Commercial records management can yield very high margins. The yield can be maximized by implementation of an operating strategy based on four principles of improved profitability. This article discusses these principles and their net effect on operations.

The commercial records- management industry has been largely entrepreneurial from its meager beginning 50 years ago. For the most part, bright, rugged individualists dominated the industry. These first-time entrepreneurs knew they had a great idea and created an industry. Since they were independent, there was very little similarity in their operations. Each developed his own operation to fit the style of the client base and the entrepreneur himself, and many made significant fortunes. Today, much of the industry continues to operate independently without performance standards or benchmarks.

While other industries have developed widely accepted principles of operation, the commercial records industry is devoid of such standards. PRISM International and its executive director, Jim Booth, have begun collecting information and are making significant inroads, although industry members continue to be reluctant to freely share information.

Developing an Operating Strategy

American industry has developed several broadly held principles that contribute to high productivity and have proven successful over the past two or three decades. Commercial records-management operators can improve their operating income significantly by implementing these time-tested principles.

I have developed four operating principles that, if implemented, can improve the bottom line of any commercial records operation by as much as 25 percent. These principles are quite different than most center operations, and several long-time operators have argued their value. My experience is if they are implemented strategically, they will work well together. Each principle relies on one or more of the others, just like the four corner columns of a building.

Principle of Effective Use of Technology

Think of your commercial records business as a vehicle. There are four components: operating practices comprise the body; software acts as the engine; the operations manager is akin to the wheels; and the salesperson is like the driver. None of these parts operates independently of the others.

There is agreement today among the software vendors that the Internet will enable the future of commercial records-management software. This is not a ploy thought up by the vendors to sell higher priced software but a real phenomenon. Why is this so, and how do we use technology?

Records are important to your business clients. They feel secure when they have more direct control over their files. In the past, when companies outsourced their records storage, it caused them to give up a lot of control. The Internet allows them to regain some of that control. They can access their index information at the box, file or document level, order using a familiar shopping-cart method, and create unique indices at their own desktop PC. They like this; it gives them comfort.

The effect this principle has on your operation is reduced reliance on customer-service personnel, improved performance to your client, and outsourcing of much of the work to the client.

Principle of Strategic Outsourcing

My favorite example of this principle is 100 percent outsourcing of the courier function. There are four components of the courier function: new-client initial pickup, regular delivery, emergency delivery and scheduled pickups. Each are outsourced and managed separately, and each must be benchmarked and measured daily.

An implicit fact of outsourcing anything is you can get the results you want--but you must manage the outsourcer to the standards you have set. Management implies you must be able to measure the activities. An outsourced courier will look no different than your own employee if you set the rules, standards of performance and measurement criteria. In today's world, you are hard pressed to make any money by having your own, in-house courier service. You always have too many or too few resources, since daily and weekly activity vary greatly. By outsourcing your courier needs, you get just what you need every day.

Outsourcing doesn't stop with couriers. I have identified more than 75 percent of the activities that may be outsourced. I am working toward the "Virtual Records Center Model," where 100 percent of the operation, including marketing, is outsourced with a residual profit.

Principle of Batch Processing

Suffice it to say, doing one activity over and over again is more costly than doing the activity in batches at the appropriate time of the day or week. I recommend set activity cycles--do only what you can do when it is efficient to do it. Since commercial records management is labor-intensive, the goal is to reduce labor by scheduling activities at the "right" time.

This principle takes discipline on the part of the operations manager. It is important to have hard and fast rules concerning your work cycle and task-processing activity. When used correctly, this principle keeps headcount to a minimum.

Principle of Labor Abatement

To operate a profitable records-center operation, you must strategically reduce your manpower requirement. This is done through technology, outsourcing and batch processing. The two essential jobs in your center operation are the operations manager and the salesperson. These two positions are essential to the implementation of the other three principles and are extremely important to the success of your operation. Wise owners choose these staff members carefully. My next two columns will address how to source and select these key positions.

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

A thriving business commands a marketing advantage. In the self-storage industry, that means offering a comprehensive access-control system and state-of-the-art video surveillance. To install a brand-new system, simply call any industry security vendor and ask for its complete security solution. That's all there is to it. Oh, but be prepared to spend $100,000. Now you're wondering, can a top-notch alternative be purchased for a fraction of this price? You bet. Here's how.

