All across America there are self-storage properties without offices and on-site staff. Back in the old days, prospective tenants could pick their own units, secure them with their own locks, fill out a contract and mail it with a check in the self-addressed stamped envelope provided at the do-it-yourself station outside the facility. Sound crazy? Not at all.

In the past, if you had any leftover land, you could create a 40- to 50-unit storage facility and enjoy a handsome return with very little labor and hassle. Sure, the facility owner may have set himself up for trouble if he took a lackadaisical approach. Someone could move in without a contract; trespassers could dump trash in vacant units; and the possibilities of all kinds of liability were endless.

On the other hand, the reality of risk was low if the site was located in a small community where everyone knows everybody else. In small towns, most people are honest and fair when using a self-service facility. I know that your legal counsel would tell you to be very cautious before proceeding with anything similar to this scenario, but the practice is still widespread.

Fast-Forward to the Past

This same concept has been improved with new technologies over the years, but the basics are still the same. Some owners post cell-phone numbers on a sign at the site. If you want to rent a unit, you call the owner and arrange all the details on the phone. You can either choose the unit yourself or make an appointment for the owner to open a unit for you.

This updated system allows owners to be a little more careful and mitigate fewer risks. It does take time to field the phone calls and meet the appointments. Some mix the cell-phone contact with the mail-in contract and are able to combine personal phone contact with the ease of self-service.

Some operators have set up websites where new customers can visit and check a few boxes to agree to the lease terms, and make the rent payment online using PayPal. This brings the lease-signing and payment-processing into the 21st century, but leaves the rest of the self-service protocol pretty much the same. Using a method like this lessens the chances of taking on a delinquent customer or getting an unauthorized move-in.

Larger facilities or multiple self-service facilities can be managed from a centralized location. An owner can arrange to have staff answer the phone in a central office, where managers will also process contracts, payments and direct customer-service issues. Some operators have created their own in-house call centers, even if that means only two or three people working the phones; others contract with established call centers to manage the telephone and the data-entry portion of the transactions.

In this way, owners can spread labor costs out over time and across several properties. But since one of the goals of remote management is to take labor cost to an absolute minimum, a call center is not always the best option for remote management. If the revenue at the property is sufficient, then the incremental cost of the phone agents can be very small and, hence, can make a lot of sense.

I realize you cannot eliminate labor altogether. Someone has to go to the site now and again to do cleaning, maintenance, lock checks, unit inventory and so on. But depending on the size of the facility and the traffic, this doesnt have to be done very often.

Kiosks

The introduction of kiosks in self-storage has changed the game even more. Kiosks enable customers to complete transactions completely using self-service technology installed right at the facility.

The systems are easy to use, can take payments, print contracts, dispense locks and manage gate accessall done remotely and virtually with no labor. The kiosks even have animated characters on the screen to help walk customers through various transactions.

The kiosk concept marries the self-service concept with no-staff operations, using the most advanced tech, highest customer-touch applications. These are an attractive solution for self-storage owners and customers.

Since the investment in owning and operating a kiosk is on a different scale than posting a cell-phone number on a sign or even creating a basic contract and payment website, it does require some math. Does the potential revenue at your property support the costs of using a kiosk? Can it complete enough transactions to become a cost-saver over using onsite staff or even a remote office or call center force?

Its possible that the ease of use and the wide ranging services kiosks can offer customers will bring a good rate of return even at a small facility. If you removed the customer-contact labor factor and the hassle factor from managing customers, how thin could you shave your margins while still making the kinds of returns that satisfy your financial goals?

You might feel a little nervous leaving your self-storage property completely un-staffed, or you might worry about leaving an expensive piece of equipment like your kiosk with no one supervising it. But you dont have to leave your assets unprotected. Using remote webcams is a simple and inexpensive way to keep an eye on your property.

Plus, digital recording is getting easier to use all the time. You can save hours of viewing for later investigations. You can log into your surveillance cameras from anywhere in the world and watch the activities at your facility.

