Selling records management, storage and services requires an effective sales strategy. The annuity aspect of this business can make this one of your best investments. This article discusses why the return on investment is significant, even for small accounts.

Investors have misunderstood records-management revenue for a very long time. Only commercial-records insiders have had a full understanding of the ripple effect of a single new account.

Selling records management requires diligence. Traditionally, it requires a six-month sales cycle and a well-trained salesperson armed with a consultative selling approach and effective sales management. So, why would any investor spend that amount of time and effort--as well as considerable money--on a 1,000-box storage account? The reason isn't clear until you look closely at the effect of this relatively mundane sale.

Looking at the Market

Commercial business in the United States falls into four groups:

1. Large multinational and Fortune 500 companies.
2. Major regional and smaller national organizations.
3. Local businesses and government.
4. Small-office/home-office businesses.

The first group is the primary domain of the large, multinational, commercial records companies such as Iron Mountain, ReCall and a handful of others. The second group is the prime market for the most aggressive, regional, commercial records businesses. The third group represents a huge market with an average of 500 to 2,500 boxes and has typically been on the low end of the sales chain because of the cost of marketing. The fourth group has not been considered a candidate for traditional records-management sales. However, there may be a way to turn these small companies into valuable clients. That will be the subject of another article.

Most locally operated, commercial records companies market to groups two and three. Since the number of prospects increases as you go downward through the pyramid (see diagram), the potential-prospect list grows as well. After completing more than 50 market analyses in North America and several in Europe, I have come to the conclusion that more than 75 percent of group three has never been called on by a commercial-records salesperson.

According to Iron Mountain, the market share remaining in the United States is 60 percent. My number reflects a larger percentage because the higher-end market has been captured, but the middle and lower ends of the market have had very little activity. You may be surprised at how many 1,000-box accounts are out there. My personal experience is these are abundant and need the most help.

Key Factors to Remember

Before we take a look at what happens in a real-life, 1,000-box account, keep in mind there are several key considerations and idiosyncrasies in records management:

Contract term--The recommended contract term is usually a minimum of two years. This ensures recovery of the costs of racking and sales.

Automatic contract renewal--The standard records-management agreement principally used in the industry includes a contract-renewal clause without prior notification.

Automatic price escalation--Prices for storage and retrieval services are generally tied to a reasonable factor, i.e., the Regional Cost of Living Index published by the federal government.

Permanent-retrieval fee--Known lovingly in the commercial records industry as the "hostage fee," the permanent-retrieval fee requires the customer to pay both a retrieval fee and a "perm-out" fee for boxes that will not return.

Compound growth rate--I recently read an article that cited a compounded growth rate of 5 percent for this business. Although this may be true for a mature commercial records center with customers who have stored for many years, new centers with new accounts may experience a much higher compounded growth rate during the first five years. This can be as high as 15 percent or more. I prefer to use a number that splits the difference: 7.5 percent.

These factors will keep boxes in your facility for a long, long time. Iron Mountain refers to records-storage revenue as "largely recurring revenue," since customers typically retain their records for many years. The nature of the business is it continues to grow at a compounded rate. Let's look at an example.

The 1,000-Box Account

The numbers I use in this section are considered industry averages. I have tempered them to make a conservative point.

Storage Revenue on a 1,000-Box Account

• Although the standard box size is 1.2 cubic feet, many other sizes exist. The average appears to be 1.5 cubic feet.

1,000 boxes (storage units) x 1.5 cubic feet = 1,500 feet in initial storage

• In North America, the average cost for records stored per cubic foot is 25 cents.

1,500 feet of storage x .25 = $375 per month in storage revenue

• For each dollar of storage, a low-end provider of services can expect 65 cents of service revenue (although this could be much higher).

$375 in storage revenue x 1.65 = $618.75 per month in storage and base service revenue

• One year of billing includes 12 months.

$618.75 in storage and base service revenue x 12 = $7,425 in revenue for the first year

• The growth is compounded annually at 7.5 percent for the first five years.

Year 1 = $7,425.00
Year 2 = $7,981.88
Year 3 = $8,580.52
Year 4 = $9,224.05
Year 5 = $9,915.86

Total revenue for the first five years = $43,127.30

Customers for Life

I want to emphasize this is not the end of this account or its growth. It may be just the beginning. Selling records-management services is not a single sales event, but a lifelong relationship with the customer. Many accounts have achieved much higher growth rates during the first five years, and some have 1:1 or even 2:1 service-to-storage ratios.

Selling records-management services is an investment in an annuity that will continue to grow for many years. It is not a simple business. It is not just storing boxes. Those companies that do well will integrate services and technology into a comprehensive set of problem-solving solutions for their clients.

If you would like more information on how to start up a commercial records- management company, the Inside Self-Storage conference and tradeshow in Las Vegas, Feb. 13-15, will feature a records-management seminar and roundtable discussion. Exhibiting at the show will be several records-management software and service providers.

Regular columnist Cary McGovern, CRM, is the principal of FileMan and FIRMS (FileMan Internet Records Management Services), which offer full-service records-management assistance for commercial records-storage start-ups in self-storage operations. For assistance in feasibility determination, operational implementation or marketing support, or for questions on the FIRMS Sales Manager, call 877.FILEMAN, e-mail [email protected]; www.fileman.com.