Get a Facelift

Every day, consultants help self-storage owners plan their security upgrades. The service is free and extremely rewarding, as facilities gain the marketing resource they need to remain the competitive leaders in their area. The typical operator in this scenario has a 250-unit site with two five-year-old access keypads and DOS software. The site usually has four black-white cameras attached to a simple multiplexer and a time-lapse video recorder. This site can be improved with a miserly security budget of just $5,800. Furthermore, complete payback can be expected within the first year.

Access Control

Drive-up keypads are your tenants' first and last impression of your security system. Even if your current keypads are running trouble-free, they may soon need servicing. But these keypads are several years old and have probably been discontinued. A system upgrade would almost equal the cost of a complete system replacement. Why wait for trouble?

Trade in your outdated keypad system for a model that supports every feature you and your customers desire. Modern access keypads provide a sophisticated appearance and offer instant feedback to your tenants. Today's keypads require fewer service calls and are extremely well protected against vandal and weather hazards. The best systems include illumination around the keypad, a bright information screen and battery backup, and allow tenants to use pay-at-the-gate convenience.

Take the worst-case scenario and assume you cannot incorporate any component from your current keypad system. In this case, expect to pay about $3,000 for two keypads, Windows security software, a system controller and a computer interface. You should also expect complete do-it-yourself instructions and free technical support from the security vendor. If your existing keypad wiring is suitable for the new system, installation should only take a few hours.

Be wary of security vendors that charge extra for telephone-installation support. If you need on-site assistance, you may be able to exchange your older access system for a few hours of an installer's time. If your site does not have an electric gate operator, you should plan on another $6,000 to pay for that product and its installation.

Integrating an intercom system with your access keypads ensures your customer service is only a call button away. For a two-way conversation through the keypad, you will also need an intercom master station in the management office. Aiphone makes a high-end master station that allows a tenant to conduct a hands-free conversation with your site manager. Expect to pay less than $300 for an integrated keypad intercom, master control station and the required power supply.

Keypad and intercom systems use low- voltage power and, except in extremely rare cases, do not require wiring permits from the city. The entire process of replacing keypads and adding intercoms can be a one-day job for your facility handyman. Likewise, video- surveillance equipment is simple to install and also uses low-voltage wiring.

Video Surveillance

During the 1990s, black-white cameras ruled the surveillance world because they provided the sharpest images; but the rules changed with the arrival of color cameras. These modern wonders automatically compensate for any lighting condition, allowing you to see clearly, even in subtle moonlight. They provide an impressively sharp 410,000-pixel resolution image--twice that of a typical television program. The best of the best cameras use the unequaled "Sony chip set" with built-in digital signal processing to enhance image contrast and quality. Your surveillance is only as good as the cameras you choose, so don't settle for less. If cost is a major factor, follow the advice of this article and you will never overpay.

The same camera technology will range in price from several hundred to thousands of dollars, based on nothing more than the shape of the camera and who you select as your vendor. Consultants and security vendors can package one of these high-resolution cameras with a long-range lens, automatic iris-shutter, vandal-proof housing, sun shield, wall mount and power supply for $2,000. However, the best consultants have the resources to acquire the same camera package for under $500 (retail).

The "standard" facility mentioned earlier has four black-white cameras attached to a simple multiplexer and a time-lapse video recorder. We'll exchange three of the site cameras with high-end color cameras and reuse the existing camera wiring so installation is a breeze. The three black-white cameras we just removed should be placed in new locations to provide coverage at additional access points. Consider monitoring an elevator lobby, the cart-return area, RV parking area, main tenant corridor or an unprotected driveway.

For a simple yet professional appearance, string your camera wires neatly along your ceiling or roofline. Use plastic wire ties every few feet to bind your new camera wires to the existing conduit lines. You may not need to use a protective wire conduit, since any attempt to cut the camera wiring would result in a video record of that crime. Expect to spend $300 for a few rolls of power and video wire, plenty of video connectors and a few boxes of wire ties.

Integration and Marketing

At this point, our newly modernized facility offers interactive access keypads and superior video surveillance. We can integrate these two technologies by upgrading the access keypads to include a hidden color camera. This allows you to record an image of everyone who enters an access code at the keypad, including all nontenants entering random codes. To ease installation, the covert access camera uses a spare pair of existing keypad wiring to transmit the image, and the camera draws its power directly from the access keypad. Add $500 for a complete keypad camera kit.

You now have a total of eight surveillance cameras, each providing a high-quality image. Replace the 4-port multiplexer with an 8-input video sequencer. A good eight-camera color sequencer will cost you less than $200. I recommend the ProVideo PR-SQS8B for $120 (store price). You can donate the old multiplexer to charity for a tax write-off.