Stack and Pick

There is a new twist being marketed for remote-site management: the automated stacker and picker for storage units. It uses the same kind of technology a vending machine might use to retrieve a storage unit from a stack and present it at a loading area. This can all be done in a remote automated location. What new challenges or opportunities will a system like this stimulate?

People are very amenable to self-service. We see them doing many things, such as banking at ATMs, making payments online, purchasing items online. Smart phones are selling like crazy and even our cars are blue-tooth enabled. What does all this mean for remote facility management? It means you will see new development and improvements on the old "help-yourself" system where you pick your own unit and drop your payment in the box just like in the old days, but better. 

Tron Jordheim is the director of PhoneSmart, an offsite sales force that helps storage owners rent to more people through its call center, secret-shopping service, sales-training and Internet lead-generation services. Mr. Jordheim is also a member of the National Speakers Association. You can read what hes up to at www.selfstorageblog.com. For more information, e-mail [email protected].

We've all heard the adage, "What gets measured gets done." Now put a spin on that: "What gets monitored will increase your revenue." This may sound far-fetched, but think about it for a moment: Whether youre a property manager, owner-operator or third-party management company, auditing (monitoring) can make the difference between a bad year and a good year, or a good year and a great year.

This article will walk you through four areas where auditing must occur, helping increase your revenue and minimizing the amount of money left on the table or walking out the door. You may think you have all your bases covered, but are you sure?

Space/Unit Audit

This is the most common form of auditing with operators, but it either isnt done properly or completed frequently enough. In order to conduct an accurate audit, you must first have accounting software capable of giving you up-to-date, real-time occupancy information to include units that are delinquent and should be overlocked. This information is crucial in performing an unannounced detailed and accurate space audit. I would recommend using a rent-roll or a unit-status report of the facility.

Once you have this in hand, you need to physically check every single door and space on your propertyby foot. This allows you to see issues you may miss while on a golf cart or in a car. When performing the audit, you should not have anyone present with you. Oftentimes, managers like to tag along. This creates a distraction for the auditor and also gives the manager the opportunity to divert the auditors attention from any problem areas on the property.

When auditing, the auditor should make notes of any discrepancies on the preferred auditing report, and note any observed property deficiencies. All vacant units should be open to make certain the units are rent-ready and indeed empty. Sometimes, tenants (even managers) will occupy units without your knowledge, so pay attention to the details and dont cut corners. If someone is occupying the unit and it shows vacant, you are leaving money on the table.

After you have completed a thorough audit of the property, you should return to the office and research any discrepancies. If you have units that show vacant but have a tenant lock, you need to pull the file and/or review the dead files. You also need to review account notes and the gate-activity log.

Look for a manual-payment receipt book. Maybe the manager is doing some off-the-book transactions with cash customers. If these steps do not answer the question as to why there is a discrepancy, then ask the manager. He is responsible for accurate bookkeeping and should be able to provide answers. Be careful not to accuse, but pay close attention to body language and mannerisms. It may be that he is not checking units frequently enough, embezzling funds, or just completely incompetent, all of which are a problem. You need to perform these types of audits to ensure you are maximizing your revenue.

Daily Deposits and Petty Cash

Any time you are dealing with cash, your business is susceptible to theft. To reduce that vulnerability, you must monitor your money. Your basic practice should include your manager making a bank deposit every day and obtaining a validated deposit slip. If your office is in a different location from the facility, then have the deposit slip faxed or scanned in daily. Then, double check that amount against the number input into the accounting software.

Implementing this practice into your organization reduces the chances of having an employee "borrow" from the deposits until the next payday. Employees who do go this route sometimes begin taking more than they can pay back. Thus, a fraudulent cycle begins.