For most self-storage operators, litigation is like the typhoon that ravishes a remote country--  unfortunate, but far away. Yet a lawsuit is an undeniable possibility for even a well-managed self-storage facility. Win or lose, the process and result can prove disheartening, sometimes devastating--and always expensive. Frequently, you need competent legal counsel for something more mundane--a contract, partnership agreement, lease or the myriad legal pitfalls of employee relations. But get these wrong and litigation will soon follow.

There are steps you can take to improve your odds when you work with a lawyer. Some are straightforward--the same types of business-management routines you practice daily. Others require planning. As you use these techniques, you also will discover many answers to your most significant but unspoken questions: Is my lawyer qualified? Can I trust this person to work diligently for me?

This information could have proven invaluable to Storage Trust Properties. On March 2, 1996, Randall A. Swanson rented a self-storage unit from Four Seasons Self-Storage in Lenexa, Kan. He paid $88 dollars per month, plus late fees, as required by the rental contract. On Sept. 30, 1996, he received a letter and new contract from Storage Trust Properties, stating that because it had purchased the property, his Four Seasons' contract was terminated.

Swanson refused to sign the new contract and continued to send the rental and late fees as required by the original. Because he failed to pay the higher late fees imposed by the new Storage Trust contract, his property was sold at public auction on July 23, 1998. He then sued.

A Cooperative Effort

Whether defending against a potentially serious lawsuit or engaging in the comparatively simple task of negotiating a contract, you may feel tempted to lay your problem at your attorney's feet, step back and hope for the best. This is the most common lawyer/client relationship, and some lawyers prefer this arrangement. It is, however, the least effective. Often, it is the most expensive.

Except for basic legal work, the interaction between client and lawyer should be viewed as a cooperative effort. Obviously, you pay for and expect the lawyer to do the heavy lifting. But do not discount the value of your participation.

The Consultation: What to Say and Think

Before your consultation, preparation is essential. Write a synopsis or "facts statement" of your situation. List the events, in chronological order, that brought you to the lawyer.

In the first draft, aim for a "Just the facts, ma'am" type of summary. Reduce your final draft to one or two pages--something your lawyer can read in a few minutes. Next, gather the documents pertaining to your situation. Put these in chronological order and add a sheet including the contact information of every person involved with the case. Write a sentence or two describing each person's involvement. This represents the first significant service you can contribute to your cooperative effort.

A well-qualified lawyer is predisposed to your benefit from the moment you begin to speak, mentally calculating strategy and tactics as you talk. Still, from your lawyer's perspective, only specifics move the process forward. With this in mind, you should prepare your verbal statement as carefully as the written.

Again, give him just the facts. If you want to stimulate your lawyer to put forward his finest efforts, you must be organized. If you can place the facts before your lawyer in an organized manner, he is more likely to think, "This is someone I can work with." Don't be dismayed if your lawyer interrupts your story, even redirects your narrative. In all likelihood, he is more concerned with potential legal solutions than your feelings at this point.

OK. You presented your written documentation. You verbalized the basics of "your side of the story." Now it is time to assess your lawyer's response. It is possible your lawyer will immediately lay out a strategy. Equally likely, he will need time for research and thought before committing to a course of action. Whatever the circumstances, expect a reasonable explanation of the preliminary steps he will take. You should be wary of any lawyer unable to communicate in simple and clearly understandable language. If he cannot communicate adequately with you, it is doubtful he will do better with a judge, jury or opposing counsel.

Define the Working Relationship

You cannot expect your lawyer to inform you of his every action. Still, you endanger your peace of mind if you rely on your lawyer's discretion to determine a reporting schedule. One of the most frequent complaints made by clients is their lawyers kept them in the dark.

Specifically discuss with your lawyer how often you want a progress report, how much detail you require and if you want the report by phone or in writing. Keep in mind you will be billed for every phone call and report. Remember this is your business at risk. As your case progresses, you will be left to wonder what is happening unless you make it clear to your lawyer that you expect to be kept informed.

Under the best of circumstances, memory fades with time. Your lawyer will take notes of your conversations. Follow his example. Always take careful notes whenever you talk with your attorney. At your first meeting and thereafter, ask your lawyer to memorialize your discussion in a letter. This letter, or "précis," which means a "concise summary of essential points," becomes a key element of the reporting system. Compare any discrepancies between your lawyer's précis and your written notes, then discuss these differences openly, but without antagonism.

Human nature dictates that people make accommodations more readily at the beginning of a relationship. This includes your lawyer. Every point you fail to resolve with your lawyer early in the process, including fees and expenses, will prove more difficult to correct later. Your lawyer will prepare a "representation agreement." This is a critical contract between you and your attorney, so read each word carefully. Ask questions and request changes to anything that seems unreasonable or unclear.

Throughout the evolution of your case, ask yourself: Are you comfortable with the tone and quality of the meetings--your attorney's answers and the questions he asks you? Can you work with this person over an extended period of time? Bear in mind that the best time to change lawyers is early in the process; but do not hesitate to keep looking if your instincts tell you to select different legal counsel.