Here is a summary of the do-it-yourself access and video security upgrade for $5,800:

• $3,000 New keypad system with controller, software and computer interface
• $300 Drive-up keypad intercom system
• $1,500 Three high-grade color surveillance cameras
• $300Camera-installation kit
• $500 Hidden color keypad camera
• $200 Color-camera sequencer

Our sample site has 250 units, 90 percent occupancy and a $60 average monthly rent. The new security system will be quite visible and extremely appealing to prospective tenants. A 2 percent increase in the site occupancy would increase revenue by $6,000, covering the cost of the upgrade. If the site is already 100 percent full, rental rates could easily be raised $2 to accomplish the same revenue gain. The end result is a rapid one-year payback on the security investment.

What's Next?

Add door alarms to each of your units and rent electronic door monitoring for a monthly fee of $5. This can yield another $15,000 in gross annual revenue. If you are on a tight budget, just purchase a handful of wireless door alarms and place them on storage doors when the tenants choose this added service.

Another great investment is to upgrade the site's time-lapse VCR to a high-quality digital video recorder and offer remote viewing to tenants. The better digital systems allow tenants to use any Internet connection to visit a website, enter a password and have access to the surveillance camera aimed toward their unit or RV. Tenants can only view the cameras that have been assigned to them. Day or night, a nervous tenant can see his storage unit or vehicle. This service can be offered for an extra $1 per month, or can be provided free as a marketing tactic.

An owner's password allows you to replay video segments from any previous day or remotely watch your employees' work with the click of a mouse. If a tenant makes a claim of theft, a manager can quickly view the event in question. The video unit should support recording at 640 x 480 resolution or better to preserve the image quality of the cameras. A complete high-end digital video system with Internet viewer will cost $5,000 and work with all the cameras just added to the site.

The competence and knowledge of security consultants and vendors varies widely. It takes several years, and hundreds of installations, to become a true security expert. This article has provided a list of the features to ask for and the prices to pay. You should consult an expert to help guide you past the pitfalls. If one vendor cannot provide the products and services you want, search until you find the solution that works best for you.

Doug Carner is the vice president of marketing for QuikStor Security & Software, a California-based company specializing in access control, management software, video surveillance and call-center products for the self-storage industry. For more information, call 800.321.1987; e-mail [email protected]; visit www.quikstor.com.  

You're across town having lunch with a business partner. You open your briefcase and, within seconds, you are both reading an up-to-the-minute analysis of the occupancies and delinquencies at your storage facility. You run a few revenue reports, review the profitability of your move-in specials, and transmit special instructions to your manager. By the time dessert arrives, you are watching live video of your manager showing a vacant unit.

This is not science fiction--all you need is a laptop, special software and a portable Internet connection. You can use almost any laptop made in this decade; however, lighter is always better when creating a portable office. I recommend the Sony Vaio-SRX77 (www.sonystyle.com) or the Compaq N200 (www.compaq.com). Both are incredibly thin, weigh less than three pounds and sell for less than $2,000.

Getting Connected

You will also need an Internet connection. Several companies offer dial-up, DSL (direct subscriber line) and cable Internet connections. All of these solutions require that you remain attached to a wall plug. For true mobility, you will need a wireless Internet connection, but I am not referring to the wireless web that comes with most cellular phones. Telephone web browsers are not suitable for the task of remote management. However, a cell phone can serve as a wireless modem for your computer. This will provide Internet access in every major city and most places in between. Contact your cellular provider to confirm your model cell phone can connect to your computer.

Using a cell phone for Internet service results in a sluggish data rate of 9,600 bits per second--four times slower than a standard dial-up connection and 40 times slower than basic DSL. With this solution, you will need patience and a phone plan with a generous allotment of minutes. Fortunately, not all wireless solutions require a cell phone. For example, Verizon (www.verizonwireless.com) offers a wireless modem card that slides into the PC card slot of your laptop computer. The resulting Internet connection is slightly faster, but this type of service is only available in select major cities.

To accommodate a remote connection, the storage facility must also have an Internet connection. Earthlink (www.earthlink.com) and America Online (www.aol.com) offer unlimited "connect on demand" dial-up service. For a more responsive experience, consider installing a DSL connection from your phone company or a cable modem through your local television-cable company.

Using the Internet to complete a remote link to your self-storage business also requires special communication software. For example, PC-Anywhere (www.symantec.com) runs on any computer with a 266 MHz processor. The company's newest version has a street price of $140 and gives you complete control over the remote computer as if you were there in person.

