Construction Corner is a Q&A column committed to answering reader-submitted questions regarding construction and development. Inquiries may be sent to [email protected].

Q: I am having problems with tenants using the dumpster in the back of the facility to discard large items. I don't mind them throwing away small items or boxes, but the larger items are getting expensive to remove. What can you recommend as a video-surveillance solution so I can at least find out which tenants to charge?

-- Linda in Oakland, Calif.

A lot depends on the configuration of your site, the ability to run conduit for camera wiring and how much you are looking to spend. The first method would be to mount a conventional camera. The new, smaller models would help catch people in the act without them knowing they are being monitored; but conduit and wiring to the office is necessary and sometimes not possible, depending on the facility.

If the dumpster or monitoring location is fairly close to the office (approximately 50 to 100 feet) but there is a driveway or other obstacle preventing wiring, you can go with a wireless-camera solution. The last option I recommend is a camera that can easily and quickly mount to a light fixture and transmit the video signal back to the office via the AC power lines. This solution is not very costly and can be a great way to monitor a single location like the one you are describing.

Q: My general contractor and I have a difference in opinion when it comes to landscaping and security. He feels it should be more open, and I feel it would be better to put up higher walls and trees. What do you think?

--George in Bothell, Wash.

I'm sorry, but I am going to have to side with your contractor on this one. An open site leaves less hiding places for potential thieves and makes their work of sneaking around much more difficult. Trees and other tall shrubbery provide natural areas for burglars to hide and make it harder for your manager to keep an eye what is going on around your facility. You should also consider using taller wrought-iron fencing instead of a solid perimeter wall. In addition, if you plan to have other security equipment, such as video surveillance or alarmed storage units, it will be a visual deterrent for thieves. It will also be great way to market your site's security to prospective tenants.

Tony Gardner is a licensed contractor and installation coordinator for QuikStor, an industry security and software provider since 1987. For more information, visit www.quikstor.com.

My life and its events are always in a state of flux. The only constant is change itself. Our self-storage industry is no exception.

One thing I thought was a rock-solid foundation of our business was the concept of monthly rent. Whether you prefer the first of the month or the anniversary date of a customer's move-in as the starting point of occupancy, paying a monthly rent has been the standard. Sure, prorating for partial months upon move-in has been industry practice, but even charging a minimum of one month's rent may be changing.

I mystery shop hundreds of stores each year and, ever so slowly, I am seeing changes in this fundamental principle. A number of stores also appear to be willing to prorate for a customer as he moves out. This creates a daily rental rate. This is not just reserved for the larger companies--single-store operators are doing it as well.

If you ask those managers for their rental rates, they will still reference the monthly cost of $150 for a 10-by-10. Perhaps they should be offering a 10-by-10 for $5 per day, assuming a 30-day month. I know this flies in the face of our normal business practice, but being willing to prorate in and out establishes a new reality: a daily-rental system. The customer only pays for the days he uses.

I know there are a few stores out there that charge a full month no matter how many days are left when a customer vacates. I remember having a customer move out on the 14th after having paid for the month and being able to rent that same unit on the 15th, effectively doubling the rent on that unit for a period of 15 days. I remember having greater than 100 percent financial occupancy some months at stores when I managed Sovran's portfolio of properties years ago. I do not think most of us will see those days again.

There are a few operators who have set up daily rates for a prospective customer who insists he only needs the unit for 10 days. But in every instance I know, they applied a premium daily rate. Instead of $5 a day for that 10-by-10, they asked $8 or $10 per day. A 15-day rental of $10 per day would generate the same monthly rate you could hope to achieve. The major benefit to this practice is human nature, because people generally stay much longer than they initially anticipate.

During my two visits to London last year, I spoke with many operators renting spaces on a weekly basis. They, however, had a different motivation. Follow the math with me: If you charge a monthly rate of $150 for a unit, that earns $1,800 for the year. Most people consider a month to contain four weeks, which would mean your weekly rental rate was $37.50. If multiply that $37.50 by the 52 weeks of a year, however, you actually earn $1,950. If the unit remained full for four weeks, this is an 8.3 percent increase over the monthly rate. Across the United Kingdom and Europe, entrepreneurs are building a new self-storage industry. Their weekly-rental strategies appear to be something we should all at least consider.

I realize most operators experimenting with alternative-period rentals are doing so because of competitive pressure. I urge you to put together a spreadsheet to calculate the positive or negative impact a shift away from monthly rents could have on your bottom line.

Employment Potential Increases

I have watched the transition of store managers during my 18-year participation in the storage industry. In my early years, I was never able to walk into a self-storage store without finding a senior couple behind the counter. In many cases, they presented a folksy image and a laidback style.

Then industry articles and speakers voiced concern over the lack of professionalism they thought the industry's managers portrayed. Many said, "You can't have a professional manager who lives on site!" My conclusion is a manager can be on a second or third career living in the store's residence and provide just as professional an image and positive overall rental experience as a younger, nonresident manager. All along, the truth has been it is the individual that matters. It is their knowledge that counts. The direction, support and tools they are given make the difference from one manager to another. Some owners have yet to discover or appreciate these facts.