Strike a Balance

In the dispute between Swanson and Storage Trust Properties, the U.S. District Court ruled on May 18, 2001, that Swanson remained subject to the terms of the original rental contract as a holdover tenant. In other words, the new contract was void--point in favor of Swanson. However, the court dismissed Swanson's claim that Storage Trust violated his due-process or civil rights. Sound confusing? You bet. Unlike a television drama, real-world litigation often goes on and on. In this instance, after four years of legal wrangling the expense and frustration continued.

Managing your lawyer is a balancing act. You should not attempt to direct your lawyer's every move. It would prove counterproductive and too costly. Nor would the lawyer allow it. On the other hand, this is your case and you must live with the results.

Granting complete control to your lawyer is imprudent. As Jean Hill, an attorney for the Utah Department of Education, observed in the Salt Lake Tribune, "All of the strategic decisions that the lawyers make can affect the final decisions in the case, and the client is stuck with the decisions of the attorney." Don't get stuck; participate.

Gregory P. Hawkins is a practicing trial lawyer with more than 15 years of litigation and general practice experience. He is also an associate professor of law at George Wythe College. Claude T. Hawkins has spent more than 25 years working at various levels of management for organizations in the private and public sectors. He is currently a consultant for businesses in Florida and the western United States. For more information, call 801.558.2527; e-mail [email protected].

It's not hard to get a self-storage operator to agree he must distinguish his product if he is to avoid debilitating price competition. That leads to a conversation about his exclusive offerings. Location generally leads the list--and it's worthy, given tenants' general preference for a proximate site. The owner's confidence is justified only until another facility opens nearby. Then what happens?

Three Options

You must be ready to present your facility to the market in a way that differentiates it from others. The prospect must see you as different--and, hopefully, better. If you are perceived as the same as others, you will be subjected to price competition, or "shopping." While some would have you believe marketing is complicated, it is not. You must provide the prospect with a unique reason to decide in your favor. That's it. All the rest is aimed at implementation.

When competing, business owners have only three possible options. Option one: You control the supply. In self-storage, that would mean being the only facility in your market. That is the basis of success for many facilities, and it is the approach that is increasingly coming under assault. Your second option is to compete on price, which is really competing on cost. If you don't have a unique cost advantage, you are just throwing your net margin at the situation--which isn't much of a long-term strategy. Your final option is to distinguish your offering from that of rivals through innovation, positioning or packaging.

The reason the government is so gung-ho about competition is it provides the automatic stimulus for improvement in the provision of goods and services. The social purpose of competition is to spur the supplier to do things he would not do otherwise--in favor of the consumer.

A competitive market forces suppliers to provide the lowest prices and guarantees a steady flow of new products and services. But take note: Those suppliers don't introduce new things for the good of society. They do it to create a unique offering, permitting them to take back control of their pricing. That works until a rival is able to duplicate the new feature, removing its uniqueness and resetting the shopping cycle. What some commentators describe as a dynamic economy is really the ongoing struggle of suppliers to escape price competition through the steady introduction of unique offerings. When rivals show up in self-storage, these forces enter your life.

While a dynamic economy may be good for society, it is not necessarily good for suppliers. There is nothing good about being forced to sell your wares at less than a fair price; and there is nothing desirable about being forced to unnecessarily, but regularly, retool the product offering. The process is costly and prone to errors--yet absolutely necessary in a competitive market.

That Choking Sound

I usually address my comments to self-storage owners because it takes an entrepreneur to make these choices of strategy. The first two options don't take much marketing. But when the choice is to subdue the effects of competition through differentiation, the story changes. Many owners don't know enough about marketing to fully understand what this choice entails. They only understand the need to secure their position in a strongly competitive market.

It may be their first brush with formal marketing. I frequently hear that choking sound an owner makes, in shock at discovering the amount of preparation needed to direct a sound marketing program. Most of them know media is an important part of a marketing effort. What surprises them is when they are told media is the least important and last step.

Any decent marketer will not spend media money without research. That means careful identification of segments and uncovering the significance of self-storage to each. It also means pinpointing an offering specific to the needs of each--in other words, a plan. When I explain this to self-storage owners, they generally ask if all of this is really necessary.

A Complete Solution

Central to the success of a marketing approach is for the operator to accept that, in most cases, storage is just one component of solution for a prospect, and it may be secondary. As a marketer, you want to know what event occurred that induces the need for storage. You need to know this so you can "be there" for the prospect when that event takes place.

For example, a prospect moves to a new home. When does that event take place? That's simple: When he signs the contract on the new property. That is his cue to start thinking about how he is going to get from here to there. His primary thought is transportation. Ideally, he would like to move his stuff from the old to the new home in one step. Sometimes that can't happen, and he needs the interim step of storage. Does that make him a happy camper? No. It involves double handling and loading, extra expense--none of which is enticing. Only reluctantly does he concede that he needs storage. It is not central to his purpose.