Going Live

To go live from your portable office, start the remote software on your laptop and enter the Internet provider (IP) address of your storage facility. If your storage site's IP gave you a static account, that address will always remain consistent. If the provider issued a dynamic IP address, your manager will need to provide you the site's current IP number each time. Some management-software vendors offer IP logging tools that will automate this task.

Once connected, you will have secure access to your facility's management, security and surveillance systems. At your command, you can see current reports that instantly evaluate the effectiveness of your recent advertising and promotional campaigns. You can schedule rental-rate increases and review the daily transactions of your staff. If any delinquent tenants used a credit card to guarantee their rent, those charges can be instantly processed.

If your security and surveillance controllers are properly integrated, you can review tenant gate access and the electronic snapshots captured from the cameras in your access keypads. It is just as easy to watch live or pre-recorded video from any of your surveillance cameras. If you want to know when your manager came to work, you can recall that video on demand. Just ask your security vendor if it supports the features you want. Adding remote connectivity may be expensive, or impossible, once your security system has been installed.

Privacy

With traditional remote software, like PC Anywhere, you and the facility manager have simultaneous access to the same viewing screens. If you use a remote connection to enter a secure area of your management software, anyone behind the management counter will also see everything you see.

To keep your actions private, you will either need a private connection or to perform your work outside business hours. With a private connection, your work is concurrent and independent of what the manager sees and does. Ask your management-software vendor if its products can create a private remote session.

The Future

The World Wide Web Consortium, known to insiders as W3C, is a worldwide collection of 275 companies, organizations and government agencies. The W3C is a truly international organization and it defines the future of the Internet. It has approved several new standards that will vastly improve speed and security for everyone using the Internet.

IPwireless (www.ipwireless.com) is incorporating these changes to provide Internet data speeds up to 300 times faster than current cellular solutions, which is far more than what is needed to provide a seamless remote-control session to your site's management and security systems. "We use the new 3G Standard so you remain connected, even while driving across town," says John Hambidge, senior director of marketing for IPwireless. The company maintains a fully operational test system in Las Vegas and expects to market new service to select cities this summer.

Airvana, BeamReach Networks, Iospan Wireless and Navini Networks are also hoping to release competing high-speed wireless Internet solutions. The result will be an extremely competitive market that offers fast transmissions and fewer lost connections than with the current cellular technology.

Remote management allows you to maintain greater business control using far less of your time. You can stay connected in any situation and remove barriers to your mobility. Technology has finally reached the needs of business.

Doug Carner is the vice president of marketing for QuikStor Security & Software, a California-based company specializing in access control, management software, video surveillance and call-center products for the self-storage industry. For more information, call 800.321.1987; e-mail [email protected]; visit www.quikstor.com.

"It was our feeling that Wall Street catered to the public companies, while the large tradeshows catered to the smaller operators based on their need to generate sufficient numbers of attendees," says Ken Nitzberg of Devon Self Storage LLC. "Those owners and operators with more than 1 million square feet but not publicly traded seemed to get lost in the noise." It was during the Inside Self-Storage Las Vegas Expo of February 2001 that Nitzberg and Hugh Horne of Storage Spot conceived the Mid-Size Owners Group (MSOG).

The principals of the mid-size firms had, for the most part, stopped going to the various tradeshows and conferences, as the majority of educational opportunities were targeted to smaller operators. The issues and needs facing mid-sized operators were not always addressed, Nitzberg explains. That perceived void was the driving force behind the formation of the MSOG.

A letter was mailed to potential members, inviting them to a meeting to be held in New Orleans in March 2001, the day prior to the Self Storage Association (SSA) spring conference. "From then on, the group has taken on a life of its own," Nitzberg says. The response to the invitation was overwhelming. More than 50 people attended the first meeting, including many members of the SSA board of directors. The level of sharing and openness was exceptional, Nitzberg reports. The enthusiasm was high and the desire to continue and expand the concept was strong.

Since that time, three more meetings have been held, with the most recent taking place this past February in Las Vegas, immediately preceding the Inside Self-Storage Expo. The next meeting is July 25 in Atlanta. "We initially decided to hold three meetings per year--one every February on the day before the annual ISS conference; a meeting in the summer, unrelated to any other trade meeting; and one in the fall on the day before the annual SSA conference."

MSOG recently agreed to come under the umbrella of the SSA as one of its charter forum groups. "This means we will still be MSOG, but we will have the ability to place our dues in their treasury, obtain liability coverage and, finally, get the recognition as an organization to reserve rooms and space for our meetings."