The great news for successful managers across the country is there are many more opportunities for them to consider. Managers at smaller stores with smaller budgets can advance to larger stores with larger budgets. Talented managers can move to regional- manager positions and from there to vice president of operations. I know owners don't want to hear this, but there are opportunities for personal and financial growth, regardless of a manager's age. I am excited about the future and promise of our growing, multibillion-dollar industry for skilled managers with a customer-service attitude of success.

You Don't Need Oprah to Have a Book Club

Although there are many social and political issues on which Oprah and I disagree, I admire her. No matter what your viewpoint about all she does, no one can take away the fact she has been more instrumental in encouraging people to read books than any individual in the history of the United States. Many others, like Kelly Ripa from Live with Regis and Kelly and Katie Couric from the Today Show rushed into the void created when Oprah announced she would choose random rather than monthly book selections.

But you don't need anyone's help to create a book or article club for yourself. Consider teaming with other managers or owners to read a book or industry articles. Then compare notes by phone, fax or e-mail--or even at the corner coffeeshop. Ask each other what you have learned. What motivated or inspired you? Are you planning to do something different in your business or personal life as a result of what you read? This can be a great way to build new relationships and will certainly help enrich you as a person.

Statistically, very few people read books following high school or college graduation. Those not reading are missing a great chance to continue to learn and profit from the experience. Please let me know if you get back to the books. As the first selection for your book club I suggest Rudy Giuliani's Leadership. You won't find checklists of things to help you in the office, but you will find insights into one of the people who led our nation through some of its darkest hours.

Jim Chiswell is the owner of Chiswell & Associates LLC. Since 1990, his firm has provided feasibility studies, acquisition due diligence and customized manager training for the self-storage industry. In addition to contributing regularly to Inside Self-Storage, Mr. Chiswell is a frequent speaker at Inside Self-Storage Expos and various national and state association meetings. He has introduced the new LockCheck^TM inventory data-collection system to the self- storage industry at www.lockcheck.com. He can be reached at 434.589.4446; visit www.selfstorageconsulting.com.

Types of Bankruptcy

Chapter 7 is a liquidation. In a Chapter 7 case, where the debtor can be an individual or a corporation, a trustee under supervision of the bankruptcy court collects the debtor's property, converts it to cash, and distributes the cash to the creditors.

Chapter 11 is a reorganization. In a Chapter 11 case, where the debtor is likely a corporation, the debtor creates--again under supervision of the bankruptcy court--a plan to pay off the creditors, usually from post-petition (after the bankruptcy filing) earnings.

Chapter 13 is also a reorganization, but is limited only to individuals who meet certain requirements. Here, the individual files with the court a plan to pay off his debts over time with a so-called "wage earner" plan.

The Bankruptcy Process

What follows are the steps a self-storage owner should take upon notification of a tenant's bankruptcy. Also included are possible strategies to recover the debt or simply make the occupied unit available for rent.

Step 1: Stop the sale.

If the facility is contemplating or in the process of a foreclosure sale, all sale efforts must cease immediately. This includes any preforeclosure notices, placing any ads and, of course, selling the tenant's property.

Step 2: File proof of claim.

The proof of claim is a document that may be obtained from the bankruptcy court. It is imperative to check the document to determine whether it is filed with the court or the trustee. This often is determined by the type of bankruptcy. The document identifies all the debt that occurred up to the time the petition for bankruptcy was filed (the "prepetition" debt). It will serve to identify the storage facility as a creditor against the debtor. Because most rental agreements provide for a lien against the tenant's property and a possessory interest in it, an owner can identify himself as a secured creditor. Because these proofs of claim often have deadlines, the storage facility must file this document with the appropriate entity as soon as possible.

Step 3: Continue to charge rent and other fees after the date of the petition.

Depending on the strategy used to proceed in the storage facility's collection efforts, it is important to continue charging the tenant for use of the space. One remedy for recouping the post-petition rental fees is requesting rent be paid as "administrative costs" of maintaining the property. Additionally, a debtor or trustee may assume the rental contact, as clarified below.

The owner must also review the tenant's debt by examining the amounts owed and, more specifically, payments received in the 90 days prior to the filing of the bankruptcy. The concern about payments in the 90-day period relates to "preferential claims." A nonaffiliated creditor cannot accept more than $600 payment toward debt within 90 days prior to filing of the bankruptcy. If money is paid in excess of the $600, the trustee will demand the funds be returned to the debtor's estate as a preferential claim, and the funds will be distributed among all the creditors. Failure to respond to the trustee's demand will result in a suit against the facility owner to recapture those funds.

Step 4: Contact the debtor's attorney and bankruptcy trustee.

The contact information for the debtor's attorney and trustee is listed on the bankruptcy petition. The objective of this contact is to determine the intent of the tenant.

Possible Courses of Action

The actions a storage facility may take after a tenant files bankruptcy are:

Assumption of the contract. The debtor can ask the bankruptcy court to allow it to assume the contract. This is called assuming an "executory contract." If the debtor assumes the contract, the monthly rent gets paid while the case is pending, and the outstanding past-due rent must be paid to the debtor out of default. This situation moves the self-storage owner to the front line of priorities. Nonetheless, if the trustee does not believe it will benefit the debtor to keep the property in storage, he will reject the contract. If the trustee takes no action to accept or reject the lease within 60 days after the date of the order for relief, the lease is deemed rejected and the automatic stay is terminated under 11 U.S.C. sec. 365 (d)(4).

