Everyone in this country had a rude awakening with the events of Sept. 11. We were faced with the fact that the only thing constant in our lives is change. Rest assured, change is the one thing you can always rely on to happen. And how we react and adapt to change says something about our character.

Change is inevitable in the self-storage business also--changing lien laws, changes to our leases, change at our facilities that includes upgrades or improvements, new software, new forms, new supervisors, and perhaps new owners or management companies as well. How will you react to these changes? Do you go with the flow or are you the type of manager who says, "That's not the way we used to do it. Why are we changing?"

When it comes to something like lien laws, you will have no choice but to follow the rules. But at some point in your self-storage career, you may be in a situation where you have a new supervisor, owner or management company, and they will want to put in place their own forms, policies or procedures. Perhaps you will not agree with their input or the changes they want to make; however, it is your job to implement these new policies. Maybe you don't buy into these modifications for some reason. What do you do? How do you react?

First and foremost, do not overreact, even though your first impulse may be to confront your owner or supervisor with your disagreement. Take a deep breath. Try to put yourself in his place and understand why the new policy or form is being implemented. Once you have thought things through, ask to meet with the new owner or supervisor and let him know you would like to discuss your concerns about the changes.

Make sure to prepare for your meeting. Have questions ready and solid facts regarding why you have concerns about the new policies. Be sure to schedule your meeting far enough in advance to be prepared yourself and allow your owner or supervisor time to prepare also. At your meeting, don't become emotional. Be professional and prepared to lose your arguments, which is probably what will happen.

Many facilities have been bought and sold over the past year. National companies have purchased some of them. In other cases, owners elected to hire a management company to direct their assets so they can move on to other projects. Perhaps they simply decided to hire a new management company. When this happens, there are bound to be changes. These changes are aimed at helping the facility as a whole, and not toward making your life more difficult.

Most owners, supervisors or management companies realize the facility manager is an asset to the company. They want your input and to listen to your concerns. They should listen and be able to explain how and why changes are being made. Keep in mind, however, they might not be able to disclose financial or confidential information.

In the end, you were not only hired to manage and maintain your facility, but to support the owner's or management company's objectives and be a strong team player. If you have very strong convictions or morals that prevent you from accepting certain changes at your facility, it would be in your best interest and that of the facility to give your two-week or one-month notice. If you choose to take this course of action, do so in a professional and positive manner. That way, you'll retain the support and positive references of your owner, supervisor or management company.

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.

For years I've been reading what self-storage employees should do for potential and existing customers--from the way they communicate over the phone to handling delinquent rents. Working for the publisher of this magazine, I may know more about self-storage than the general public. But I never actually needed storage--until recently.

A situation arose where I needed to store items for a few months--as long as it took me to go through them and throw them out, sell them or give them away. Storage wasn't going to be a long-term solution, but it was clear I needed it. I decided to conduct a little test.

I took stock of what I needed to store. The items took up about half of a one-car garage. Of note, I had two eight-foot tables with collapsible legs and another odd item that was exactly 10 feet long. Other storables included desk parts, swivel chairs and file cabinets. I would also need a truck. If a facility couldn't provide one, I needed to rent one somewhere else.

I opened the local Yellow Pages to begin what I thought was the typical search for self-storage. It helped that I knew of several facilities in a couple-mile radius of my home. I made sure to consider them, too. I called the first eight facilities that fit my criteria for location--no more than five miles distant--and asked the same series of questions. And listened. I toured several facilities and paid close attention to my impressions and feelings. The "best" facility was rewarded with my business.

Yellow Pages Ads

Trying to choose self-storage via the Yellow Pages is overwhelming. After poring over more than 30 pages of storage section--mostly full-page ads--my eyes began to glaze over. The large ads with numbered maps made it easy for me to find a location close to home. In the absence of maps, I simply glanced at ads for cross streets. If there was no indication of location, I didn't even bother to call.

Facility A: While this two-page spread wasn't the first in the section, it might as well have been--it was the first thing I noticed. Each of 10 facilities was numbered on the left page along with cross streets, addresses and phone numbers, and the numbers corresponded to a map on the right page. A list of options, amenities and available supplies were listed. I also noticed an offer of a free gift with a visit, as well as a guarantee of satisfaction. At the top of each page was the facility name, and underneath it on the left page was the slogan. A national toll-free number and website appeared at the bottom. It was a comprehensive ad.

Facility B: A map was included with numbers for facility locations, as well as phone numbers, which I liked. Amenities available at all locations were listed below the name and catchy slogan, which were side by side at the top of the full-page ad. Location-specific amenities appeared as graphics next to each facility's information--there was free truck rental at the one closest to my home. I also noticed the company's website and corporate phone number.

Facility C: This full-page ad sat opposite that of Facility B, but used a different spot color. Like A and B, it had a map with numbers that corresponded to facility addresses and phone numbers. Features at all locations were listed, and there were amenities listed after each facility so I could tell which ones each location had. The slogan over the top border caught my eye. Just underneath was a list of cities served, and beside that was the company logo. A website was listed over the bottom border.

Facility D: Two-thirds of the full-page ad was in reversed type, and in the middle was one sentence, which I guessed described its unique selling position. It made me want to call to find out. At the bottom was a list of each facility by city, address and phone number. I also noticed "free truck rental" and a website.

Facility E: This full-page ad seemed busier than the others. It had a numbered map. Three facilities specific to my area were listed with addresses and phone numbers in large fonts at the bottom, and information for the others were included as well. I noticed an invitation at the top, then the logo next to an offer of free boxes and supplies with a rental. Underneath was a list of amenities. A website appeared at the bottom.

Facility F: While this ad was the smallest I'd seen, at two-thirds of a page, it was the most impressive. There was a numbered map, with facility addresses and phone numbers listed beside it. Next to the company logo at the top was a notice of free truck use. Also listed were amenities--door alarms and video surveillance caught my eye. At the bottom was a website, and a guarantee of 100 percent satisfaction. It was a clean ad.

Facility G: The top of this half-page ad was used to ask me if I had too much "stuff." Underneath the question was a list of amenities, followed by the company name. There was a drawing of stuff flying out--or in?--of a unit. At the bottom were thumbnail maps of each of its two locations, with phone numbers, addresses and cross streets.

Facility H: On the same page as Facility G, this half-page ad listed the facility name at the top, next to its features. The range of unit sizes was displayed above what I assumed to be gate hours. Each of four locations had a thumbnail map, with addresses and phone numbers.

I hadn't formed too many opinions at this point, because I knew much would change once I called to find out price, availability of units and amenities at particular locations. I was most impressed with the ads for facilities A, D and F.

The Phone Calls

For consistency's sake, I called the facilities in the order in which their ads appeared in the Yellow Pages. The reporter in me took notes. The names of the people with whom I spoke have been changed "to protect the innocent."

Facility A: The on-site manager answered the phone: "Thank you for choosing Facility A. This is Mary. How may I help you?" Mary was enthusiastic and courteous. Before I had a chance to say anything, she asked what I was going to store. I listed my needs. A 10-by-10 fills a one-car garage, she said, and the 8.5-foot ceilings would allow me to stack boxes. Because I have that 10-foot item, she suggested I consider a 10-by-15. She described more of her facility, then listed the price of the two units. There was a special on each--half off the first month's rent.

She told me about the rent schedule, fees and gate hours. I asked about 24-hour access, because it was listed in the ad. Mary said there was a charge. "Especially for this facility--and most of the others do the same--we do want to know why you would need 24-hour access," she said. "Is there an extremely good reason? We would work with you from there."

She was honest when I asked about rent increases, saying they generally go up once a year, around April. Mary also suggested I visit the facility and take a tour. "Let me show you a couple of units first, and then you can get a better idea of how they're situated and what they look like, and just exactly what you could get into them," she said. "You know what you have, and I don't." We set a day and time. Mary told me I needed my own lock and said she had boxes and packing supplies for purchase. She asked for my name, and we ended the call.