Petty cash is another area of exposure. Typically petty cash is used at the site level to purchase various items such as postage, maintenance or office supplies. You should have a clear, written policy of what employees are and are not authorized to purchase with petty cash. Further, I highly recommend you disallow this fund to be used to pay contractors or temporary labor. This opens the door for fraudulent or unnecessary work.

Petty cash should be balanced at the site daily and tracked using a standard receipt tape that is initialed and dated. This practice will allow the manager and the auditor to determine exactly when the petty cash became unbalanced.

You should require all original receipts to be stored in the petty-cash drawer until they are submitted for reimbursement. By not auditing petty cash, you create the same "borrowing" issue that can arise with cash deposits.

In the event you conduct an audit and find a shortage, you should not allow or require the manager to replenish the missing funds. Inquire as to how the problem occurred and use this as a training opportunity to prevent the issue from happening again in the future. Note: A person willing to pull money from his pocket to cover missing funds will also pocket the money if there is ever an overage. If the shortage was an honest mistake, do not punish the employee. If you suspect theft, handle that situation accordingly.

Merchandise

Boxes and packing supplies can be very profitable for your self-storage business. These are typically items of convenience; therefore, it is not nearly as necessary to have the lowest prices in the area. The primary problem with boxes and packing supplies is shrinkage.

Shrinkage is basically the difference between your actual inventory and reported inventory. It can result from customer or employee theft, damaged stock or inventory counting errors. Keep record of inventory so you know what you should be making from the sale of those products. You should also verify that the inventory ordered and delivered is what was actually accounted for correctly in your software. Catch these issues early, as this makes it easier to identify and correct the problem.

Performing an inventory audit is simple. Count everything in your warehouse area and display items. This makes up your actual inventory. Compare that information to the inventory reported in your accounting software. If there is a discrepancy, find out why. Boxes and merchandise are an expense until they are sold, so keep your eye on the ball.

Sales Presentations

Most people do not think of sales presentations as an area that should be audited. A sales presentation is the number one reason you rent to a customer. If your managers presentation is lacking, so will the performance of your property.

There are several ways to monitor the presentations:

• Do it yourself
• Have a friend mystery-shop your manager
• Hire a company to monitor progress

The sales presentation should be audited as much, if not more, than the other items mentioned in this article. It has the biggest financial impact on your property.

Audits should be unscheduled and completely random. I recommend a thorough audit at least once per month and sometimes directly after a regular visit to keep your manager guessing. An honest manager will not take umbrage on your practice. If he does, you might want to dig a little bit deeper.

Brian Byrd is the vice president of sales and marketing for Landvest Corp. The Wichita, Kan.-based company offers third-party management options, training, consulting and development services to the self-storage and multi-family housing industry. For more information, call 316.634.6510; e-mail [email protected].

The Inside Self-Storage Expo in Nashville, Tenn., will include a seminar on securing loans for self-storage construction and remodeling, intended for owners and developers interested in building a new facility, or expanding or renovating an existing one. 
 
On Oct. 8, 2008, Georgia Ragsdale, president and CEO of Watermark Financial Inc., will provide a comprehensive introduction to the finance market and how it affects construction loans. Attendees can expect to learn about beginning the loan process, gathering the proper documentation, and selecting the best loan structure and type. She’ll also share what banks are looking for when evaluating a loan request, how to get to loan-to-value and more.
 
Over the past 18 years, Ragsdale has brokered for a hard-money lending source and acquired land for development companies. She has also coached the corporate sales teams of Fortune 500 companies such as GMAC, Charles Schwab, Bank of America, Gateway, Toshiba America, Ikon Office Solutions and Grubb & Ellis. She is a graduate of Southern Methodist University in Dallas.
 
Based in Los Angeles, Watermark Financial is a licensed commercial mortgage brokerage that focuses on the construction sector, with many clients in the self-storage industry.