Relief from stay or adequate protection. A creditor may request a "relief from the stay" that, if granted, allows the facility operator to enforce his lien rights to foreclose on the property. A request for relief from the stay is filed in the form of a motion with the court, requesting that the court "lift the stay."

Alternatively, a motion for adequate protection may be filed. Whether a secured creditor is entitled to adequate protection depends on whether he is oversecured or undersecured. An oversecured creditor has collateral worth more than the debt. An undersecured creditor has debt greater than the worth of the collateral. Adequate protection can come in the form of post-petition interest on its claim for an undersecured creditor and payment of principal and interest for an oversecured creditor.

When a secured creditor has interest in property to be used, sold or leased by the trustee or debtor, the court may prohibit or condition such use, sale or lease as is necessary to provide him adequate protection. Under 11 U.S.C. ß 363(o), the bankruptcy trustee or debtor-in-possession has the burden of proof on the issue of adequate protection, and the secured creditor who has asserted a lien on the property to be sold has the burden of proof on the validity, priority or extent of the lien.

Apply for administrative costs. In a Chapter 11 or 13, the storage owner can request the trustee or debtor pay the costs to maintain the property in the storage facility. The bankruptcy court can make the determination that certain costs are required to proceed with the bankruptcy, and the maintenance of the debtor's property in the storage facility could be considered such a cost.

Turnover. Certain creditors may be required to "turn over" property of the debtor to the bankruptcy trustee. This allows the bankruptcy court to collect the assets of the debtor to distribute to all of the creditors. If the bankruptcy court requires the storage facility turn over the stored property to the trustee, the facility will receive a notice of the request in the form of a motion for turnover, which will require the facility's response. However, turnover may not be required by the court unless the debtor can provide sufficient collateral to the creditor to ensure its claim is protected. The bankruptcy court will not require a secured creditor to give up its possessory interest if by doing so it will lose its security rights.

Abandonment. Another approach under a bankruptcy is to file a motion with the bankruptcy court requesting it order the trustee to "abandon" the tenant's property. The motion must demonstrate to the court that this property is burdensome and of "inconsequential value and benefit" to the debtor. If the trustee is ordered or chooses to abandon the property, it will be released to the storage facility as the secured creditor, the stay will be lifted, and the property can be sold in an effort to recoup monies owed on the storage facility's claim. If nothing else, an abandonment would allow the storage facility to remove the property from the unit.

Statutory liens. Whether the storage facility's tenant files a Chapter 7, 11 or 13, it should be assumed that if the facility is holding the tenant's property and has a signed rental agreement providing for a statutory lien, it is a secured creditor. This fact provides it additional priority over other creditors who are unsecured, and will entitle it to faster payment for the outstanding debt.

Conclusion

Tenant bankruptcy is a difficult process for self-storage operators made worse by tenants who remain on the property after the bankruptcy and continue to default on payment. By following these step-by-step procedures, an operator can act to establish priority on his secured claim against the tenant. At a minimum, the operator can turn over the property to the trustee and open up the space to generate further revenue for the facility.

Scott Zucker is a partner and Lisa Cohen is an associate in the Atlanta-based law firm of Weissmann & Zucker P.C., which specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. For more information, call 404.364.2300 or visit www.wzlegal.com.

They say a picture is worth a thousand words. Well, here are a thousand words about taking pictures.

Magpix-350

A good video-surveillance system provides a broad record of your site activity. However, these video cameras won't provide an up-close view of a cut lock, damaged unit or a unit's contents for an upcoming lien sale. Furthermore, there are times you need to permanently store images of tenants, their cars and their driver's license. The solution is to use a compact camera. A compact camera is only as valuable as its ease of use and appropriateness for the task. A storage facility needs an extremely portable camera capable of working in almost any lighting condition.

The self-storage standard has been the brick-sized, $50 Poloroid OneStep. It holds a film cartridge of 10 pictures that self-develop in less than a minute. Instantly, you know if your picture was in focus. A newer alternative is the $65 Poloroid MIO. It is the size of a wallet, which is fitting since it produces wallet-sized pictures. However, Polaroid pictures cannot be e-mailed to a customer or anxious owner. Furthermore, Polaroid film does not store well, and after a few years, the pictures may begin to deteriorate.

An alternative solution is a disposable camera. A 27-picture unit with a flash sells for less than $15 at most convenience and drug stores. A one-hour photo service can develop the film, but the car trip and wait time is a nuisance. Some film developers will also provide a CD-ROM containing electronic representations of each picture. The images on this CD can be e-mailed as needed. Yet there is no determining before developing whether the images taken with a disposable camera are in focus. Once you develop the prints, it's too late.

A third option is an auto-focus camera. These start at $100 and, as the name implies, they help ensure each picture is clearly in focus. However, auto-focus cameras also require an outside film service to develop the pictures.

Each of these traditional cameras has a use limitation. As is often the case, electronic technology has provided solutions with instant printing, easy e-mailing capability and amazing portability. In this case, our hero is the digital camera.