Facility B: There was something blasé about how Tricia answered the phone. (I should have known after my chat with Mary that I couldn't expect everyone to be so helpful.) I told her what I needed to store, and she told me which sizes she had available. I told her I thought I needed a 10-by-15, largely based on my conversation with Mary at Facility A. Tricia listed the price. I asked a question that was on my test list: Any specials? "Not really," she said, but paying so much in advance would get me a half-month or full month free. I asked her about rent increases, and she didn't really know. "Those all come from our corporate office," she said.

Since this facility had truck rental, she told me about the conditions of use--so many miles for so many hours, all based on the size unit I rented, and so many cents per mile after that. Tricia explained the gate hours, and when I asked about 24-hour access, she told me I'd need a "really good reason." The facility would work with me if I needed an extra hour or so, provided I ran it by them first. I asked about climate-controlled space--the facility had none. Then, I asked about the price of a 10-by-10, just in case, and Tricia told me. We said our goodbyes.

Facility C: After Laurie answered the phone and introduced herself, I explained what I needed to store. She suggested a 10-by-10, but I told her about that pesky 10-foot item. She suggested a 10-by-15 and mentioned the price. Then, a surprise: Since the ceilings are 10 feet, she said I could lean my long item against the wall and still fit into a 10-by-10. She listed the price of those units as well, then asked if I knew where the facility was located. "Just come in and take a look," she said. "I can show you the units--the two different sizes--and sometimes a visual is a little bit better gauge of what you need."

In response to my other questions, she said tenants are given 30 days notice for rent increases and told me there is new on-site management and security-gate access. Unfortunately for me, there was no truck rental available--"I wish it were, because I get a lot of calls for that," Laurie said. She closed by listing the gate hours and saying there were boxes for sale if I needed them. She asked for my name, and that was it.

Facility F: An automated answering service asked me to hold for the next representative. "Hi, this is Lonnie. Thank you for calling. Can I help you with storage?" is how the conversation began. Lonnie asked when I needed storage. "Do you know what size, or is that something I can help you figure out?" she asked. I had a firm grasp on what I needed, but for the sake of research, I said I needed help. She suggested a 5-by-10. "Do you think that'd be pushing it?" she asked. Yes, I said. "The next best thing is a 5-by-15, and you know you're safe with that." The 5-by-15 was different than those at the other facilities and less expensive. Lonnie told me where the facility was and mentioned other details: on-site management, monthly pest control and an access-controlled gate. A free truck was available.

Lonnie took down my key information--name, phone number and credit card--to reserve the 5-by-15. I was given a confirmation number, and it was set. We settled on a day and time I would stop by for a tour. There was an administration fee, and I'd need a lock, which the facility sold. I inquired about 10-by-10s and 10-by-15s so I could compare price with the other facilities. The numbers were fairly consistent. I would probably not have considered this facility, as it was nearly five miles out of my way, but I was convinced to pay the manager a visit after the phone conversation.

The others: I was able to eliminate half of the field--Facilities D, E, G and H--based solely on the phone call. For some, I didn't have a good conversation with the person who answered. For others, price was significantly higher. The representative from Facility D was pleasant and accommodating, but didn't have any units in the size I needed. She suggested I visit another of their facilities across town. I received a follow-up call from a manager at that second facility, but it was too far away for me to consider.

Even though I had seen Facility E from the street for years, I was unimpressed after the phone call. The price was nearly $10 above the other facilities across the board. They also required a disc lock, even though I had my own standard lock. Also, the facility limited my visits to 15 minutes--Amanda said it was a security feature. I can't think of why I'd be there for longer, but it seemed like I would be worried about time on each visit, and I didn't want to feel that way.

I had to take the lead with the woman from Facility G--she didn't help me estimate the size unit I might need. This turned me off to her facility. The Facility H rep simply gave me the price of the units I might need. To these, I thought of what Anne Robinson, host of NBC's "Weakest Link," would say: "G'bye."

Facility Visits

After my calls, I narrowed the list down to four--facilities A, B, C and F--which I visited over the course of two days.

Facility A: I had high expectations based on the phone call, and the visit didn't disappoint. Mary was behind the counter when I entered the office. This was the only office I saw that I would consider a "store." It had separate displays for locks, packing materials, gloves, etc. There was a display of assembled boxes with a price for a package deal, including boxes and other moving supplies. We visited an empty unit by cart. Back in the office, I inquired about a truck, because I had forgotten to ask when I called. She said they didn't have one, but gave me a phone number and cross streets for another of their facilities that did. It was too far away, but I appreciated the effort. Behind the counter was a big monitor labeled "security." As I left, Mary gave me a flashlight--the only gift I received--as her way of thanking me for stopping by.

Facility B: When I walked into the office, shortly after it opened one morning, the first thing I noticed was Tricia half-asleep at the desk. This was consistent with the blasé attitude I received from her when I called, I thought. I next noticed a security monitor showing the view of nine different cameras, with a VCR displayed for all to see. There was plenty of customer parking outside this older facility, with average-width aisles inside. We walked to a unit, Tricia showed it to me, and that was that.

Facility C: This facility had the best curb appeal of the bunch, plus it was just two miles from home. As it turns out, Laurie's management team was ousted in the time between my call and visit. A stand-in manager from the corporate office showed me the facility. It seemed to be the newest of the four I checked out--the aisles were considerably wider, giving it an open feel. The unit I was shown hadn't been swept out, and the manager apologized, saying it would be cleaned out for my move-in. I remember what he said as I left: "We'd like to do business with you."

Facility F: My positive impressions of F disappeared during my drive. It was nearly five miles from my home, along a stretch bogged with heavy rush-hour traffic. I didn't want to deal with this on every trip to the facility. It was an older facility, tucked behind a strip mall. I couldn't find any parking. In fact, there was none. I was told I could park along the curb, but noticed I could possibly have blocked cars from accessing the gate. The person working the counter was pleasant and accommodating enough. I found out I had been routed through a call center before, so this was the first time I'd met Shirley. We whisked to a couple units in the golf cart. I was shown a 10-by-10 converted from two 5-by-5s, as well as an original 10-by-10. Shirley gave me the manager's card.

Facility I: While visiting my finalists, I noticed a facility I had not seen in my Yellow Pages search. I looked up its phone number in the directory, then called. It was the only message I left, and I never received a return call. That's where this story begins and ends.

And the Winner Is...

Facility A. My satisfaction with this facility began in the Yellow Pages and continued through the move-in. It wasn't the most state-of-the-art facility I visited, but its prices were competitive and--most important to me--had unmatched customer service.

From my understanding, Facility A is part of a national chain, but I was never treated like a number or just another prospective tenant. Mary's demeanor didn't seem forced. She was informative and easy to deal with through the whole process. She didn't seem put out by my questions or requests. She seemed to really enjoy what she was doing, which is more than I can say for most of the others with whom I dealt.

To show how important customer service is to me, when I finally moved in my things, I noticed the unit hadn't been swept out. I was so impressed with the rest of the operation that it went undetected until then. I had already made my decision to store with Facility A, and I felt comfortable chatting with Mary even as I filled out the rental agreement. I can't say I would have felt that way at any other facility.

Pricing was in line with many of the other facilities, but A offered half-off the first month's rent, which was the icing on the cake. The money I saved was used to rent a truck to haul my things to the facility. I didn't volunteer this to the managers, but I likely would have rented with them without the discount.

Interestingly enough, I would have come to the same conclusion had I picked the first ad in the Yellow Pages, called only that number, visited the facility and signed an agreement. Facility A had great ad placement in the directory, but backed it up with competitive pricing and friendly, courteous service. To me, that combination is unbeatable.