Twin Objectives

The MSOG has two objectives. First, group members wanted to join, whenever possible, to obtain economic advantages through the benefits of scale. This would include better pricing and efficiency in purchasing power or availability of products and services. MSOG is exploring the formation of a captive insurance company for the members' casualty and liability coverage, which has become more important after the events of Sept. 11. The organization has also explored group purchasing of supplies and Yellow Pages advertising.

The group's second objective is to provide an environment for sharing information, knowledge, experience and education at a level commensurate with the needs and business requirements of its members. "We have had speakers on how to use the Internet to market your product, lease space and collect rent, and employee benefits and employee leasing. We have also had a nationally known, management-side, labor attorney address the group on employee-labor laws," Nitzberg says.

But perhaps the most valuable activity at the group's meetings occurs when members break into smaller groups to discuss topics of mutual interest while sharing each firm's experience, practices, successes and failures. These informal groups allow a free-flowing exchange of ideas and information between peers. "We have learned we all do it differently while still doing it the same," Nitzberg concludes.

Currently, the group has 35 member firms representing 1,238 self-storage facilities and 77,940,000 rentable square feet. "We don't know how many other firms are out there, " Nitzberg says. Membership is open to any firm that owns or operates 10 or more self-storage facilities or 1 million square feet of rentable space. MSOG welcomes questions from any qualified owner or operator interested in joining or learning more about the group. For more information, contact Ken Nitzberg at 510.450.1300; e-mail [email protected].

A recent trip I made brought into focus a critical problem facing many self-storage owners: the gap that exists between the talents and skills of their managers, assistant managers and part-time employees. I had a full-time manager tell me he did not feel he could trust the abilities of the part-timer who worked for him on the weekends. He felt he had to review every computer entry and bank transaction the employee made. He said, "I know we are losing almost every prospect who calls when she is on duty because she hardly ever rents a unit."

Many owners feel it is unrealistic to expect the same level of professionalism from the assistant and part-time managers as from the full-time manager. This logic is flawed. If you have someone covering your office 20 percent to 25 percent of the time, can you really afford to write off those opportunities? I don't think so. You should expect consistency in your day-to-day operations, no matter who is behind the counter. If you cannot get the part-time talent to do this, you will have to increase your pay levels to attract the right people.

When was the last time you had a candid conversation with your full-time manager about his relationship with and evaluation of the other employees? It is one thing for him to review what happened when he was not in the office, but if the manager feels he needs to trace every transaction, this is a complete waste of resources. If you have not reviewed the performance status of your part-timers with your manager, schedule a meeting as soon as possible. If you are a manager who sincerely feels the assistant manager or part-timers are not measuring up, you have an absolute responsibility to tell your owner and seek a resolution. I know that can be very uncomfortable, but just think of the rewards if you did not have to double-check their work.

Employee Attitude

My wife, Jackie, and I recently traveled to Tampa, Fla., for a meeting. By the time we arrived at our Marriott, it was late, and we decided to just grab something for dinner at the hotel restaurant. I didn't know it at the time, but we were in for an excellent demonstration of customer service and positive employee attitude.

When our server, Abraham Campbell, first came to our table, I realized we were in for a treat. The Jamaican-born Campbell has worked for Marriott Corp. for more than 17 years. The smile on his face was echoed by the smile in his voice. He made it very clear from the outset that his mission was to provide us an enjoyable dining experience. He was knowledgeable about the menu and able to explain how various dishes were prepared. During our meal, his presence was obvious, but not overbearing.

At the end of our meal, he simply asked: "Will I see you in the morning? We have a wonderful breakfast buffet I am sure you would enjoy." The next morning, we found ourselves back in the hotel dining room to try the buffet. We were not seated at Abraham's station, but as soon as he saw us, he came directly to our table--with that wonderful smile still on his face. He welcomed us and asked if we needed anything. When we got up to leave, he made it his business to come over to wish us a good day. It was clear from watching him we were not the exception but the rule for how he conducted himself.

Our positive experience during both meals was driven by his attitude of service and attention to us as customers. Your actions and attitude are critical to the success of your store. Does your attitude measure up with every customer who calls on the phone or walks into the office? Do you maintain that all-important smile on your face and in your voice with every interaction? You might be surprised just how much your smile can increase your closing ratios.