As a gadget hunter, I was amazed by the $180 Casio wrist camera (model #WQV3D-8). It's a color camera your manager can wear on his wrist, Dick Tracy style. It stores 80 images along with brief picture titles. Being on the manager's wrist, it is always available and safe from theft. The manager can review each picture on the watch screen.

The wrist camera includes a timer, calendar and alarm mode that can display a saved image at a specific time. Since it's also a wrist watch, each picture is stamped with the correct date and time. To save battery life, the camera does not have a flash. Yet it does include a low-light mode and automatically shuts off when removed from the wrist. The images are low resolution (176-by-144 pixels) and the camera lacks an on-board flash, but for convenience, the wrist camera can't be beat.

Another option is the $80 CaptureView binocular by Meade, a company well known for its telescopes. The CaptureView is an 8x22 binocular with a miniature, on-board, auto-exposure camera that records the image you see. I found this camera extremely easy to use, and it has enough on-board memory to store 52 high-resolution (640-by-480 pixel) images. A similar version is sold under the name of Magpix-350. Like the Casio wrist camera there is no built-in flash, but binoculars are best used outdoors anyway.

gSm@rt

Aiptek Pencam is an all-around wonder. The camera costs about $80 and stores 50 extremely high-resolution (1248-by-960 pixel) images plus a 10-second movie in DVD resolution. The camera automatically adjusts to the current lighting. The macro-focus lets you capture every detail of a damaged door latch, for example. Amazingly, this camera is only the size of a pack of cigarettes. If you want even higher image quality (160-by-1200 pixels), choose the $70 Mustek gSm@rt mini3. It stores 50 images plus a 10-second video. Unfortunately, both the Aiptek and gSm@rt lack a built-in flash.

Creative Labs PC-Cam 350 is smaller than a lighter yet packs a powerful set of features. The camera stores 20 medium-resolution (352-by-288 pixels) images or one 10-second movie. This camera includes a built-in flash and, at only $50, is a great bargain.

If you need the image quality of the gSm@rt with the built-in flash of the PC-Cam, choose the $150 Epsilon 1.3. It stores 20 high-quality and extremely high-resolution (1600-by-1280 pixels) images. It has auto everything, a color viewing screen, macro mode, microphone, speaker and movie-maker mode. The truly amazing part is it is no larger than a deck of cards. It is this author's recommended choice for self-storage facilities.

Of course, the usefulness of these amazing cameras does not stop at your storage facility. The Wrist Cam can make the most subdued owner feel like James Bond. The gSm@rt is never far from my pocket and the PC-Cam was a holiday stocking stuffer for my family.

Doug Carner is on the Western-region board of directors for the Self Storage Association. He is also the vice president of QuikStor Security & Software, a California-based company specializing in access control, management software, digital video surveillance and corporate products for the self-storage industry. For more information, call 800.321.1987; e-mail [email protected]; visit www.quikstor.com.

"Do you want fries with that?" is the familiar refrain we hear every time we walk into a McDonald's. That simple line was responsible for increasing the company's sales by a whopping 15 percent, virtually overnight. If it's good enough for McDonald's, it should be good enough for you as a storage owner or manager.

The key acronym to remember is ABS (always be selling). Any contact you have with customers is a potential sales opportunity. The question is when and where to do it. I've identified seven key times (though there are many more) at which an upsell is absolutely necessary to increasing your profits.

At the Time of Rental

When someone comes in to rent a unit, he already has his hand in his wallet. This is the ideal time to ask him to buy something else. What should you offer? Anything that would compliment what he just bought. If he is renting a unit, surely he might need some boxes or a lock. Once he agrees to purchase some ancillary items, you'll want to ask him to "buy some more fries": a box package or a premium lock. If don't have boxes for sale, get them. If you only have one type of lock available, get another one or even two at higher price points.

When You Show the Unit

What better time to ask a customer to buy something than when he is on his way to see the nicely cleaned unit that will house his belongings? Psychologically, he has already committed to doing business with you. Now is the time to look for other areas where the products you offer might apply. Get him talking and you'll find a way to sell him something.

When the Customer Buys Something Else

When someone comes into your office to buy anything at all, you'll want to see what else you can sell him. The fact he has walked in with the intent of purchasing anything at all makes him a much more likely buyer of your upsell.

Always know what you'll make available when someone wants to buy a specific item. This way, it will sound very natural when you offer it. When someone comes in to buy boxes, for example, offer him a set of tapes and marker pens. If he comes in to buy a lock, offer him tenant insurance. Even if he comes into the office for a soda, offer him something, it doesn't matter what.

When the Customer Drops Off a Payment

At the beginning of the month when people are dropping off their rent checks is a great time to hit them up for an additional item. They are in the office to pay for something. Have them keep their wallets open a few minutes longer to give you more for something else.

When the Customer Thanks You for Something

Whenever a customer thanks you for something, it's a great time to ask him to buy. You know you're on his good side because he just paid you a compliment. Why not ask him to back those nice words up with some cash?

When You Run Into a Customer on the Property

When you are out on the property walking around is another time you want to offer people some kind of an upsell. Engage them in conversation. Ask them how things are and look for an opening to match a product you carry with a need they have. It's that simple.