Thoughts on the Experience

By Jim Chiswell

Matt's objective view through the "Eyes of our Customers" should be required reading for every self-storage manager and owner. Matt's journey starts where most potential customers begin--with the Yellow Pages. Convenience was his focus as he dug through the ads looking for stores near his residence.

Several times, Matt referred to his examination of the maps in the ads. Many customers are not familiar with all of the street names in their community. They are looking for points of reference, such as the local high school, post office or area Wal-Mart. Does your ad have a good map that will help a potential customer to know where you are located? Are you including local points of reference? I have seen countless ads without maps, which I just don't understand.

The map is more critical than some picture of your dog, your kids or some other cutesy graphic reminding people they have too much stuff in their closet. I also see another group of ads where the maps are so bad it makes you wonder if the manager had any input at all in how it looks. Remember, you don't rent the unit over the phone--you rent it when the person is across the counter or desk from you. If they can't locate you easily, the phone will not ring and you will continue to hear about how many units your competition rented last month.

There is something specific that I want to point out about Mary's telephone technique from Facility A. Mary answered, "Thank you for choosing Facility A." She is already thanking the person for a decision he has yet to make. There is a great book titled Permission Marketing by Seth Godin and Don Peters, which analyzes the issue of how to get someone's permission to sell him a product. When a prospect calls your store, he is already giving you permission to sell him on choosing you above the competition. Are you taking maximum advantage of this consent? The vast majority of people who take the time to call you plan to rent somewhere. Give yourself the best chance at success by examining your telephone technique.

Are you asking for the appointment? This is one of the basic sales techniques every manager should use. It is not enough to give people information about your store and prices. The goal is not to make the telephone call as short as possible. You have to ask people to come in and make a commitment to visit the store. In most cases, potential customers have to drive by other self-storage stores to get to you. If you do not get a commitment to a general appointment time (Thursday afternoon or before 11 a.m. on Friday) they may simply drive into the first facility they see because, to many people, storage is storage.

Matt's overall experience is being mirrored thousands of times every day as potential customers are turned into long-term renters by simple repeatable techniques. One of the most important realizations in his article is he did not discover some secret formula or magic. The process, which was ultimately rewarded with his storage business, was simply hard work by the manager and owner with a clear focus on customer service.

When you decide it is time to sell your self-storage facility and move on to other ventures, can you have your cake and eat it too? That is, can you take your profit, avoid income taxes and move to Hawaii? Surprisingly, it has become easier and easier to shift real estate assets and avoid taxes through the use of like-kind exchanges under Section 1031 of the Internal Revenue Code. You could, theoretically, sell your facility on the mainland, purchase a new asset on Hawaii and live in paradise.

Section 1031 states "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment" (Title 26, Subtitle A, Chapter 1, Subchapter O, Part III, Sec. 1031). Basically, this means certain investments are eligible for exchange treatment, whereby the gain that would be recognized on a sale can be transferred to a new investment of like-kind without payment of tax on the sale.

For example, if you construct a self- storage facility for a total cost of $2 million, hold it for 10 years so its basis is $1 million, and it then sells for $3 million, you would have a taxable gain of $2 million. Section 1031 provides a vehicle for avoiding taxes on this gain until a later date by allowing you, the taxpayer, to purchase another investment with the proceeds. The new investment's basis, in our example, would be deemed to be $1 million, which preserves any gain until the sale of the new investment.

What Qualifies?

Which investments are permissible as exhange vehicles? Can you sell a self-storage facility and purchase a ranch house in Colorado? Not unless the ranch house is an investment and leased out to guests to produce income. Can you purchase stocks and bonds? No. Stocks and bonds are specifically excluded from Section 1031. Can you sell your interest in a partnership that owns a facility and exchange it for an interest in a partnership that owns an apartment building? No, because exchanges of partnership interests are also specifically excluded from Section 1031. Essentially, though, exchanges involving any type of real property assets, whether land, apartments, office buildings, shopping centers or storage facilities, are permitted if they are held for investment and are not inventory.

Not surprisingly, it is difficult to transact a true exchange where, on the date of closing, the taxpayer sells his facility in exchange for a real property investment. For a true exchange, the purchaser would need to buy a new facility for the selling taxpayer and instead of paying a purchase price, pay with the new investment. These transactions can be accomplished, but only with great effort. After losing a series of tax cases, the Internal Revenue Service was forced to recognize the validity of a delayed, or deferred, exchange, whereby a taxpayer sells his property, puts the sale proceeds in some sort of escrow account, and then uses those proceeds to purchase the new investment.

Thankfully, these rules are now codified by the Treasury Regulations and provide for a 45-day window following the sale to select the new property with a closing within 180 days from the first. The rules are complicated but have been streamlined by professional services--either title companies, banks or other qualified intermediaries--so the process is now rather smooth and not very costly. It is important to remember that the selling taxpayer may not have use of the sales proceeds until expiration of the 180-day period.

Reverse Exchanges

If deferred exchanges are permissible, what about purchasing the new property before the old property is sold? Close reading of Section 1031 does not reveal any indication these so-called "reverse exchanges" are prohibited, and clever real estate developers have been engaging them for some time. The trick is to figure out a way to finance the acquisition and have use of the property prior to the time of the sale of the old, since the developer is not permitted to own title to the new property until after the sale of the old one.

One way it has been done is to have an unrelated third party, an "accommodation party," purchase the new property. An affiliate of the taxpayer can lease from the accommodation party and have full use and benefit of the new property, including the right to construct improvements. Also, a financial institution can loan funds for acquisition, development and construction to the accommodation party. The loan can be nonrecourse to the accommodation party but guaranteed by the principal equity owners of the taxpayer. This is important because the Treasury Regulations provide that the new investment must be the same amount or more than the old, or tax must be paid.

Using the previous example, the selling taxpayer will sell his self-storage facility for $3 million and must purchase an asset for at least $3 million. If he intends to purchase raw land worth $1 million to construct a new facility, he will need to spend at least $2 million on the new improvements to comply with Section 1031. In a reverse exchange, the best way to do this is with borrowed funds. (In a deferred exchange, he would use the sales proceeds to finance construction.) The rules of reverse exchanges, like those of deferred exchanges, have recently been codified and provide for similar time periods.

The 1031 like-kind exchanges are complicated, requiring the advice of experienced professionals. At the same time, they are so well formalized that prudent landowners should take advantage of the tax benefits the exchanges provide. This article is intended as a very brief primer on 1031 exchanges to increase your awareness of their applicability. As with any tax planning, you should consult with your professional advisor prior to engaging in a 1031 exchange. Its rules and regulations are specific and complex, even though the actual exchange can be accomplished with little hassle.

David A. Weissmann is a partner in the law firm of Weissmann & Zucker PC in Atlanta, which specializes in commercial property, business and finance. Mr. Weissmann is a frequent lecturer and writer of self-storage topics. For more information, call 404.364.4620; e-mail [email protected].

The discovery of hazardous materials in a self-storage unit raises the prospect of nightmarish consequences for the facility owner. The nightmare begins with the discovery of the toxic material, and the level of fear rises if the tenant who placed the illegal property in the space cannot be located.

Under the Comprehensive Environmental Response and Liability Act and similar state laws, the facility operator is strictly liable for the cost of the removal and legal disposal of the hazardous materials if the tenant cannot be found or cannot pay the disposal costs. This rule may not seem fair, but it is the law. Storage operators should operate their facilities with this potential exposure in mind.

Not only does the law unfairly penalize innocent landowners, but if hazardous materials are discovered, few storage operators have insurance to cover the costs of removing them. Standard property and liability package policies exclude hazardous-material-cleanup claims. Some of the self-storage specialty insurers have endorsements that cover this risk, but few storage operators carry this coverage. The cost of rectifying even a minor hazardous-materials incident can be several thousand dollars, and the removal and disposal of more dangerous chemicals can cost tens of thousands of dollars. Failure to deal with a problem when it is discovered can lead to hefty fines and even criminal prosecution.