The ISS Nashville Expo, Oct. 7-10, 2008, will feature four days of educational seminars, vendor exhibits and networking opportunities. The show will take place at the Gaylord Opryland Resort and Convention Center. It is sponsored by Inside Self-Storage magazine, a monthly trade publication for owners, operators, managers, investors and suppliers of the storage industry. For details, visit www.insideselfstorageexpo.com.

On April 7, AK Steel Corp. raised its prices on all carbon steel products by $150 per ton for all new orders, effective immediately. In a press release, the company said the hike is in response to higher demand for carbon steel products, as well as the need to recover unprecedented increases in steel-making inputs. But the effects of this move may affect far more than just AK Steel customers.
 
An article published in the April 9 edition of The Oxford (Ohio) Press held that this increase paves the way for other U.S. steel manufacturers to raise their prices to “$1,000 a ton despite the worst national economic downturn in a decade.” Market analysts agree that a high demand for domestic steel as well as an increase in the price of raw materials may mean more steel-makers follow AK’s example. And rising steel price increases will be passed onto consumers of steel-intensive products such as automobiles.
 
AK Steel produces flat-rolled carbon, stainless and electrical steel products, as well as carbon and stainless tubular steel products for automotive, appliance, construction and manufacturing markets. It is a Fortune 500 company with more than $6 billion in sales and major plants and offices in Ohio, Indiana, Kentucky and Pennsylvania.

Are you thinking about retaining the services of a property-management firm to operate your self-storage business? Perhaps youve even narrowed your search to a couple of companies that charge similar fees, and you feel you could work well with either. Their serviceshiring and training employees, marketing, advertising, customer service, facility maintenance, bookkeeping, accounting, etc.all seem to mirror one another, so much so that you begin to wonder, "Is there really a difference?"

While many property-management companies may look the same at a glance, and even upon further investigation, not enough self-storage owners get to the real heart of the matter: the importance of reporting. How much and what specific information about your self-storage operations will the property-management firm report back to you? Thats the question that really needs to be asked and answered. In fact, the answer may just be the tie-breaking decision maker for you.

Its All in the Packaging

Some states have specific regulations and guidelines dictating what property management companies must report to self-storage owners regarding sites they manage. These regulations and guidelines are devised to protect you, the property owner.

For example, regulations may outline how property-management trust accounts are to be set up and who can be a signer on the account. These guidelines often outline the frequency of reporting and what should be included in the reports. Check with your state regulations first to review and familiarize yourself with regulations affecting your business needs.

When it comes to financial reports, you should expect to receive a full accounting package at least monthly. This package should includeat a minimuman income/expense report, balance sheet and check registry. For many property-management companies, this information is processed in a generic accounting program, presented with a cover sheet and proceeds check.

If this is all you get, you may have many unanswered questions specifically detailing your facilitys operations. The void may mean youll have to spend a lot of time trying to get to the bottom of things.

Property-management firms that understand the importance of good communications and strong financial reporting will take a different approach when reporting back to you. These companies will prepare and deliver a full monthly package to you, typically within five to 10 days of the close of business on the last day of the month. Professional companies will also report to you on a weekly basis via the Internet or other form of communication. Some even utilize software that you can access anytime to receive real-time live updates.

A quality month-end package will focus on the following:

Month-end call report: This report will address any problem areas at the facility, what actions have been taken and the outcome of the resolution. It will also include a summary of projects or goals completed this month, those set for next month, anticipated outlook for the following month, explanation of extraordinary expenses, a comprehensive rate survey of immediate competitors and monthly/year to date (YTD) trend analysis of key result areas in an easily understand format.

Financial report: This section will include an income/expense statement utilizing general ledger accounting principles for the current month, YTD, same period this year (TY) versus same period last year (LY), YTD TY versus YTD LY, current month to budget and YTD results to budget, a balance sheet including any journal entries provided by your CPA (such as depreciation, etc.). A complete check registry will be included along with a series of optional reports (some owners do not want all that detail), such as bank account reconciliation worksheet, detailed trial balance, payroll documentation, cash flow analysis (statement of cash flows) and invoice distribution reports. Sound financial reporting like this will aid you immensely in year-end tax preparations, bank financing and estate planning.