Storage, in this case, is just one part of the prospect's solution. But a solid marketing plan can equip a self-storage owner to address more than the one component. It may cause him to redefine his business. For the prospect to achieve his end, he needs a truck, movers, packing supplies, storage, etc. The question is, who will assist him with all this? If the prospect has to organize these tasks separately, you are regarded as just one component, a commodity. What marketers know is a competitive advantage and convenience premium await those self-storage owners who offer a complete solution.

Harley Rolfe is a semi-retired marketing specialist whose career includes executive-level marketing positions with General Electric and AT&T. He also owned lodging and office facilities for more than 20 years. Mr. Rolfe holds a bachelor's degree in economics from Wabash College and a master's degree in business administration from the University of Indiana. He can be reached at his home in Nampa, Idaho, at 208.463.9039. Further information can also be found in Mr. Rolfe's book, Hard-Nosed Marketing for Self-Storage.

It's the time of year when your owner or supervisor is expected to conduct his annual audit and inspection of your facility. Audits and inspections are a normal and necessary part of operating any business. Facility managers often are intimidated by these procedures; but they shouldn't be. They simply need to be well-organized and prepared.

How can you be prepared for a scheduled or unannounced audit and inspection at your facility? What is expected of you? What might these procedures entail?

There are several areas most audits will address. Your auditors will want to look at your daily-transaction logs, move-ins and move-outs, auction files and files for units currently in lien status. They will inspect the grounds of the facility, looking for security and maintenance issues, and examining vacant and overlocked units, as well as all interior hallways, stairwells, etc. After the inspection, auditors will compile their findings and compose a written report, which is usually given to the owner or supervisor. You may or may not receive a copy of this report; however, the findings of the audit are usually discussed with the manager so he can see what he is doing right and which areas might need improvement.

Daily Records

Assuming your office functions are automated, you should have all daily computer reports well-organized in binders or folders for each month. Have these readily available for your supervisor or owner to inspect. Be prepared to explain any credits of rents or late fees, transfers of rental monies or account alterations. You might want to highlight these entries so your supervisors can see them and make notations of why you choose the actions you did.

Most managers do a "close-out" at the end of the month where they print various reports from their software. I recommend using a cardboard file box for each month and placing in it all monthly reports, daily-transaction logs, copies of new leases, move-outs and any auction files for that month. Keeping records organized this way will make it easier to find certain files when you need them.

Store these boxes in your company storage unit. It is imperative you keep files neat and well-organized for inspections. You never know when your supervisor or owner will show up to conduct these procedures. If you still use a manual bookkeeping system, keep all ledger cards in order and use the same logic and organization you would if the system were automated.

New Move-Ins

I always recommend using three-part, carbonless leases that are sequentially numbered. When you rent a unit, the original copy of the lease should be placed in the tenant file. One copy is given to the tenant, and the third is set aside to send monthly to the facility owner or company headquarters. If you don't send these copies at the end of each month, set them aside for your supervisor to inspect when he does his site inspection.

If you processed a move-in and took no money at the time the lease was written, be prepared to explain your actions and when the tenant did pay the money. If you give away rent at any time, be prepared to explain why. You might want to attach the coupon, ad, etc., to the lease to explain your actions.

Move-Outs

When a tenant moves out, you should process the move-out via your computer. Print the move-out information and staple it to all the records in that tenant's file. Set aside all this information for your supervisor to inspect. At the end of each month, collect all the move-outs and place them in the same file box as your daily and monthly reports for that month, along with copies of your leases, and file them away.

If you didn't collect money from any tenants who moved out but still owed rent, be prepared to explain why. If you had a tenant in lien and got approval to cut him a deal if he paid some money and moved out, attach a voucher or sheet to explain why you made the deal and who approved it. This will help when your audit is conducted--you might forget what happened months ago.

Grounds Inspection

Needless to say, your facility should be kept neat and clean at all times. This means sweeping and cleaning, and relocking vacant units when they become available. Don't lock a unit that has not been cleaned or is not otherwise ready to rent. The first time you do, you just might get a surprise inspection and, trust me, all auditors have heard the infamous "the tenant just moved out of this unit" excuse. If I see a dirty unit and hear those words, I always check the computer to see when the tenant actually moved out. If it was days--or weeks--ago, this raises a red flag. It makes me wonder if the manager is doing his daily job duties. Not only that, but if he can't be honest about something as simple and minor as a dusty unit, what else is he not being truthful about?

You should walk your hallways several times a day and look for things such as burnt-out lights. Make sure overlocks have been placed on past-due units and removed from those that have been paid. Take a broom and dust pan with you to spot-sweep hallways, stairwells and elevators. Don't forget to look up. A facility full of cobwebs will look like Dracula's den and is not very inviting to prospective tenants. An auditor will look at facility maintenance, so always keep your facility neat and clean. Be prepared for an audit at all times.

Remember, audits and inspections need not be a source of fear. They are a normal part of every business. If you are well-prepared and honest, and do the best job possible, you have nothing to worry about. Auditors are not just looking for theft, they are looking to see you are adhering to your state's lien laws and company policy. Audits will only help you do a better job. If you stay focused on the optimal operations of your facility, you and your supervisors will be in a win-win situation.

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.