When You Send Something in the Mail

Some of you may send out monthly statements. This is another great time to offer an upsell. No one said you had to be physically present to offer an upsell. When you send customers mail, it's possible they will respond. In general, the actual selling will have to be done in person, so don't try and sell in the letter. Use the letter or correspondence to get them to come in to take advantage of whatever great offer you send them.

Things to Remember

The biggest reason most managers don't upsell is their fear of rejection. Human nature dictates none of us want someone to tell us no. This being the case, the owners out there will have to do some coaching. You'll have to show the manager how to upsell and make him understand the key is to ask for the sale every time. In many, if not most, cases, the customer won't bite. But we don't care--we're looking for the ones who do. The greater number of people who say no, the closer you are to getting someone to say yes.

Let's assume you ask for the upsell 10 times and only two people take you up on it. Should you feel bad? Absolutely not. That's two sales you wouldn't have had without making the offer. If you make the offer 1,000 times during the course of the year, it may mean 200 sales. This will translate into real money.

Also remember, in many cases, you'll actually be doing people a favor. Many of the items you make available for sale at your facilities are more reasonably priced than the same items in different outlets in your area.

You Must Have Something to Sell

All of the above discussion assumes you have something to sell. If you don't, my only question is, why not? I've heard people say they're "not in the box business" or something to that effect. That's ridiculous. We're all in the making-money business. Just imagine McDonald's saying it isn't in the french-fry business. The key is to offer items related (even tangentially) to the storage process.

Biggest Reasons People Don't Buy

The single biggest reason someone won't buy something at your facility is he thinks he'll be overcharged. There is one sure way to overcome this obstacle: Put a big sign on the wall facing the door to the office. The sign should read: "Our prices on all packing and shipping supplies are cheaper than anyone in town, including Wal-Mart." (I use Wal-Mart here for the sake of example. If people normally associate another store in your area with great prices on products, insert that name.)

Now all you have to do is undercut your competition by a penny on any item and you're being truthful. Many people don't buy things from you at your storage location because they perceive them as being overpriced. Hanging a sign as I suggest will completely overcome that objection.

Conclusion

The key to making the upselling system work is your offer must make sense and be presented in a helpful, conversational tone. Memorizing a script may be fine, but don't let it sound too rehearsed. People won't go for it. In fact, they'll be turned off and less likely to buy.

A manager must also buy into the concept. Simply telling managers they have to start upselling won't be enough. You'll need to get them to see how valuable it is. I recommend giving them a small piece of every product sale made so there will be some incentive to do it. Upselling is a concept not fully utilized by most storage owners. Don't be one of them. After all, it's easy money!

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 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].

One of us was recently invited by a top firm of London property advisers to spend a day sailing in the Southampton waters. Fellow guests included representatives of some of the leading U.K. property institutions as well as some distinguished commercial surveyors. During the course of the day, the author casually introduced the topic of self-storage in the United Kingdom to discussion. It was without much success. The conversation tailed off after a couple of noncommittal sentences, leaving the author feeling about as good as if he had just introduced himself as newly arrived from outer space.

The point of this story is, despite the vigorous growth of self-storage in the United Kingdom and Europe over the last three years, the attention the industry commands in financial circles is still quite limited. This can be a major obstacle to those wishing to raise financing for self-storage projects, particularly new entrants to the market.

Money Woes

Given this lack of familiarity among many financial institutions, it is significant that the l eading U.K. self-storage companies have tended to either be backed by U.S. funding or are part of U.S. self-storage majors such as Shurgard. For example, The Big Yellow was funded within a year of setting up by Prudential Insurance Co. of America. Safestore is backed by the Soros Property Fund, and Access has GE Capital as a major shareholder. Encouragingly, it is also true self-storage companies with U.K. stock-market quotations have attracted the interest of certain leading U.K. investment institutions.

Raising financing for self-storage projects in the United Kingdom can be frustrating. Many banks are not familiar with the dynamics of the industry and its exciting growth opportunities. In the United States, there is self-storage capacity equivalent to 4 square feet per capita. In the United Kingdom, the per capita rate is 0.1 percent of the U.S. figure. In Europe, capacity is even less. In short, there is quite a bit of work to do and funding to raise if the United Kingdom and Europe are to come close to matching the United States in this industry.

Overcoming Caution

The issue is to overcome the caution of the U.K. financial sector. Confidence in the financial community will grow for a number of reasons. It is clear the new breed of self-storage facility, well publicized and sited, is attracting significant levels of business. Many new sites are 90 percent full within 12 months of opening. This message needs to be communicated to the financial community to overcome the concern self-storage facilities are empty upon opening.

Furthermore, while property costs may be higher, the returns available in the United Kingdom and Europe are greater than in the United States. Most of the costs of a self- storage operation are fixed—namely rates, staff and utilities. Facilities should break even at an occupancy of around 45 percent; once this is achieved, sales are almost equivalent to profit, available to service debt, and provide a return for investors. Given the infancy of the industry in the United Kingdom and Europe, there are no signs of competition on self- storage rates.

Subject to correct site selection and keeping to the construction budget and timetable, a self-storage investment should be successful. Certainly, it is not a complex business to manage, although high levels of service are essential.

Successful Financing

How should one set about raising financing for a self-storage project? The two most important ingredients are the quality of the team and the business plan.