So how do you protect your facility from becoming a toxic-waste dump site? Obviously, the best approach is prevention. There is no perfect system that can be adopted to prevent tenants from storing illegal materials at your facility, but there are some simple things you can do that will reduce the risks:

• Make it clear to your customers that they may not store hazardous or toxic materials in their storage spaces. This policy should be stated in the rental agreement. Signs prohibiting the storage of hazardous materials should be posted in the office and around the facility.
• Identify your customer. When you rent a storage unit, request positive identification, including a driver's license and Social Security number at a minimum. A good skip tracer can find most individuals if it has these two pieces of information. Also insist on a physical address from your customer--a P.O. box is not sufficient. This may discourage some customers from renting from you, but it may deter potential dumpers from renting space at your facility.
• Quickly verify the personal information provided by the tenant. A letter should go out to the addresses provided by the customer and calls should be made to the phone numbers. This contact can be made with a pleasant welcome letter and phone call. If the information is incorrect or false, remove the tenant's gate code from the system until the discrepancy is corrected. If you are lucky, you may catch the error before the tenant even stores any property with you. This procedure will also correct inadvertent errors that could impact your lien rights.
• Have a very public policy that every vehicle is subject to search upon entry into the facility. This policy should be enforced whenever an unmarked covered truck enters the premises. Large quantities of hazardous materials are not teleported into self-storage spaces--they arrive in trucks. It does not take an extensive search to determine something potentially dangerous is being brought onto the premises.
• Make sure prospective customers understand your policies against storing hazardous materials. They should also be aware you will report all incidents to the appropriate government authorities. The goal is prevention. You want to scare off potential toxic dumpers. If you make it difficult for them, they will go elsewhere.

While following these suggestions can have a deterrent effect, some storage operators take even more aggressive measures. One tactic is to photograph all tenants upon the execution of the rental agreement. Many facilities get a thumbprint from all new tenants. Such measures may not only discourage potential toxic dumpers from renting a unit at your facility, but also customers considering renting space for other illegal reasons.

There is no perfect system for preventing a self-storage space from becoming a depository for hazardous materials. However, you can reduce the odds your facility will be chosen by toxic dumpers. Dumping toxic materials in a self-storage facility is a crime and, like most criminals, dumpers want to remain anonymous. If they believe you know who they are and are watching what they are doing, they may look for an easier site to practice their illegal trade.

D. Carlos Kaslow is an attorney in Berkeley, Calif., and is the founding partner of the Self Storage Legal Network and author of the Self Storage Legal Review, a bimonthly newsletter covering self-storage legal issues. He is also general counsel for the national Self Storage Association. For more information, visit www.selfstorage.org.

In this industry, like many others, it is a possibility you will be sued at some point in time. Lawsuits come in many different varieties in self- storage, but there are several types we see all the time. The first and most obvious is the lawsuit over wrongful sale (the wrongful disposal of property). The second type is the breach of contract/failure to perform (refund cases). The third type is employment-related lawsuits, such as wrongful discharge, sexual harassment, and wage and hour claims. The fourth type is the class-action lawsuit, which I have discussed so often in this column. This would involve late fees, for example.

Anyone with $200 can file a lawsuit. That does not mean the complaining party is correct. Unfortunately, there is no one in the Clerk of the Court's office who reviews cases to see if they are valid before allowing them to be filed. There are some steps you can take that will help you ward off some--but, of course, not all--of these potential lawsuits.

Wrongful Sale/Disposal of Property

To avoid suits of this nature, first ensure your lease is well-written, clear and unambiguous, especially where it outlines when rent is due and what happens if it is not paid on time. Forty-seven of the 50 states have lien-sale statutes that can give you guidance. (See the "Legal Perspectives" column in last month's issue for more details.)

It is important you review your lease and lien-sale procedures--preferably with your attorney--to ensure you are in compliance with your state's statute. If you have complied with the requirements of the statute, including minimum waiting periods, inventory, advertisements, mail notices, conspicuous language in your notices, etc., your liability to your tenant for a wrongful sale can be minimized or completely eliminated. Thus, these types of lawsuits are easy to avoid--or at least easy to win--by following your state's statute.

Breach of Contract

Most of us have run into a tenant who is simply dissatisfied with his experience at your facility. More often than not, the dissatisfaction arises from a break-in, damage to or theft of his property, roof leak, gate failure, etc. This is the type of person who, regardless of how well-written your lease is, thinks you are a baby sitter for his property and somehow responsible for his damages and losses, no matter how they occur.

While you have insurance to cover these types of claims--and while your insurance will almost always defend you and, if necessary, pay a judgment--many operators maintain policies with deductibles that might exceed the amount of the claim. Further, turning too many claims into your insurance company will result in rate increases or the insurance company dropping your coverage. Thus, there is a certain class of claims lawyers refer to as nuisance claims. These claims may or may not be valid and have demands not worth involving the insurance company. However, you and your facility cannot afford a reputation of simply paying the demand of every tenant who deems he is entitled to some type of compensation.

The universal factor we find in these types of lawsuits is, at the outset, the claim demands a sum of money, $500 for example. By the time the lawsuit is filed, the amount has often doubled or tripled. These cases have a way of multiplying, as the tenant becomes more angry when his demands are not met. We also hear from plaintiffs that if they had received an apology or some recognition of their claims, they never would have filed the lawsuit. Sometimes resolution is as simple as an apology, an agreement to transfer or a small concession that not only keeps the tenant, but keeps him out of court.

Another alternative to avoid a lawsuit is mediation. For a reasonable fee, most communities have a business-mediation service through either the court system or the chamber of commerce. Mediation is not court. It is an opportunity for both sides to meet with an impartial person--the mediator--who is trained to assist with the resolution of disputes by exploring options. While you may not be able to negotiate with an irate tenant and settle a case for an apology and a couple of months of discounted rent, an impartial mediator, after allowing the tenant to vent and helping him understand the potential weaknesses of his case, may be able to achieve the same result.

That result may cost you, the owner, a few hundred dollars. But it's the same few hundred dollars you would pay your attorney to simply begin defending the lawsuit, not to mention the potential judgment that could be rendered against your facility by a sympathetic judge. In many states, you can compel the tenant to mediate before filing a lawsuit by including a mandatory-mediation provision in your lease.

In any event, if you resolve the dispute through settlement with the tenant or mediation, make certain you obtain from the tenant a release of all claims accruing up and through the date of the settlement, including any issue raised in the complaint. Without a release, the tenant can theoretically go to court and sue you later for the same circumstances. With a release, which should be prepared by your attorney, you can block the tenant from ever bringing up the problems or issues he had with you in any type of action before a court.

The most common mistake I encounter with self-storage operators who settle their own cases is they base their settlement on a handshake rather than a written release. Sometimes an oral agreement works; sometimes it comes back to haunt you. It is simply too large a risk to resolve any dispute without a written release.

Employment-Law Issues

States vary in their laws regarding an employer's ability to discharge employees. If you have even one maintenance person or manager, you should strongly consider having an employee handbook outlining your company's policies regarding everything from absenteeism to vacation and everything in between.

An employee handbook must be drafted by your attorney. There are too many state-specific issues that must be included for this document to be purchased from a stationery store. Almost all employee handbooks, however, have some common threads, such as statements about sexual harassment, payment of wages or salaries, vacation policies, termination policies, expected behavior, including any uniform requirements, and attendance issues. An employee handbook should be given to every new hire, and a signed receipt should be retained by ownership. If you are instituting use of an employee handbook with current employees, ask your attorney about the appropriate consideration to give employees to make policies binding.

The employee handbook buys you, for a small price, excellent legal protection--if you follow your own rules. For example, if you terminate an employee who is habitually late and you do not have an employee handbook, the employee may cite other alleged reasons for the termination. However, if the employee received and signed for an employee handbook that states excessive tardiness or absenteeism is grounds for discharge, you are in a far better position. You can now show a judge or jury the employee knew what was expected of him and failed to act in accordance with requirements for employment.