Throughout the centuries, those who would believe--whether out of simple curiosity or basic desperation--have sought forbidden glimpses of the future. They would hold out telling palms to those who could read them or weave stories in tea leaves and porcelain cups. They would thumb the tarot, laying down the cards of their destiny. Let us not forget the spellbound myth of gypsy women in scarves and gold, bearing crystal balls and prophecies.

Cynicism has not defeated us. New Age bookstores thrive, infomercial psychics lack nothing in the way of success, and not a newspaper with half a name lacks a horoscope column. We are still fascinated. And at the turn of every new year, there is whisper of predictions that bolster us for the unexpected or generate hope. In either case, there seems no end to this human curiosity, this need to know the unknowable. The question is whether the tempting of fate prepares us for the inevitable or becomes self-fulfilling prophecy.

Where the business of self-storage is concerned, participants wonder: Where are we headed in 2002? Will development continue or wane? Will financing continue to be available, and to whom? How will political events affect the economy? These questions and others are addressed in this year's "State of the Industry Report," including predictions of industry insiders from the fields of development, finance, consulting and marketing. Read what they see in the self-storage future beginning on page 20.

Regardless what events take place across the world and in our industry, businesses strive to maintain the status quo. They all make their best attempt at luring what few consumer dollars are available for spending. Many will do this with discounts and dealing. Jeff Kinder explains why this is may not be an effective strategy for self-storage in "Competitive Pricing," page 30. Also in this issue, you'll read how to qualify for conduit financing ("Conduit Lending") and how changing technology is propeling self-storage into a new and necessary era.

Next month we will host the Inside Self-Storage Expo in Las Vegas. Each year, this tradeshow grows at a phenomenal rate, and we hope to outdo ourselves again in 2002. I don't profess to be clairvoyant, but I see a great show--and promising future--ahead.

Happy new year,

Teri L. Lanza
Editor
[email protected]

In the October issue, I shared in my letter about my experience living abroad in Siena, Italy during college. Although I won't say I was perfectly fluent in the language upon returning to the States, I did acquire a reasonable working knowledge of the native tongue. I wondered whether I'd ever again have opportunity to use it. Then, while attending the annual conference of the Self Storage Association of the United Kingdom and Europe back in March, I met an Italian gentleman whose company built the country's first self-storage and now operates facilities in Varese, Milan, Rome and Lugano.

I'm embarrassed to say, my Italian was extremely rusty and just about worthless to me. But his English was just fine, and he was generous enough to contribute an insightful article overviewing self-storage development in Europe. You'll read it on page 32.

Also in this issue, you'll read about the conquests and challenges met by Devon Self Storage in its experience developing and operating in France, Germany and The Netherlands. Though the company's leaders were skeptical when an Amsterdam site was proposed for its first overseas venture, doubts soon gave way to determination. Read the story on page 27. On page 34, one Australian entrepreneur shares insight on the pitfalls of European development and, on page 36, read advice on promoting self-storage to a public largely uneducated about the service.

With American developers such as Devon and Shurgard concentrating their efforts overseas, and European companies such as Access, Big Yellow, Safestor, Mentmore Abbey, etc., stepping up to the plate, we're seeing facilities sprout up rapidly throughout the United Kingdom and continental Europe. In response, industry suppliers are seizing the opportunity to distribute product throughout these unpermeated areas. Marketing efforts are set in motion to educate the European public and create product awareness. All told, shifting our focus toward European expansion seems to be the next natural phase in self-storage evolution.

To that end, our tradeshow division is hot on the heels of a premier overseas location at which to host a tradeshow and conference in the fall of 2002. Keep watch in the magazine and on our website for more details of this endeavour. And dust off those language dictionaries from college-courses past--you never know when they might be useful.

Happy holidays,

Teri L. Lanza
Editor
[email protected]

Developing personal relationships with your competition may cause you to be conflicted. This is especially true if your entry into the self-storage business occurred after having particularly positive experiences visiting other facilities in your area. You may have felt like pioneers in your market; perhaps you were. Others in the business were then your friends. I want you to understand what active competition does to that mix. What was a friendly, open, "we're in this together" attitude somehow segues into a dog-eat-dog mentality.

People in agriculture experience a similar type of competition, but experience it much differently. They all grow identical produce, but none has any direct influence on the price any of them gets for their individual efforts. Thus, there is no reason for the animosity that signifies competitive behavior. Moreover, there is often regular cooperation between neighborly farmers--cooperative use of machinery, exchange of personnel, etc. The friendships are deep, enduring and can extend over generations. One of the laments about the passing of the family farm is the concomitant passing of that great way of life.

The Crucial Difference

But there is an important difference between the situation in agriculture and that of self-storage. While both are often commodities, in agriculture there is no chance the actions of any one farmer can alter the market conditions encountered by customers. Farmers and ranchers are, therefore, free to work openly with each other as well as state agricultural schools and county and federal extensions. Such cooperation has resulted in marvelous improvements in productivity.

And self-storage? In any local market, cooperation among facilities can easily result in price management, where operators control the prices or terms to be exacted on tenants. The laws allow only for distant relationships between rivals. They are not to have any contact with each other regarding pricing, increases, discounts or other competitive elements. Breach of such rules can result in Federal Trade Commission proceedings in which no sane person wants any part. Consider this riddle: If prices are identical among rivals, is that evidence of collusion or competition? You know how the government sees it. If challenged, you get to prove differently--at your own expense.