The team should be well-rounded in terms of skills. These include site selection and property acquisition, construction, marketing, operations and finance. Evidence of strong commercial experience is important, and a track record in self- storage obviously helps, but is not a prerequisite.

The business plan should be clear, simple and to the point. Self-storage is not like splitting the atom. The plan should describe the project, the management team, the market for self-storage (national and local), and describe the risks and rewards of the investment being sought. It is crucial the plan contain detailed financial projections and the key assumptions underlying them. Too often, projections look fine to the casual observer, but credibility is eroded by poorly conceived assumptions.

For example, are the lease costs on the building for the facility achievable? Have you included all the up-front costs, such as legal and property-advisory fees? Do the construction costs stand up to detailed examination? Have you allowed enough contingency for cost and time overruns, and increases in interest rates? In short, the business plan is vital. You are asking a bank or investor to support your project. Why should they do so if your plan is full of holes or is poorly thought out?

With the plan completed, the next step is to approach the financial markets. If you have some of your own money to invest, this will clearly help, as this demonstrates the commitment of the project's sponsor and lessens the need for external finance.

The size of the financial requirement will depend on whether a freehold or leasehold property is sought. While a leasehold property may be cheaper for a startup venture, the landlord is likely to require significant personal guarantees or a rent deposit until the business has achieved a solid profit record. Even with a leasehold project, it is likely funding between £750,000 to £1 million will be necessary. Banks and business angels (including family members) are the most likely source of funds at these levels. Most venture capitalists prefer larger deals and are averse to startups.

The fund-raising process can be lengthy, dispiriting and subject to pitfalls. Generally, persistence and good preparation are rewarded, although there are no guarantees. Searching as widely as possible makes sense in a prudent funding structure. No bank will lend 100 percent of the project cost.

There is plenty of scope for the recent growth to continue in the United Kingdom and Europe. Self-storage need not be the preserve of just the major companies in the sector, there should be room for the smaller player that is well run or serving a market niche.

Richard Fox is an independent corporate adviser based in London. He was an investment banking director at NatWest Markets and is a qualified lawyer. For more information, e-mail [email protected].

Bill Lax is a qualified chartered accountant based in Gloucestershire, England. Mr. Lax has worked as group financial director for a number of mid-size companies. He now advises on individual corporate projects. For more information, e-mail[email protected].

Self-storage facilities are the first choice for records storage and, consequently, have an advantage over commercial records centers for providing records- management services. Several key factors enable self-storage operators to block commercial records centers from targeting their facilities, one of the most common and easiest sources of new records-management business. This article discusses why this is and how to implement a simplified records-management strategy.

There are hundreds of thousands of business startups each year. The majority of these are small, entrepreneurial businesses that range from a single-practice lawyer to new equity-capital-funded enterprises. They have one thing in common: business records.

In the United States, all businesses must keep records, and they typically keep them for far too long. According to a recent study, the average records carton stays in storage for 16 years. This is way beyond the average practical or required life of a business record.

So why do they do it? The answer is actually quite simple: It is easier to keep records than to decide to destroy them. The nature of our record-keeping systems is driven by regulatory compliance, litigation avoidance and sound business practice. It is confusing to figure out what you need to keep, and the whole process is filled with "mythology." Ask anyone how long they should keep records--the most common answer is seven years. But there are thousands of laws and rules requiring business records to be kept for very short and long periods. Seven years is just one of the many possibilities.

How Businesses Choose a Provider

The business owner opens his doors for business with hope and expectation. Over the first year, he grows his business, purchases supplies, pays his bills and adds employees. At the end of his first year, he files his first tax return. He has now begun the process of record keeping. He has accounting records, tax records, personnel records, payable and receivables records and usually a myriad of others. He sticks them into several boxes, labels them "2002 Stuff--Boxes 1-10," puts them in the closet or attic and generally forgets about them--he is busy running his business. Several years go by, his business grows and he runs out of room in the closet or the attic is about to crash through the ceiling because of the weight of the boxes.

What does he do? Well, he could take them home and put them in his garage, but his wife doesn't want that stuff around and, besides, she can't open the car door with all those boxes there. Then he remembers there is a self-storage facility on his way from home to work. That's it--he'll rent a room! That's the solution for his first 100 or so boxes.

Every once in a while, he sends a lowly clerk out to storage to fetch a record. The boxes are not indexed, so the clerk has to open several cartons to find what the boss wants. It takes two hours, and the storage room becomes littered with files stacked on boxes that have never been returned to their proper place. No one cares. Time goes by. The room fills up, and the owner is faced with the need for a new or bigger room.

This is an endless cycle. No one ever has the right amount of space for storage because they either have too much or too little room. Rarely is it just right and then only for a short period of time. New business-records growth can average from 25 percent to 100 percent for the first five years of a new business operation. The owner's cost is escalating and he can't find anything. A simple retrieval takes a search party and half a day.

What to Do?

Records are purely and simply a big pain in the neck for most businesses. They don't want them, but they need them. They constantly grow, and the paperless office is a myth. Up to this point, you have been the happy provider of storage for many businesses and have collected your rent every month. But you operate on a 30-day lease.