An interesting development, which has been around for a long time but is really coming home to roost in the self-storage industry, is fair wage and hours claims by managers. The Fair Labor Standards Act is a federal law. As you may know, people who are in management can be salaried and may not be subject to the provisions of this act, which requires payment of overtime for more than 40 hours worked in a week, or eight hours a day in certain circumstances. However, there have recently been cases involving the apartment industry, for example, where people who have the title of manager are not considered management by the act's definitions.

Generally speaking, for a manager to be exempt from the requirements of the act, he must be an executive, professional or administrative employee. He must receive a fixed salary even if he does not work a 40-hour week. An executive generally must manage at least two other employees and exercise a significant amount of discretion and independent judgment in doing his job. The administrative exemption is more like a project manager instead of a manager of employees. Still, this employee must exercise a substantial amount of independent discretion in his position, be included in decisions that directly relate to the company's management policies, and operate with only general supervision.

In either position, the manager's work must significantly relate to the success or failure of the business. If these employees do not have this sort of authority, they are not actually management; and even though you have them on salary, they might be entitled to overtime for working in excess of 40 hours a week. Self-storage facility managers often work more than 40 hours a week, either because of staff shortage, busy weeks when rent is being received, maintenance, etc. The penalties for wage and hour violations are substantial, and the look-back period is two years, or three years in the event of a willful violation. Consult with an attorney to see if changes should be made to your policies.

Class-Action Lawsuits

While these suits are rare, they have certainly garnered a lot of attention in our industry, especially over late fees. Please make sure your late fees are in compliance with your state statute and are not punitive. (For more information, refer to the "Legal Perspectives" column in the April 2001 issue of Inside Self-Storage.) More local self-storage associations are trying to lobby for statutes that provide guidance for the types of late fees you should be allowed to charge. Most recently, Missouri and Arizona have passed such bills, with other states likely to follow.

Until your state has a late-fee bill, make certain your late fees are not unreasonably high or find other creative ways to avoid charging late fees. For example, some operators require all tenants give them a credit card with authorization to charge the card in the event rent is not paid on time. These operators avoid all late rent. The few tenants with issues such as maxed-out credit cards are not being charged late charges; rather, the operators are simply working to remove those people from the facility via lien sale, eviction, etc. This is just one example of what operators are doing to get around the problem.

When You Are Sued

All of this being said, there is still a good chance that, at some point, you could be sued. There are several things you should do as soon as you are served with a summons from a court:

1. Immediately tender the claim to your insurance company in writing by certified mail.

2. Prepare and organize the file pertaining to the claim.

3. Conduct your own investigation and review existing policies.

Notifying the Insurance Company

Most insurance policies have a provision stating that if you do not notify the insurance company you are being threatened with a lawsuit and/or being sued within a certain number of days after receiving notice, its obligation to cover you is waived. Even if you are not certain you want to invoke your insurance coverage, you must immediately let the insurance company know there is a potential claim.

If there is any question as to whether the insurance company will cover the claim, it may issue what is called a reservation of rights letter. This letter says that while the insurance company will assume the obligations of defending you in a lawsuit, it reserves the right to determine whether the claim is actually covered and whether it would actually have to pay any judgment rendered against you.

The insurance company will assign an attorney to handle the lawsuit. This attorney, while employed by the insurance company, works for you. You make decisions about the case with him. The insurance company only authorizes payments of settlements or pays judgments. That being said, it is never a bad idea to keep your own attorney involved in the case to always ensure your best interests are being represented or in case some portion of the claim is not covered by insurance. Often, the attorney hired by the insurance company will not have the working knowledge of your business and industry that your own attorney has. You would be responsible for your own attorney's fees, but that minimal investment may pay great dividends later in the case.

Preparing and Organizing the File

As the owner of the facility, you want to make certain you have a complete and accurate file regarding the situation. Documents have a habit of disappearing--especially if your employee has done something wrong. Before anyone else in the company knows about the lawsuit, compile a full and complete copy of the tenant's file, including computer printouts and all written documentation. If the lawsuit is a claim against the facility for something such as a personal injury or theft, make certain you have obtained copies of all police, fire, and/or ambulance reports and witness statements. You should also take photographs of the scene of injury, accident or theft.

It is also important to gather the names, addresses and phone numbers of anyone who may have seen or learned any information about the case who may be able to act as a witness. As time passes between the filing of the lawsuit and the trial (this can be several years), you may forget or lose track of the people who could be witnesses in the case. Gathering this information early will make it easier for you and/or your attorneys to find these pertinent people later.

Conduct an Investigation and Review Policies

If this is a claim by a tenant for some type of wrongful action, make certain you have not actually done something wrong before preparing a large and expensive defense. If you have done the alleged act, find out if it was somehow justified. If not, it might be in your best interest (and less expensive) to get out of the lawsuit early through settlement. This would also be an appropriate time to review your policies and procedures and ensure you have properly instructed employees to avoid a reoccurrence of the same problem.

Be aware there is a time limit by which you must file an answer and certain other pleadings with the court. If you miss these deadlines, you may not only lose by default, but you may waive the right to assert counterclaims or join other parties in the lawsuit. This is not the time to be frugal with your money and avoid hiring a lawyer. If you have not reported this claim to your insurance company and/or it has not appointed an attorney, obtain one on your own.

Assuming complaints and answers are all properly filed, there will be a period of time for what is known as "discovery." During discovery, each party is entitled to obtain information from the other party, including asking questions about the nature of the case, determining valuations, and reviewing medical records, incident reports and all other documents that may be used at trial.

Some of the forms of discovery may be familiar to you, such as interrogatories, requests for production of documents and depositions. Others, such as requests for admissions and requests for physical examinations may not be as familiar to you, but the idea is there should be no surprises at trial. A properly prepared case should allow you and your attorney to know exactly what the other side intends to claim and the basis for those claims, as well as the evidence, reports and all other documents they intend to produce at trial.

If you find through discovery that the plaintiff has a good claim against you, there are opportunities, informally and through court intervention, to reach a settlement or negotiated resolution of the matter. Sometimes, cases may even be sent to binding or nonbinding arbitration, where one or several independent parties listen to the case and render an evaluation/judgment on the claim. Other cases are sent to mediation for the same type of back-and-forth negotiation described earlier in this article.

If all else fails, the case eventually will have its day in court. A larger, complex class-action case has its weeks in court, while a simple property-loss claim may have its 15 minutes in court. In the end, both sides will have had the opportunity to have a judge or jury determine who is responsible for the alleged loss, and how much the alleged loss is worth to the injured party. If the plaintiff wins, there will be a judgment for the plaintiff, and an amount will be awarded that will have to be paid by you or your insurance company, depending on the nature of the claim and your coverage limitations.

For a self-storage owner/operator, there is absolutely nothing fun about litigation. It is not only distracting, costly and time-consuming, but emotionally difficult. It is never easy to be told that you are wrong or may have done something wrong. That is why good documents, preparedness and a willingness to listen and resolve the situation early is more important than ever.

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, Mr. Greenberger can be contacted at Katz Greenberger & Norton LLP, 105 E. Fourth St., Suite 400, Cincinnati, OH 45202, or by calling 513.721.5151.

Vern Cannon has his own way of doing business, and it works. Cannon Storage Systems, a national turnkey building supplier and construction-service company, has had a steady stream of business since it opened its doors 22 years ago. As Cannon's methods are passed to his children, the company enjoys continued growth and success.

It was 1979. Cannon, a commercial contractor at the time, was asked by a customer to construct a self-storage facility. Back then there were no guidelines--no industry trade magazines or tradeshows--and the Self Storage Association was in its infancy. Cannon performed his first survey on labor for a self-storage project and finished the job. Gauging the company's success in a burgeoning industry was easy. "The calls never quit coming in," Cannon says.