Togetherness Is Not All Bad

It gets more complicated. There are areas where industry cooperation is both needed--and dangerous. Self-storage operators share common problems. All facilities need state laws guarding them from responsibility for tenants' properties, illicit activities of tenants on-site, lien-processing standards, critical planning groups, etc. All of these legitimate problems defy solution without cooperation, since no political body will move without there being consensus from the industry. Associations are the usual vehicles for achieving political progress, but they have also been seen by the FTC as a hotbed for conspiratorial acts. The FTC is wary of the temptations facilitated through informal and social circumstances of association activities.

Say It Isn't So

The reality of the situation is more and more facilities are sprouting in the various markets, which reduces or eliminates the role of location in isolating and protecting your facility from straight competition--usually price competition. Your rivals do benefit from your loss. How can a friendly relationship survive a situation where your loss is reason for celebration on behalf of your "friends"?

A competitive market is defined by prospects. They become aware of having multiple options and shift into shopping mode. No longer do they appreciate good service at a fair price. They become preoccupied with getting the best deal. Does that make them bad people? No, it makes them normal. And your rivals? Are they bad people for responding to the behavior of prospects by lowering their prices and taking tenants that could have been yours? Of course not. They have families to feed, partners to appease and mortgages to pay. So what are your choices? The same as those of your rivals. You're in the same boat and must resort to the same tactics to garner tenants.

You and your rivals are subject to one other factor. You must give the prospect a basis on which to decide. If you are competing on price, you cannot stop at meeting the price of your competition, because your tenant would still have no basis on which to choose. You must lower your price still further, setting in motion the downward price (death) spiral. This is not a prescription for a friendly relationship with self-storage comrades.

Am I Overdoing It?

Do I exaggerate the effect of competition on members of the industry? In sports, members of opposing teams are often friends. It's only when on the field that there is aggression. But with business competition, the game never ends. Every day you are planning or executing a plan to keep your facility profitable. That includes doing what you can to keep it occupied.

Because self-storage markets are relatively small, you can regularly encounter your rivals on the street, at the grocery store or anywhere. Each time it happens, it's hard to avoid wishing the rival would just go away. Competition is the culprit in causing animus among otherwise fine people. While it may be good for society, it can be painful and destructive for any one supplier, whether an individual person or a business.

Your prospects and the government want you at swords' points with your rivals. Emotions run high. Straight price competition is often destructive to suppliers of commodity products. The only way to avoid it is to plan your business so you are not seen as the equivalent of the others; that is, you need to differentiate your offerings. That way you aren't directly competing with anyone. You have your niche and your would-be rivals have theirs.

Harley Rolfe is a semi-retired marketing specialist whose career includes executive-level marketing positions with General Electric and AT&T. He also owned lodging and office facilities for more than 20 years. Mr. Rolfe holds a bachelor's degree in economics from Wabash College and a master's degree in business administration from the University of Indiana. He can be reached at his home in Nampa, Idaho, at 208.463.9039. Further information can also be found in Mr. Rolfe's book, Hard-Nosed Marketing for Self-Storage.

The history of Landmark Interest Corp. and its president/owner, M. David Boothe, began 40 years ago in the residential, multifamily, commercial and industrial construction markets. Seven years ago, Landmark's focus changed with Boothe's first self-storage project. Since then, the company's forte has been the construction of self-storage facilities.

Landmark, with an office conveniently located in Baytown, Texas, is a multitalented, multiservice construction firm with more than 100 years of construction experience. The company offers a variety of services in several divisions, from metal-building components to retrofit standing-seam roofs--including site-formed, one-piece roof panels for extended building widths.

The company's self-storage division offers proposed site layouts for maximum property use and complete engineered self-storage buildings. Projects include boat and RV storage, climate control, single- or multistory, and drive-thru. Landmark can deliver material or erected packages nationwide, including doors and insulation from multiple plants.

On a local scale, throughout Texas and Louisiana, Landmark offers additional construction services such as general contracting, construction management, and working with potential customers on negotiated projects as well as hard-bid construction. The company's turnkey division works closely with independent real estate agents on finding site locations and independent feasibility services to protect potential clients from building in areas that lack demand.

On design-build projects, Landmark works closely with the customers, architects and engineers to ensure a quality project that will function for years to come.

A part of the contracting business is staying on top of everchanging national and local code issues, the Americans with Disabilities Act and, in Texas, the Texas Accessibilities Standards Act. Landmark is familiar with work in all of these key areas.

The lifeblood of any business is its customer base. Landmark works closely with several repeat accounts and welcomes new business. The company's repeat clients are primarily upscale, "A-class" facilities offering many amenities. The base buildings are steel construction on concrete slabs, with alternate exterior finishes such as reverse-roll metal panel, stucco, brick veneer, CMU and insulated Rockwell.

