidly that renting storage units is only one of many responsibilities they will face daily.

Surprise, Surprise!

How many of you quickly learned that your owner/management company expects you to rent space and be a retail store clerk, a rental-truck and trailer dealer, post office and packaging expert, an RV-storage attendant, document shredder, junk remover, carwash operator, etc.? It seems that where there’s a will to make money, self-storage entrepreneurs are always struggling to find a way. Ancillaries are the answer.

At first glance, all the jobs listed above seem to correlate to self-storage. The argument by many managers, though, is they can’t be topping the charts for unit sales at the same time they’re weighing and shipping boxes. Let’s explore this further and figure out how to make it all possible.

The Retail Front

Many offices have limited space, and any attempt to display a variety of products in this area often ends up as a clustered mishmash that looks more like a par course than an organized work station. Maybe your site is the exception with ample space and a retail center like a small Staples. Regardless, the idea is to get the customer to purchase products along with signing a rental agreement—beefing up the bottom line. Your goal: persuading them to buy from you rather than go to another retailer. How do you do it?

Believe it or not, this process should be relatively easy if you follow a script. “Mr. Jones, we have a variety of products readily available to help you in your move. We are competitively priced with (name the closest retailer that sells moving and storage supplies), but we can save you the time of having to hunt for them elsewhere and stand in line to pay for them. Can I show you our package deal for your (5–by-10, 10-by-10, etc.) unit and other products you may need? By the way, our high-security lock is an asset to help you maintain control of your possessions, and it is important that only you and your designated representatives have the key/combination. Would you like to purchase a lock for your unit?”

Many people refer to this process as up-selling. It’s a service we can provide to the benefit of the renter; moreover, it pads a facility’s profit and helps maintain operational standards.

The only problem is most managers lack the training and confidence to follow through with this process. Ancillary and up-selling can seem more like the nemesis than an opportunity. Why is it so many managers can quote the proper space size for the customer, point out the convenience and security features of a facility, yet fail to sell packing and storing supplies to someone who will likely need them? Is it because these items are considered “ancillary” instead of necessary? Could it be managers are so driven to obtain signed rental agreements that they forget products can be a highly profitable part of the business? Or is it the employer’s lack of emphasis on this part of the business?

When we go to purchase a new car, how easy is it for salespeople to get us to buy an extended warranty? How likely is it for them to convince buyers to spend a few more for custom wheels? How many of us have purchased floor mats or other accessories because, once we were made of aware of it, the convenience was so easily exploited? I think it is safe to say most of us have succumbed to these offers at least once in our lives. We’ve even been grateful to accept an offer and save ourselves from going elsewhere to make the same purchase.

Why All the Fuss?

Let’s look at a financial model to understand the reason behind the angst. Assume a manager rents 25 units per month, each for $100, and each customer stays for six months. Revenue generated from this is $15,000.

Now let’s assume the manager can sell 75 percent (19) of those customers a box, lock, bubble package and marker for $50. Sales have now generated $950, approximately 6 percent of the rental-space income. If the margin of profit is 50 percent, the site will pull in $475 of profit for the month in addition to the space rental. Multiply that by 12 months ($5,700), using an 8 percent cap rate, and you have just increased the property value $71,250 from this process alone.

If you take a look at any services/products mentioned in the beginning of this article, you should now understand better why your employer has set you up to become a “multi-task” manager, and why it’s important that you treat this part of the business with the same enthusiasm you do in renting storage units. After all, the objective is to make more money and the property more valuable. By achieving success in ancillary sales, we help self-storage owners and customers in one swoop.

Your Turn

Take a look around your office and facility and question if you are doing everything possible to make ancillary products/services more desirable to customers. Look at the displays: Can you do a better job of presenting items? Look at how you park your trucks/trailers: Are they neatly lined up, clean and ready to go? How about that packaging area: Is it organized and tidy with plenty of supplies on hand to do a quick shipping order? Is the counter area organized and ready to go for the next customer, or is it just another cluttered shelf without a purpose?

Bottom line is this: Ancillary angst is an unnecessary stress. While we may not have originally signed on for all these extra jobs when we accepted a position as a self-storage manager, we should embrace the challenge.