A Cut Above

What sets Lawton, Okla.-based Cannon Storage Systems apart is its commitment to quality and customer service. "We're perfectionists," Cannon says. "I realize you can't reach perfection, but you can strive for it. Everyone working for me knows that." The company is also willing to travel, and that factor helped in the early days when few companies did.

Eighty percent of Cannon's new customers come through word of mouth, he says. With a number like that, there must be plenty of satisfied facility developers out there. Nancy Hollingsworth is one. "Originally, we went with Cannon on the recommendation of someone else for whom he had built," she says. "Then we added on twice and used him again." Hollingsworth, who has facilities in Texas, says Cannon makes time to fit existing customers in his schedule for add-ons and new phases. "He had a good product at the better price," she says. "They're real nice and they did a good job."

Cannon says his company has never lost a customer to another. "We've completed every job since 1979 ahead of time and on budget," Cannon says. A track record like that speaks for itself. "I think that is one of the keys--that when customers call our office, we can turnkey their projects for them. We can design the site, design the buildings, design the heat and air," he continues. "Most of the developers who call us like one-stop shopping. They don't have to look for other crews. We not only sell them the material, we put all our own material up."

The company also takes a no-nonsense approach in its dealings. "What we tell you is what you're going to get," says Cannon's daughter, Starr, who moved from the company's headquarters to open and manage a brand-new field office in Arlington, Texas. "We don't sugar-coat it. We tell you if we think your project's going to work or if it's not."

Cannon Storage Systems is also selective about its business associates. "We don't do every job that comes our way," Cannon says. "We don't build the cookie-cutter self-storages. We don't build the little metal ones that go up in everybody's backyard. We only build those that are quality projects, where the people are going to be around a long time, because we invest a lot of time and effort into each project."

The Next Generation

Cannon, now 53, is working his way out of day-to-day operations. His children, who grew up around self-storage construction, are being groomed to take over the business. Starr was installing roofs and partitions when she was 15. Tom Garbutt, Cannon's eldest son, oversees the company's nationwide construction. "Tommy started at 13 screwing buildings together," Cannon says.

"I kept the business small while Starr and Tommy were young," he continues. "As they've gotten older and come into the business, the business grows by about 25 percent a year. That's due in direct relationship to their abilities. Over the past several years, they've done quite a bit. More or less, I'm the guy who sits over their shoulders."

The decision to expand came with Starr's continuing on-the-job education. "We waited for the right time," Starr says. "I needed to learn more about the business. I had been a teenager when I first started really working for Dad. Once I'd been in the office and learned as much as I could, that's when we decided to do it." Starr also sees the company growing as her younger brother, David, works his way into the business. "I've tried to do my best through the past three-and-a-half years to learn, because Dad started with nothing and built it up," she says. "I just want to make sure I continue to help it grow."

Longevity sits in the employee ranks as well. There are people working with Cannon today who were superintendents when his idea for self-storage construction came to life in '79. "Most of the people who run my crews have been with me for more than 20 years," Cannon says. "More than 60 percent of the people who are still working for me have been here for 10 years, which is very rare."

Self-storage has grown by leaps and bounds in the last 20 years, and Cannon has been there to see it through the good times and bad. Cannon says the public's perception of the industry has improved, allowing it to grow to the billion-dollar industry it is. Cannon Storage Systems has also evolved from a one-man operation to that of nearly 40 employees working throughout the country. But for all the money to be made erecting piers, headers and standing-seam roofs, it's still a people business. Just ask Vern Cannon.

"Our success is due to the people who work in the field," Cannon says. "We're very good here in the office, but it's the people in the field who satisfy the customers and work during the rain, snow and wind. That is where the money's made. That's where your reputation's made."

For more information, call the corporate office at 888.500.3299; fax 580.248.6091; visit www.cannonstorage.com. The Arlington, Texas, office can be reached at 817.784.6611.

Storage is a simple business, but it's not an easy one. The steps are straightforward. First, you get the phone to ring. Once people call, you try and get them to come in and visit. Next, you get those who visit to sign a rental agreement. Finally, you get those who rent from you to stay forever and tell all of their friends.

Incoming phone calls are a crucial piece of the storage-marketing puzzle. Given how crucial these phone calls are, it is critical to have some means to measure their success. The key measurement is how many calls are converted into visits.

If you get 200 calls a month and convince 100 of those callers to come in and visit, you're closing ratio is 50 percent. Is that a good number? For years I've heard the average storage facility converts about half of its phone prospects into visitors. This figure has become widely accepted but, honestly, very few people keep accurate records in this industry. I recently had one owner tell me one of her managers "refuses" to keep track of these numbers. My response to her regarding the manager can't be publicly repeated.

Rather than fixating on being "average," your time is better spent trying to improve your closing ratio--whatever it is and no matter what level at which you begin. The best way to improve manager performance on the phone is to monitor calls. The problem with most monitoring services, however, is they measure the wrong things. I've heard countless stories of how a certain manager scores famously well when shopped by the monitoring service, yet the facility's occupancy remains stagnant or even goes down. If a manager scores well when called by a monitoring service, the facility's numbers should reflect this performance. If that isn't the case, you are clearly assessing the wrong criteria.

Manager Resistance

Many managers will interpret phone-skills monitoring as your lack of trust in them, but it's all in how you sell them on the idea. If you have hired the right manager, he should be anxious to improve. Make it clear to your managers that you're not trying to play the "gotcha" game. Instead, explain how a well-trained third party can provide you both some great ideas on increasing closing ratios. Frame it this way, and you should be able to get just about any good manager to agree.

Legal Issues of Monitoring

I'm not a lawyer, nor do I play one on TV. I do know you need to inform your employees they are being monitored on the phone. Make them sign a consent form that agrees to the monitoring. If they aren't willing, why are they working for you? If you don't follow these procedures, you could end up working for your manager after the lawsuit that may follow.

Five Crucial Items to Measure

Highlighting Your USP. The first item that should be measured when monitoring employees' phone performance is whether they highlight your facility's unique selling position (USP) to potential renters. If a person is calling around to facilities, we know they need storage. It is also true many people who call are doing so for the first time, so they need to be educated. Your managers need to let people know what makes your facility different. Not only do you want them to know what you have that's unique, you want to show them why the feature is indispensable.

Disclosing Price Before the USP. Any phone call where a manager gives out the price of a unit before giving out the USP is a failure. You cannot allow managers to lose sight of the importance of this issue. If you're using a monitoring service, make sure it has this item on its list.

During seminars, I always ask owners whether they think their managers will give me the price of a unit over the phone without any other information. Most say, "Call my manager--he/she will never let you get away with just getting the price!" In every case, I've been able to make the call with a very hurried voice and get the price without the USP.

Offering an Incentive to Visit. To increase the number of calls turned into visits, you'll need to consider offering incentives. In most cases, if you can get people to visit your facility, they will rent a unit. How much would you be willing to pay if you could increase the percentage of people who visit your facility by 10 percent? Don't offer incentives unless you have to; but in most markets, you'll want to consider it.

What do you offer? Something with high perceived value but low cost. The cost of getting the phone to ring can be extremely high depending on your market. In the Los Angeles area, for example, the cost of each phone call can be upward from $87. So if an incentive is needed to get people in to visit, then so be it. You can try different incentives to see which ones work and are the most cost-effective. Mention of the incentive should be another important item on the phone-monitoring checklist.

Establishing Rapport and Gathering Information. Everything else being equal, people buy from people they like. It is, therefore, essential your manager not only be perceived as competent, but also a nice person. This is a tough skill to teach, but it's not tough to judge when monitoring phone calls.

Rapport is built with prospects by asking questions and finding some common personal ground. One way for a manager to make conversation is to talk about what the prospect will be storing. Most phone-monitoring services give points when a manager is able to assess the correct size unit for a prospect through phone conversation. Although important, it is less important than many think. In fact, one out of three times a manager will quote a size for a potential renter, only to find out he has drastically underestimated the person's needs. The most important thing is to monitor the manager's ability to build rapport and gather information.