Landmark's buildings are standard rectangular boxes or unique sizes and shapes, depending on the site layout. A variety of floor plans can be used to accommodate unit-mix demand. Single-story, multistory and drive-thru buildings contain climate- controlled as well as ambient units. Climate-controlled units are normally accessed via well-lit corridors with video surveillance, epoxy-painted floors, ceilings and individual unit alarms. Larger units are also used for office, warehouse, RV and boat storage, or covered parking.

Through market studies, Landmark has found amenities--such as extensive landscaping, wrought-iron security fencing and matching gates with keypad entries--attract potential customers. Well-marked buildings and wide concrete drives allow easy access to units. Finally, Boothe offers this advice: Business signs are a vital part of advertising in any business, but visible roll-up doors (whether operable or dummy doors) are the best way for a customer to recognize a storage facility.

Landmark is willing to work with clients in any way possible to provide the kind of service they will be proud to recommend to others. For more information about the company, site-planning assistance, quotations or other services, call 877.427.8085; visit www.landmarkinterest.com.

There has never been a better time to enter the commercial records-management business. There are several factors at work that make this the precise time for such a business opportunity. But records management is not for the faint at heart. It requires hard work and capital to reach the intermediate goal of 100,000 cubic feet of box storage ($500,000 in gross annual revenue) in 30 months. The return on initial investment can exceed expectations, but it requires very careful planning and the right set of resources.

Why Now?

1. The future of the "paperless office" is questionable.

The paperless office is a myth. It has not and will not exist for a very long time. Most industry observers believe it could take many years or may never come to fruition at all. There are numerous technological and sociological issues at play in this concept. In the meantime, the rate of paper-records growth is enormous. In an article titled "The Evolving Commercial Records Center Industry," Michael Faber, certified records manager, wrote, "The 'paperless office' remains an elusive target for most companies and organizations ... The commercial records industry should continue to function traditionally for the next 12 to 15 years."¹

2. There is still availability in 60 percent of the U.S. market.

Richard Reese, CEO of Iron Mountain, presented this year's keynote address at the PRISM International Conference in Bal Harbor, Fla. (PRISM is the trade association for the commercial records-management industry. For more information, visit www.prismintl.org.) He pointed out that in a study commissioned by Iron Mountain, it was confirmed only 40 percent of the U.S. market and 10 percent of the European market have been captured by commercial records-management businesses. The study also shows the industry should expect peak growth years for the next 10 to 15 years.

3. Industry consolidation has produced some key effects.

Iron Mountain, Pierce-Lehay, Recall and other records-management companies have purchased many of the largest commercial records businesses in the United States and major markets around the world. In fact, Iron Mountain merged with Pierce-Lehay last year to become the giant of the industry. This majority of the consolidation is basically over, although there will be more acquisitions in time. The consolidation has taken most of the competition from the market, leaving room for entrepreneurs to develop new businesses. Studies have concluded most business owners prefer to do business with local companies. The locals, therefore, have a key advantage over the international giant--as long as service levels are maintained in line with client expectations.

4. Paper-storage volume continues to grow.

Regardless of the impact technology will have on business as we move into the future, the pure mass of paper records is increasing every year. As Faber pointed out in his article, the number of tons of paper stock made into file folders increases every year (per the American Paper Institute), filing cabinet sales increase by 18 percent each year (per the Business Equipment Manufacturing Association), and the sales of paper-fed fax machines grew by 16.5 percent from 1998 to1999, and continuing increases are likely through 2004 (per the Associated Press). Next to nearly every PC are a printer, fax machine and copier--and people will continue to use them.

5. Disaster-avoidance issues are increasing.

The Sept. 11 tragedy has given additional cause to send more and more active records off-site. There has been a trend in many industries to take files typically considered active off-site because of the cost of storage and, now, because of disaster-related issues. As long as access to the records can be ensured, more commercial records centers will see active records-management opportunities.

I could go on about the reasons ensuring continued business for traditional records management, but neither time nor space allow. I must emphasize that businesses offering commercial records-management services will be required to provide high levels of service and use technology-related techniques. The industry has changed and delivery systems have improved. But this business opportunity is excellent for those willing to take the right steps. There are several requirements to meet the goals of this growing business.

Business Requirements

1. A full-time sales effort.

Records management is sold best using a consultative-selling method. It has a long sales cycle and requires diligence in the sales effort. One full-time salesperson who has no other responsibilities is absolutely necessary.

2. A sales-cycle process that works.

The sales method for selling records management requires managing 100 or more prospects through a seven-step consultative-sales cycle. It cannot be done manually to produce the results you want. The selling process leads the client through a method that can ensure a 75 percent close rate for those prospects that make it though the third step of the process.

3. Sales management.

Selling requires management--simple as that. An unmanaged sales process never achieves the results you expect. The problem lies in the fact companies typically can't afford a sales manager to oversee one salesperson. A new concept called the Distance Sales Manager² allows for traditional sales management from afar via coaching, mentoring and closing assistance using an Internet-based tool.

4. Capital.

How much is enough capital? That depends on you and your current business circumstances. If you already have a self-storage operation or a moving and storage company, your capital requirements are far less than if you do a traditional startup. I have developed financial models for both scenarios. Either way, the return on initial investment is quite considerable and may even amaze the nonbelievers. This business is not easy. It requires diligence in sales and operations, patience and a great deal of management; but the returns are surprising.