Facility reports: These are reports directly from your self-storage facilitys computer system. At the very least they should include management and financial updates, such as summary reports, potential income (revenue) reports, reports showing deviations in rents by unit as compared to standard rates, transaction-summary reports showing total daily business for the month, collections reports, rent roll, reports showing concessions, fees waived or other credits by unit number or transaction. The packet should also include any other reports you request.

A complete and thorough reporting package should be laid out in such a way that you can easily understand what is going on with your facility at first glance. For example, the package may include a comparative trend analysis, complete with charts graphed for key result areas such as physical occupancy, occupied square feet and economic occupancy on a YTD basis. Right away you will be able to see peaks and valleys allowing quick identification of seasonal trends. However, if you choose to delve into all of the data supporting these facts, you have this information right at your finger tips.

Property-management companies utilizing advanced reporting methods will also typically handle compiling and mailing the same reporting packages to your investors and partners, but it is a safe bet to ask the question and confirm they will go this extra mile for you so there is no misunderstanding.

The decision to go with a management company is yours. You can easily see that finding a company that provides comprehensive reports will save you time by getting to the heart of the matter. Hire a company that puts the right information at your fingertips. Your self-storage site deserves no less. 

Raymond E. McRae is the vice president and director of operations for Mesa, Ariz.-based Storage Solutions, which conducts feasibility studies, third-party management, market surveys, consulting, auditing, acquisitions and development for the self-storage industry. For more information, call 480.844.3900; visit www.storage-solutions.org.

The concept of third-party self-storage management started to become popular in the '60s and 70s when facility owners decided a) they had more important things to do; b) they did not like or were not capable of handling all operational functions; or c) they recognized that outside management companies had the experience and knowledge to do it better. The opportunity for third-party management has been growing ever since.

Many of the first management companies were rooted in apartments, mobile homes, shopping centers or other similar operations. As the concept of self-storage grew, so did the role of the management company, as numerous aspects of operating the business became more specialized and important to the profitability of a facility.

At first, most operators looked around and found "caretaker-quality" retired couples who were looking to supplement their income or work in exchange for free rent. For the most part, records were kept on a simple one-write bookkeeping system, and it was relatively easy.

Rental agreements were simple forms, often plagiarized from another industry and modified to fit the needs of self-storage. Buildings were simple, with garage-type and swing doors, usually selected for their inexpensive price and installation ease. Most self-storage entrepreneurs laid down gravel driveways, put up a chain-link fence and installed a manual gate that was closed at night. Manager apartments were small, offices were barely large enough to accommodate just one customer at a time, and our idea of security was to use the managers pet dog, which may or may not even acknowledge a stranger on the premises.

As the business concept caught on, owners were the management company, they hired their own bookkeeper to do the banking, pay the bills and keep simple records. As the demand for rental space became greater, more time was needed to ensure that the managers were collecting all the rents and depositing them properly. When tenants failed to pay rent, we had to devise a system to "go after them."

In time, the secret of self-storage got out and other entrepreneurs tried to get their piece of the pie. We also entered what has become our litigious society, or better put, if customers did not get what they wanted (free rent, free insurance, impenetrable security), we began to get sued. And of course, let us not forget that our respective governmentsincluding the city, state and federalwanted their share via property taxes, sales taxes, employment taxes, etc. This in turn created more work for the owner and made all operators wonder whether we should even be subject to these taxes.

The Middle

Management companies were formed and began to put more emphasis on marketing the facility, setting up sophisticated reporting systems including inventory controls, auditing accounting and so on. They also recognized the need for better trained managers, for quality maintenance programs and the need to be pro active in getting lien laws passed in their states to assist in collecting delinquent rents and, if need be, auctions of customers goods or eviction processing.