You were hired for your good attitude and willingness to pitch in, work hard and enjoy the reward of knowing you’re helping customers while providing services—plural. It’s not just about a rental unit. It’s about renting units and selling those ancillaries. It needs to have nothing to do with angst, but it has everything in the world to do with income.

Mel Holsinger is the president of Tucson, Ariz.-based Professional Self Storage Management, which offers self-storage facility management, consulting and development services. He is also a frequent speaker at industry conferences and a regular contributor to Inside Self-Storage. For more information, call 520.319.2164; visit www.proselfstorage.com.

When the self-storage industry first began, most people only needed the product during a move. But as the business evolved, storage owners added ancillary products and services such as truck rental, records storage and retail items to attract a broader range of tenants and boost profit. Wine storage is also making a splash, giving storage operators yet another means with which to serve a niche market.

The Right Storage

Wine is a delicate commodity requiring specialized conditions to maintain proper storage. Customers of wine storage tend to be collectors, and their wine collections are personal to them, their families and friends. By letting tenants know you care enough to provide the best home for their prized possessions, you secure long term-customers.

The most important elements to protect wine include:

• Temperature. Wine should be kept at 55 degrees, which will assure it will mature. Lower temperatures slow aging, and higher temperatures affect the wine’s quality.
• Humidity. Wine needs to be stored in humidity from 60 to 70 percent. Excessively high humidity breeds molds and damages labels. Low humidity causes corks to dry out, resulting in the wine inevitably spoiling.
• Light. Ultraviolet light can damage wine even if exposed for a brief period. Keep your wine storage dark when not being used by customers.

Red and White

Here are some more pointers to successfully launch wine storage at your facility. I’ve used the acronyms RED and WHITE for easy memorization.

R is for racks. You will need wooden, wire, decorative or designer racks to hold specialty bottles of wine. Racks are typically priced between $50 to $500.

E is for extras. You want to attract and retain your potential customer with extras. Why not sell corkscrews, coolers, wine tags, glasses, cases, carriers, books and wine magazines? Become a one-stop shop, allowing tenants the ability to pick up extra items when they’re scrambling with last-minute party preparations. They’ll appreciate the convenience; your bottom line will appreciate the profit.

D is for different. Wine-storage operators attract a different type of self-storage customer. Accept the challenge and diversify your amenities to fit their needs. Wine storage can become quite personal to connoisseurs. Make them feel special by treating their belongings with great care.

W is for wine lovers. Remember your audience. Wine is their baby. They want to know it is safe, and they need to trust you and your facility. Give them every reason to believe in your services and make those services obvious in all marketing materials.

H is for high-tech. Let your customers know their wine collection is safer at your facility than in their own homes. People like high-tech and will go great lengths to obtain it. Install the equipment necessary to maintain the correct humidity and temperature. Finally, invest in high-tech security measures to assure safety.

I is for insiders. Wine appreciation is like a club. People who are in-the-know about wine terminology are accepted as members of the club. Walk the walk and talk the talk by studying up on wines and proper storage.

T is for tasting. Wine-tasting tops the list of fun activities for this group of enthusiasts. Consider bringing in a local expert to share knowledge about special wines. You’ll bring your audience of wine lovers to your lobby, where they’ll see how great your provisions for storage can protect their own collections.

E is for educate. Marketing is a form of education. Inform consumers about your service and how to find you. An educated consumer can be your best customer.

Building Relationships

To promote your new wine-storage service create relationships with existing local wineries, breweries, restaurants, spas, hotels and chambers of commerce. Circulate brochures describing your wine storage and amenities to every business within a 3- to 5-mile radius. Word-of-mouth is often the best kind of marketing.

Another smart move is to partner with local wine retailers. Not only can they refer customers to you, but they may also store extra cases of wine at your facility.

Most important, know your customer base. Connoisseurs can store their wine in their basements, garages or hide it in the back of their refrigerators, so give them a reason to store it securely in your facility. By storing with you, they can savor every bottle at its peak, and you can enjoy the profit of a successful wine-storage business.

John R. Wharton is a resident manager for Space Mart Self-Storage in Newport News, Va. He is active in the Virginia Peninsula Chamber of Commerce, where he was recently awarded the Entrepreneurial Success Award for 2008. Mr. Wharton has been in the self-storage business for nearly five years. To reach him, e-mail [email protected].