Regular columnist Cary McGovern, CRM, is the principal of FileMan and FIRMS (FileMan Internet Records Management Services), which offer full-service records-management assistance for commercial records-storage start-ups in self-storage operations. For assistance in feasibility determination, operational implementation or marketing support, or for questions on the FIRMS Sales Manager, call 877.FILEMAN, e-mail [email protected]; www.fileman.com.

Storage is a simple business, but it's not an easy business. It's simple because the steps are obvious. First, you have to generate phone calls from prospects. These result from a strong and well-executed marketing campaign. Second, you have to get those who call to visit your facility. After they visit, you must get them to sign a rental agreement. The fourth and final step is to get them to stay "forever" and tell all of their friends about you.

Four steps. Simple? Yes. Easy? No.

I'd like to explain how to convert a higher number of your callers into visitors. To see if you're improving, you're going to have to track your numbers. Based on my own research, I've learned the average conversion ratio in this industry runs a little less than 50 percent. That means less than half the people your manager talks to on the phone come into your facility to visit. Frightening, isn't it? Half of your marketing dollars are being wasted.

To understand how much each call is worth, calculate how many total dollars you spend on marketing in a set period of time and divide that number by the total number of calls you receive. If you do this over the course of a year, you'll get a fairly accurate number. I've seen the cost per call range from a low of $20 in a small market to as high as $100 in larger, more expensive markets. To stress the importance of each phone call, one of my clients has even taped a $20 bill to the phone receiver.

If you blow an opportunity with a customer over the phone, it's going to cost you money. For some of you, it will cost big money. That being said, there is only one goal for the phone call: to get people to come in and visit your facility. The goal is not make them think you're a nice person or that you have the best telephone technique; it's to sell them on visiting your operation. Don't get me wrong--you should be perceived as a nice person over the phone and have a pleasant technique, but for purpose of maximizing revenue, this is not the end goal.

If a prospect is calling you, he is probably calling your competition as well. To have the best closing ratio, you need to highlight your unique selling proposition (USP). If you don't have something unique about your facility, you'll need to come up with something. Without a USP, all you have to sell is your price.

It is also perfectly acceptable to bribe people to visit. What kind of a bribe do you use? Whatever generates the greatest number of visitors at the least cost. Some managers use what I refer to as a coupon system. They get local merchants to contribute a coupon on their products and services. A restaurant owner may agree to a two-for-one offer on dinner, for example. If you can collect a good number of coupons from your local merchants, you can put them together in a book and offer it to prospects. This has very low cost to you but a very high perceived value.

Let's make it even simpler. Assume each phone call to your facility is costing you $20. If you offered callers $10 in cash just for taking a tour, would this increase the number of visitors you received? You bet. Is this what I'm suggesting you do? Perhaps. It's the lazy person's way to entice people, but I have seen it work. If the average rental customer is worth $300, it would be worth it to give away $30 (the cost of the phone call plus $10 in cash) to get people to visit.

The most important thing to remember in converting callers into visitors is you must not give out your price before you let people know your USP. Here's how a typical call should go:

Customer: Hi, I'm interested in knowing how much you charge for a 10-by-10 unit.

Manager: Let me grab the price sheet here (stalling). Do you mind me asking how you heard about us? (It is essential you record the source of your calls.)

Customer: I got your name out of the Yellow Pages.

Manager: Could you give me an idea what you'll be storing so I can make sure you actually need a 10-by-10?

Customer: You can skip to the price, because I've stored the exact same stuff before and I know I need a unit that size.

Manager: Great. I'll give you the price in just a moment; but please remember, if you're shopping around, we're the only facility in town that gives people a crisp $10 bill just for coming in to take a tour.

Customer: Really?

Manager: Yup! We're so confident you'll like what you see and want to store with us, we're willing to pay you to come by and visit.

This example uses cash. You could come up with any number of items. Test a few to see what might work better. You might offer people a free pizza or movie tickets--anything you can think of to get them to come in and visit. In addition to the bribe, you'll want to present any other USPs. Instead of the line above, you could change the dialogue to: "If you're shopping around, we're the only place in town that has individual door alarms. That way we know when an unauthorized person has attempted to enter your unit. In addition, we're also giving people $10 just for taking a tour of our facility." Never give out your price before you give people your USP(s).

Be sure to track your numbers meticulously. This is the only way to know if a certain system is working. Most managers are resistant to tracking. They often look at it as busy work. You, as an owner, need to explain the "why" behind the tracking you're doing. This will help secure the cooperation of your manager or other employees. I also suggest auditing your facility to see if employees are following your phone directives. There are a number of companies that can help you in this area.

Your short-term goal should be to raise your closing ratio by 10 percent. If you can move your closing ratio from 50 percent to 60 percent, you'll be doing a great job and your occupancy rates and profitability will increase accordingly.

Fred Gleeck is a self-storage profit- maximization consultant who helps owners/operators during all phases of the business, from feasibility studies to creating an ongoing marketing plan. Mr. Gleeck is the author of Secrets of Self Storage Marketing Success--Revealed! as well as the producer of the only professional training videos on self-storagemarketing. 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].