Management companies were instrumental in helping to fight sales tax legislation, in forming local, state and national associations, and they continued to take an active role in all of these functions. The specialization of these companies has allowed the industry to evolve into a more professional status among the institutional investment world, and they have been effective in helping the industry grow to the size that it is today.

The role of the management company has changed considerably, along with the evolution of the industry. However, the basic concept remains the same as what it did in its original stages: to allow an owner to be free of the day-to-day operational functions while enjoying the growth and profitability of the business.

In return for a fee, management companies today facilitate numerous functions such as accounting, computer knowledge, legal understanding, marketing, maintenance, customer service, human resources, disaster (fire, flood, theft, etc.) management, etc. They have continued to help the industry develop into highly efficient and sophisticated organizations, challenging the industry to provide better products and services.

We all have been faced with competition, the challenges of improving hiring/training programs for onsite personnel, and creating innovative marketing programs. Management companies continually polish their credentials to meet the ever-changing needs of efficiently and proficiently operating facilities. And they can usually do it better because of their wealth of knowledge and experience in working with a wide variety of self-storage sites.

The Future

Good quality management companies will help the industry by continuing to provide professional services at affordable and competitive fee structures. These companies will be the foundation for facilities facing a highly competitive future. The expectation is management companies will rise to the occasion, improving services and bolstering the industry.

Take the time to interview several companies before you make your decision; it could be one of the most important decisions you make in your business plan. Not all management companies are the same, and owners should be very careful selecting the firm that will operate their facilities. A proven experienced, trustworthy and knowledgeable management company may often be the difference in facilitys profitability or failure.

As an owner of a facility, my role is to see that the management company fulfills its duties and manages my site in a professional capacity. As a management company owner, it is my role to see that we operate all the facilities for our clients in a professional manner and that, as much as possible, we alleviate the owners from the headaches associated with daily operations. It is a role I will continue to embrace.

Regardless of which hat I am wearing at any given moment in the day, I am excited about the challenges our industry is facing this decade. I hope that you are too, knowing you are making the best decisions for managing your facility, now and in the future. 

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

The membership of Self-Storage Talk, a free online community for the self-storage industry, today exceeded the 1,000 mark. Launched by Inside Self-Storage (ISS) in January, this interactive forum, found at www.selfstoragetalk.com, allows users to share information, ask questions and network with other community members.

In addition, the forum’s 1,000th member to register, username KayBee, has won a one-year subscription to ISS magazine, a 2008 ISS Factbook and a standard registration package for the ISS Expo in Nashville, Tenn., Oct. 7-10.

Topics being discussed on the site cover an extremely diverse range, from day-to-day management challenges to legal issues to construction-related questions. Self-Storage Talk also includes state-specific forums in which users can communicate about issues and developments within their local areas.

Participation involves a simple registration process in which new members create a username and password and provide a valid e-mail address. Once registered, they can create new or respond to existing threads on numerous self-storage topics, including day-to-day management, legal issues, insurance, financing, construction, development and more. They can also post photos of self-storage projects, highlight facility employees, share tenant horror stories and exchange info on educational resources.

Marcus & Millichap Real Estate Investment Services has named Charles “Chico” LeClaire as its top self-storage investment specialist for 2007. LeClaire, who has received this honor from the company every year since the award’s inception in 2003, is senior vice president of investments in the Denver office. The designation reflects his transaction expertise, understanding of the national market and dedication to client service.

LeClaire joined the company in October 1990 and was promoted to his current position in January 2008. Last year, he facilitated transactions valued at nearly $103 million. They included included a $32 million self-storage portfolio in Oklahoma City, an $18.52 million facility in San Francisco, and an $8 million facility in Denver.

With more than 1,300 investment professionals in offices nationwide, Encino, Calif.-based Marcus & Millichap is the largest commercial real estate brokerage in the nation. In 2007, the firm closed $20.7 billion in transactions. For more information, visit www.marcusmillichap.com.