Closing for the Visit. In every sales situation, the close is crucial. If a manager isn't striving to get the prospect to visit, he is on the wrong track. Make sure your manager invites prospects to visit your facility. If you can get them to visit, you can get them to rent. Without a visit, it's impossible.

To close effectively, the manager must determine the kind of person to whom he is speaking. In nearly every case, it's important to get the prospect to commit to visiting on a certain date and time. It is also important the manager convey a sense of urgency. If there's no urgency, there is less likelihood of a sale.

These are the top five items to monitor on the phone. There are others of less importance that should still be monitored, but without these five basics, the rest don't matter.

Two Ways to Monitor

There are two ways to evaluate your managers. You can monitor them yourself or pay a company that specializes in this service to do it for you. Use caution when hiring outside services. They frequently try to make you feel good by giving your managers high marks for irrelevent criteria. If your manager gets great marks from a service and occupancy rates don't rise, change your monitoring-service provider.

If you choose to monitor employees yourself, you'll need help. Using your own voice to call your facility will not yield accurate data. Instead, have someone else do the calling for you or invest in one of several sophisticated devices that will realistically alter your voice. (You can check the Internet for such devices, though good ones are fairly expensive.) Have whomever makes your calls ask your manager a list of questions you provide. Make sure you have him record the calls.

Every manager, no matter how good, needs to be monitored. Even Tiger Woods has his coach, Butch Harmon, monitor his swing on a daily basis. If the best golfer in the world can use feedback on his swing, even the best manager in the world can use some feedback. Using some intelligent fine tuning, even the best can get a bit better.

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-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].

bud*get \'buj-et\ v The act of spending countless hours compiling data from the past year so as to get an accurate and complete financial picture regarding revenues and expenses someone above you will ultimately decide does not show you are making enough money and will totally rewrite for you anyway.

Simply put, a budget is a guideline or statement of the probable revenues and expenditures of your self-storage facility. It is meant to project as accurately as possible how much money in revenues will be created by your facility, as well as what you would expect to pay out in expenses.

The revenues include but are not limited to rental revenues, ancillary product or merchandise sales, money generated through administrative fees (sign-up as well as late fees), and any services you may charge for, such as trash service, cleaning, package acceptance, 24-hour access, etc. The expenses side of your budget is usually a much longer list, including but not limited to salaries (this is where you see whether the owner really can't afford to give you a raise), real estate taxes, water and sewer bills, electricity, repairs and maintenance, credit-card fees, bank-service charges, telephone bills, office supplies, Yellow Pages ads, additional advertising expenses, health insurance and even the subscription to the magazine you are now reading.

In a perfect world, you would be in on the creation of your facility's budget. This would allow you, the manager, to get a clear and accurate picture of the financial status/viability of your facility. It may even allow you to help set the goals for your facility--financially and physically; after all, the money for the projects to upgrade/fix/maintain your facility has to come from somewhere. It's much easier to get a couple thousand dollars out of the boss for a golf cart if you've already talked about it and left a little room in your budget. But let's not get ahead of ourselves.

I happen to be in on the budget process of my facility. This is when I look at my expenses from last year and try to gauge what my expenses will be for the coming year. I also look at my revenues and try to predict what they will be for the new year. This is what I like to call a reality-based budget. It's the budget the boss looks at and decides we need to make more money. Then there is the budget he creates, which gets approved and usually has little resemblance to the one on which I was working. Whichever is the case, you should be aware of the budget that has been assigned to your facility.

All too often, owners do not allow their managers to be a part of creating the budget or even sharing the information it contains. They sometimes feel this is proprietary information, or they may not want you to see the net income of the facility (their take). Yes, your owner is probably making a little more money than you. But he came up with all the money to make the facility happen and took all the risk in losing that money if the business failed. Besides, he was probably already doing pretty well. Rarely do people get rich in this business--they're generally already headed in that direction.

The problem comes when the owner believes you should be asked to live up to a set of financial obligations you have had no say in creating. In other words, he does not want you to do exactly what he hired you to do--manage the facility. He is doing himself and you a great disservice, asking you to keep expenses within budget (without telling you what that is) while expecting you to achieve goals (without telling you what they are).

Managers are frequently excluded from the budget process. Most never even see their facilities' budgets. If you are one of these individuals, you should ask to see the budget that has been created for your facility for 2002. It should be completed by now. If you were made part of the budgeting process, you realize the tens of thousands of dollars you are depositing each month is not going directly into the owner's pocket.

I once took a two-story fall from a rickety, broken ladder while doing some sign work at a facility I was managing. I busted the ladder as well as my butt. Do you think I could go out and just buy a new ladder? No. It wasn't in the budget.

The owner I worked for lived in a very upscale community on the coast of California. He lived the lifestyle of the rich and famous, with a couple of Rolls Royces, a $6 million home overlooking the Pacific and shoes that cost more than I made in a week. It infuriated me this person was living large while I couldn't even buy a ladder for my facility. It was hard for me not to resent him. If I had been privy to the yearly budget, however, I would have seen that although my facility performed well and made a tidy profit each year, this wasn't how the owner got so stinking rich.

If you ever get to see the financial balance sheet of your facility, you'll be surprised just how little of those tens of thousands of dollars are left each month after expenses. Had I been in on the budget, I could have left a little room in the miscellaneous-expense column for just such an occasion. Had I looked a little further, I would have seen the owner's biggest expense was actually me. That's right--salaries are usually one of, if not the largest, expenses of a facility. Little did I know the owner could have saved himself a cool $5,000 a year or more by replacing me. My resentment may have turned to understanding had I known more about our budget.

The point is everyone gains when the manager is made part of the budgeting process. Then there are no unseen expectations or surprises. If it's too late to be included in this year's budget, ask to see the final approved budget and open up some conversation regarding it. Trust me when I tell you it will be an education for everyone.

David Fleming and his wife, Tina, are an award-winning management team with Premier Self Storage Inc. of Western New York. Mr. Fleming has more than 10 years of experience in the self-storage industry, having managed facilities in three states. He is currently a corporate trainer and senior site manager overseeing five locations. He and Tina work as full-time resident managers of Premier Self Storage in Amherst, N.Y. To contact the Flemings, call 716.688.8000; fax 716.688.6459; e-mail [email protected].

If you are using DOS-based management software, your computer may be several years old and nearing the end of its life cycle. When your computer dies, your business productivity will instantly suffer. You can dramatically reduce this risk by switching your files over to a new PC.

You might decide, like many people these days, to shop for a new computer over the Internet, which can be quick and easy. Computer producers advertise that a brief visit to their websites is all you need to do to acquire the perfect custom-configured system. Or you might choose to patronize your local reseller and look for its monthly special. A knowledgeable salesperson and the promise of on-site support will ensure your business computer will operate reliably for years to come.

The reality is neither online shopping nor a store purchase will guarantee a pleasant purchasing experience. I conducted an informal survey of dozens of customers who bought new management computers during 2001. I found some vendors had made the buying process very difficult or misleading.

Online Shopping

The Gateway (www.gateway.com), Dell (www.dell.com) and Compaq (www.compaq.com) customers I surveyed were quite pleased with the ease and speed of their online purchases. The web pages were designed simply and logically with convenient links to related items.

On the other hand, those who shopped with Hewlett Packard (www.hp.com) had a confusing experience. The HP site included a select mode that looked similar to its purchase mode. Shopping on the site required twice as much time since the selection of features during the configuring process had to be repeated in order to purchase the PC. This should be corrected soon now that Compaq and HP have merged.

IBM's website (www.ibm.com) was the most frustrating. It contained so many buttons and so much content the customers had a very difficult time purchasing the system they wanted.