Let's say a business customer of yours has grown to the size where he is looking for ways to reduce cost and improve efficiency. This problem jumps off the table when a salesman from a commercial record center appears at the company's door offering a solution more efficient and cost-effective than your storage units. He takes the business from you like candy from a baby. You lose the account without contest. He gets a new account with a permanent lease and annuity revenue. How can you convert your 30-day contract to permanent revenue and increase your yield per unit?

It's simple. You can offer records management when he walks in the door the first time, tie him to a permanent lease and create annuity revenue far exceeding the typical commercial records center. You can double or triple the monthly revenue on these accounts and save your customer money. Is this magic? No, not at all. It is simple with no additional staff, no additional space, no additional computers and very little new capital investment. Nontraditional records management can be implemented in self-storage within a week with the right skills, tools and resources. You need simple systems, packaged training and marketing, outsourced labor, and courier services and software.

Regular columnist Cary F. McGovern is the principal of FileMan Records Management, which offers full-service records-management assistance for commercial records-storage startups, marketing assistance, and sales training in commercial records-management operations. For assistance in feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail [email protected]; www.fileman.com.

As the self-storage industry grows, evolves and becomes increasingly competitive, its professionals must recognize the importance of setting themselves apart from the rest of the marketplace. With today's customer calling four to five stores before deciding where to store his belongings, it is imperative we understand our different advantages and communicate them in our sales and marketing efforts.

When we educate prospective customers on our unique advantages, we create opportunities to make the phone ring and maximize each call received. Therefore, knowing and capitalizing on your facility's specific advantages will allow you to convert more callers to renters, better overcome objections, and maximize your overall marketing efforts.

The average self-storage operator is converting fewer than 35 percent of his callers to renters. In other words, the average store is renting to only one out of every three prospects who call. This demonstrates a poor job in setting ourselves apart from one another. It is immensely important we build additional value for our store via educating our customers on our differential advantages.

The consumer is asking himself, "Why should I choose your store over another? Is there really any difference? Isn't all storage alike?" Unless you want to be viewed as just another storage facility, you need to tell every prospect why your store is better than the next one on the list. Selling in a competitive marketplace is all about differentiating yourself from your competition and providing prospective customers a better understanding of what sets you apart.

Knowing your competition is one of the most effective ways you can sell against it. A true understanding of your advantages starts with shopping your competition on a consistent basis. If you really are familiar with the competition in your area, you can communicate your sales presentation to emphasize your advantages. For instance, if you are the only store in your area to offer insulated units and security cameras, it's important to incorporate these features into your presentation. The more you know about your competition, the more confident you will become in selling the specific features of your store.

Differentiating yourself from the competition will also give you an opportunity to overcome customer objections. For example, if a customer is shopping around and only wants to know about price, highlighting what sets you apart from the rest of the market will allow you take control of the conversation and educate the customer on your advantages. If you overcome the price issue by building additional value for your store, price will become a nonissue. The vast majority of customers will store their belongings where they feel most comfortable. Taking the time to build trust and educate your customers on what to look for when using storage will result in the prospect renting a unit the majority of the time.

Your effectiveness increases even more when you customize the sales presentation to point out how your particular advantages satisfy the needs of the customer at hand. Many times, you can overcome an objection based on proximity by pointing out the differences between your store and the closer one being considered. This can be done in a positive way without slamming the competition, but only if you have taken the time to study and know the other locations in your area. Knowing your differential advantages and how you stack up against your competition is one of the most effective ways to overcome customer objections.

When you know your organizational uniqueness, you can incorporate these advantages into your marketing campaign. For instance, customers in today's society are in a hurry and want as much convenience as possible. If you are the only store in your market area that offers a rental truck, moving supplies, appliance dollies, etc., in addition to storage, your marketing and advertising should emphasize these offerings. All communications should point out to the customer, you can "Take Care of All Your Moving Needs in One Place." This is a definite advantage that can be very effective for you if communicated in the proper way. Again, knowing your differential advantages can be a real asset as you incorporate these messages into your marketing efforts.

The advantages you have over your competition can also be used in your overall marketing process. Once you know who your market is and from where they are coming (apartment complexes, pharmaceutical companies, housing communities, etc.), it is imperative to figure out the most effective ways of advertising to these target markets. It is critical you incorporate the advantages you have over your competition as you market and advertise to these key influencers. This will set you apart, especially as you build consistency in your marketing efforts.

As you know, consistency and repetition are two very important keys to an effective marketing campaign. If you have four to five advertising programs working simultaneously, it is amazing how much synergy can be generated between the programs. The synergy usually comes from effectively and consistently incorporating into the advertising the knowledge that you have about your advantages. Over a period of time, if done properly, your key influencers will begin to understand the importance of your advantages and how these features can benefit them when they need storage. This will help to create a steady stream of referrals. Start maximizing your profits today through differentiation!

Brad North is founder of Advantage Business Consulting and specializes in sales and marketing training to the self-storage industry. He has produced two live videos along with a workbook called "Maximizing your Sales and Marketing Program." This invaluable resource will help managers take their sales and marketing programs to a higher level. Mr. North also offers comprehensive on-site sales, marketing, feasibility and operational training to the self-storage industry. For more information, call 513.229.0400 or visit www.advantagebusinessconsulting.com.

Asbestos material in buildings is still a concern in the United Kingdom and Europe. For those anticipating purchasing a building for conversion into self-storage, here is the low down on what to anticipate.

The potentially hazardous material that may be present in your new facility will vary depending on the age of the building. If your facility is a new build, your only real problems will likely be existing ground contamination, which any competent initial survey will uncover. It is during a conversion that hazardous material is more likely to cause problems.

Though a thorough survey should detect the presence of material such as asbestos, it may not indicate the full extent, locations or type of contamination. If hazardous materials are discovered during initial negotiations for the building, it is possible to obtain a specialist asbestos surveyors report on the extent of the material, its condition and the approximate cost of removal.

Although construction using blue (amosite) and brown (crocidolite) asbestos has been banned in the United Kingdom since 1985, white (chrysotile) asbestos was still being used until November 1999, when asbestos was banned in the country completely. It will be banned in all European countries by 2005.

Many thousands of buildings, especially those built in the 1960s and 1970s, contained large amounts of asbestos from roofing material, insulation material, pipe lagging, ceiling panels, etc. It is currently not illegal in the United Kingdom to have a building that contains asbestos material, so many older buildings you may be looking to convert may well have it.

If in sound condition, asbestos is not dangerous. It is only if the fibers become exposed that they are likely to become airborne and a real health hazard to everyone in the building. Removal of asbestos material can become very expensive and must only be carried out by a fully licenced specialist contractor. It generally requires the entire affected area be completely sealed off or enclosed in a type of tent kept under negative pressure to ensure no fibers escape.

All waste is collected in specialized containers and disposed of at hazardous-waste sites. All of the operatives performing asbestos removal must be protected by specialized breathing apparatus and coveralls. The potential dangers to removal contractors and specialized equipment—including decontamination facilities outside the affected areas for workers—contribute to the high cost of asbestos removal.

On Dec. 16, a new regulation to manage asbestos was added to the Control of Asbestos at Work Regulations (CAWR). It applies to you if you have maintenance responsibilities for nondomestic premises or you own the building. The duty requires you to manage the risk from asbestos by:

• Finding out if there is any asbestos in the premises, as well as its amount and condition.
• Presumimg materials contain asbestos, unless you have strong evidence they do not.
• Making and keeping an up-to-date record of the location and condition of all asbestos-containing material.
• Assessing the risk from the material.
• Preparing a risk-management plan.
• Taking the steps to put the plan into action.
• Reviewing and monitoring the plan.

Because there could be as many as half a million non-domestic premises in the United Kingdom that contain asbestos, there is an 18-month lead-in period for the regulation. It is recommended the risk-management process be started immediately. Many buildings with asbestos-containing materials function normally without any problems or additional expense beyond routine maintenance and repairs. But be aware, asbestos is a material with very stringent legislation for which owners are responsible.

Graham Lomax is a founding director of Rabco Europe Ltd., based in Essex, England. Rabco Europe opened in August 2001 to expand The Rabco Corp.'s Orlando, Fla.-based operation into the European market. For more information, visit www.rabcoeurope.com.

There's plenty I could say about legal issues and litigation as they pertain to self-storage, especially as we now have dozens of industry associations across the country working to pass bills and establish laws to protect and beneficially affect our business. But as we've dedicated so much space in recent editions to emphasizing the global potential of self-storage, I thought it more appropriate to address a broader matter, one we've not had much need to discuss: international legal disputes.

If you are a U.S.-based supplier or developer of self-storage, providing products or services to the United Kingdom, Europe or other international market, you may eventually have a difference of opinion on your hands. Disagreements can arise in any domestic business transaction; dealing overseas introduces convoluted naunces. If there is a clash over quality of work, or delinquent payment for goods or services, what legal avenues do you pursue? Do you secure legal representation locally? Do you contact an attorney in the country of origin? To which laws do you adhere? What is enforcable outside certain centers of authority?

Inside Self-Storage recently grappled with these questions as a restraint-of-trade issue reared its ugly head. This month, the Self Storage Association of the United Kingdom and Europe hosts its annual convention and tradeshow in Paris, March 5-7. We submitted application to exhibit and were denied, based on our status as a competing organization. This does not affect our presence at the show; it does, however, stir up some key legal concerns.

In the United States, there are laws addressing anti-trust violations and restraint-of-trade contracts. The Sherman Act, for example, prohibits "contracts, combinations and conspiracies" in restraint of trade. Its primary objective is the preservation of competition in the marketplace. Similarly, there are laws governing the monopolization, or any attempt at monopolization, of any part of trade or commerce among the states or with foreign nations. But this is U.S. policy. The question of whether to force our rights with a U.K.-based entity, hosting an event in France--becomes extremely complicated.

I cite this as an example of the kind of situation that can present itself. It may not be something you expect, and you're not likely to know, immediately, how to address it. If you are new to the self-storage industry in the States, this may also be true of very common, domestic legalities: late fees, delinquencies, rental agreements, lien sales, tenant bankruptcy, hazardous waste, etc. The keys are preparation and education, and prevention is the best policy. Don't be caught unaware--you'll fare far better in the long run, regardless whether your battlefield is at home or abroad.

Good luck,

Teri L. Lanza
Editorial Director
[email protected]