Store Purchase

All of the online purchases of the surveyed group were pre-planned upgrades. The self-storage clients evaluated their upgrade needs and choices well in advance of the actual purchases. By contrast, those who purchased through local stores tended to shop from urgency or impulse. For example, their site computer may have suddenly failed and there wasn't time to shop for a bargain.

The store-bought computers had been on the shelves for several months. For this reason, they were slightly less powerful than their Internet counterparts. Most store customers also bought the optional extended warranty and/or on-site service. It is too soon to know if those services were wise investments.

What to Expect

All of the new PCs were easy to set up and, so far, have performed as expected. On average, the new computers were 10 times faster than the systems they were replacing. Each PC included Microsoft's latest operating system, Windows XP^TM, which provides file encryption and strong security settings that prevent unauthorized system use. However, XP is not designed to support older DOS software, and this forced some customers to simultaneously upgrade their management software.

The costs and options to upgrade your software will vary widely between vendors. Some suppliers offer a 100 percent trade-in credit and free data conversion, while others will charge a fee. It is critical you use management and security software compatible with your system. For example, Windows 95/98 software is not guaranteed to operate reliably in the XP environment.

Data Protection

Even if you quickly repair or replace a failing computer, you may have already lost valuable business files. This loss could cost weeks of productivity, and irreplaceable data may be lost forever. A recent and complete backup of your business data is critical to ensure a computer failure remains just an inconvenience.

For years, computer suppliers have offered an optional tape-backup system that can store your files on a removable medium. You simple identify which folders hold your important work, choose a backup schedule and the backup software does the rest. By storing the most recent backups off-site, you will have excellent protection against computer theft, vandalism or office fire.

Some self-storage management programs can automatically gather your tenant and keypad-access files, compress them into a secure format, and automatically e-mail the data off-site. This is a great feature that removes the risk of someone forgetting to take a tape backup home each night.

The Future

Soon computers will be made of carbon nanotubes in what is being called the postsilicon circuit. This unprecedented technology may replace everything we know about computers today. IBM has already made a sample circuit using carbon nanotubes, the technology of which will shrink modern electronics by a factor of 50 to 100. This will mean computers that use far less power while operating more than 1,000 times faster.

Don't wait for technology to cease advancing before making your purchase. By the time nanotube computers become available, the next wave of technology will be emerging. Buying a new computer today is cheap insurance that allows your business to focus on customer service rather than computer repair.

If you operate software compatible with your computer and maintain data backups, your business files will be there every time you need them. Then you can spend your time thinking about your business instead of your business software.

Doug Carner is the vice president of marketing for QuikStor Security & Software, a Sherman Oaks, Calif.-based company specializing in security, software and management for the self- storage industry. For more information, call 800.321.1987; e-mail [email protected]; visit www.quikstor.com.

The commercial records-management industry has settled on the assumption that the standard sales cycle is six months. Why does the industry believe this and why is it, in fact, a myth? This article discusses the assumption and its far-reaching implications.

On Myth and Belief

In J.R.R. Tokien's popular work, The Fellowship of the Ring, Gandalf the Wizard tells readers that the epic begins as story, then becomes tradition and, finally, myth. In a PBS special hosted by Bill Moyers, the great mythologist Joseph Campbell called myth "a principle of human existence." We hand stories down as myth and metaphor, and over time they become "truth."

Ask anyone in any business why he performs a particular task the same way every day and he will usually tell you "Well, we've always done it that way." Practices, theorems and beliefs are handed down through families, cultures and industries and become truths, too.

The Sales Cycle

If you have been in or around the commercial records-management industry, you have heard the prime myth that the records-management sales cycle is a six-month process. Why do you suppose the industry declares this? Because everyone believes it's true. But I have discovered it does not have to be six months. It can be 60 days with a 30-day implementation.

Entrepreneurs built the commercial records-management industry in its early days. These pioneers went out and built their businesses with hard work and without regard for strategy or tactic. We do not have that luxury in today's business environment. We now know the duration of an uncontrolled sales cycle is left to the buyer to determine. Major sales organizations such as IBM, Xerox and others have adopted formal sales methods that ensure control of the sales cycle. You, too, must take control of the sales cycle if you expect to manage it.

A controlled sales cycle that works ensures we direct customers through it at our own pace. We must change the nature of the sales cycle to one we control. How about a 60-day sales cycle that includes only prospects who will buy?

Sales-cycle management requires three principal ingredients: a professionally trained salesperson, a precise sales-cycle process, and measured and managed results. I personally subscribe to a seven-step sales method. (For more information on this process, refer to the sidebar accompanying this article. The original text can be found in the July 2001 issue of this magazine, or visit www.insideselfstorage.com and type "McGovern" into the archive search.) The first step (identify prospects and make initial contact) is the most essential. It is here I separate suspects from prospects. I prefer to have 25 qualified prospects than 2,500 suspects in my sales cycle.

By step three (understand customer requirements), I want at least a 75 percent close rate. To ensure this, it is imperative the sales cycle be managed. In my January column, I described the value and permanency of records-storage revenue. Owners must understand the value as annuity revenue before they can accept such rigor in a sales cycle.

I have often written that the commercial records-management industry is the most misunderstood I have ever encountered. When people finally understand the annuity nature of the business, a lightbulb clearly comes on over their heads. They say, "You mean the revenue is permanent and grows every year?" In a self-storage business, revenue can fluctuate seasonally because the term of the contract is usually 30 days. Records-management contracts are usually one- or two-year contracts with evergreen clauses that reissue the contract automatically at the end of the term. Permanent-retrieval fees ensure customers for life.

The Consultative Selling Process

The application of a consultative selling process to your sales representatives' activities is essential for the short- and long-term success and of the annuity growth of your commercial records center. There are a number of benefits to be derived from using a consultative selling process:

• The consultative selling process focuses on solutions. It helps sales representatives uncover and address the needs and requirements of their clients. It helps them develop sensitivity to the prospect's "pain." The process also supports a focused approach to solutions.
• The process is a systematic, proven, measurable approach to sales activities. It has been and is used with great success throughout corporate America and Europe.
• It is a straightforward process--easy to learn and easy to use. It provides reliable tools and techniques for teaching sales representatives how to sell in a professional, consistent and predictable manner.

It is only when you direct the events of the sales cycle that you can predict its success. Selling has direct and indirect costs attached to its processes. Not only must we measure its costs, but also its value. Selling should never be mysterious. By managing the sales cycle, we can make it 60 days rather than six months.

The Seven-Step Sales Method

Step 1: Identify prospects and make initial contact. Create the prospect list from the resources available (i.e., Yellow Pages, chambers of commerce, local business guides and the Internet). Establish rapport with your customers and create an environment amenable to them accepting you as a preferred provider of records- management services.

Step 2: Qualify customer interest. Gain an understanding of your prospects' organization, identify key decision-makers and influencers, and develop an interest in your services by explaining the customer-needs assessment (CNA) method. Get permission to perform the CNA.

Step 3: Understand customer requirements. Conduct the CNA, analyze the data and verify it with your client. This is the most important step because it is here that you make sure all client needs are met--especially those of the process owner and decision-maker. If there is little or no interest after this step, you may decide to discontinue the sales process.

Step 4: Determine client solutions. You should not have presumed any solutions until this point. You have just uncovered the problem that causes the customer pain. Step four is for developing the solution to alleviate that pain.

Step 5: Present proposal and justification. The purpose of this step is to develop and begin the implementation of a work plan, prepare the proposal documents and cost justification. The work plan forms a logical basis for presenting the proposal based on the customer's needs and stated requirements.

Step 6: Negotiate to close contract. Negotiate the terms of the agreement, clarify any issues and time frames, have the customer sign the contract and process the order.

Step 7: Management/implementation. Make sure all of the customer's requirements are met. The customer must be trained on the systems. The initial batch of records is reconciled and business begins.

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