New York Victory

Chris McGrath, the president of the New York Self Storage Association, recently sent a letter to all association members. The letter detailed the judgment of U.S. Court of Appeals for the 2nd Circuit, which unanimously affirmed a Kings County Trial Court decision in Seaforth V. Public Storage (733 NYS 2nd 228; 2001 NY App LEXIS 11250). "This is yet another affirmation of the validity of ß182 of the lien law in New York," McGrath wrote.

In this case, the customer rented a unit and defaulted on his rent for two months. He then moved without providing a written notice to Public Storage as required in the rental agreement. There were three unsuccessful attempts to contact the customer with a default notice. Public Storage complied with the lien law that requires the publication of two notices in the newspaper.

The appellate court's ruling was straightforward and direct. It stated: "The defendants demonstrated their compliance with the lien law, including its notice requirements, in every respect. In opposition, the plaintiff cited only trivial irregularities in the defendants' paperwork, and failed to raise a triable issue of fact (citations omitted). The plaintiff's remaining contentions are without merit."

Wouldn't you like to hear a court rule this way in your favor? You can if you are following your state's lien law to the letter in conducting your sales. Mr. McGrath, in discussing the result of this case, made another major point: "Having a bad or out-of-date occupancy agreement is putting your business at risk. It is like allowing someone to have a knife at your throat." If you have not had your agreement reviewed in the past two years by an attorney who really knows self- storage, you could be at risk.

Thom Winninger

I just finished reading a great book by national sales and marketing strategist Thom Winninger, Full Price: Competing on Value in the New Economy. The entire book is devoted to strategies designed to get your customer to pay full price for your product. While not written specifically about our industry, it will help break the mindset that we have to turn to discounting as a marketing technique. You can get the book online, order it at your local bookstore (ISBN 0-7931-3954-6) or visit www.winninger.com.

Jim Chiswell is the president of Chiswell & Associates. 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 can be reached via his company's website at www.selfstorageconsulting.com or at the Virginia corporate office at 434.589.4446; write 6 Slice Road, Lake Monticello, VA 22963.

Think of the security elements of your facility as parts of a chain. Your security system will never be stronger than its weakest link. Let's take a look at each element of that system, and how you can bolster it to maximize effectiveness.

Create a Secure Environment

The layout of your facility is your first line of defense and the first thing your renter sees. Try to build sight lines into your facility from the street. Thieves like to work in private. Besides looking unthreatening and inviting to a renter, an open, accessible facility keeps the spotlight on criminal behavior. Those lights won't do any good if activity can't be seen from the street.

If you have automatic gates, make sure you have entrance and exit keypads. Link those keypads to your computer system to record the duration of your renters' visits. In many cases, thieves rent units and legally enter your facility. Then they are free to roam the place and break in during off hours. If you record visits, they just might not want to rent with you at all. If they do, you will have a record of their activities. And make sure your cameras can record license plates and faces going in and out--thieves like anonymity.

Moreover, thieves are not your only security concern these days. In the past, you only had to worry about the bad guys breaking in. Now you have to worry about them moving in. Throughout rural America, methamphetamine labs have been cropping up in self-storage facilities. Your local police can give you tips on how to detect them (see also "Speed Kills ... Profits!," Inside Self-Storage, February 2000). The same security devices that deter thieves, such as cameras and exit and entrance records, can deter these and other criminals who might be attracted to the convenience and anonymity self-storage facilities provide.

Know Your Manager and Your Renter

The next link in your security chain is your office. Actually, it's the person behind the desk. You're giving the keys to your manager. Do you conduct criminal and credit checks? Even before deciding a person's competence, don't you want to decide their honesty?

If you don't want a thief managing your facility, you also don't want one renting a unit, so set up some simple procedures to screen your renters:

• Require a valid picture ID, such as a driver's license or passport;
• Record the license number of the renter's vehicle;
• Send each new renter a welcome letter with the current "address service requested" notice for the post office;
• Try to get a phone number at an address, rather than a cell phone;
• Require emergency contact names with phone numbers and addresses on the lease.
• Post a sign that states "For your safety, we require . . . etc."

When the renter enters your office, he may be impressed with the monitors that show your cameras surveying the grounds. Cameras and monitors are a powerful marketing tool, but the pictures don't offer much security if your manager can't see them. Have at least one monitor positioned so the manager can see what's happening, perhaps on a second wall or under the desk, where the public can't see it.

Select the Appropriate Hardware

So you've screened your renter, and now he is ready to fill and secure a unit. Do you offer door alarms? They are a powerful crime deterrent and a great marketing tool. Are they so powerful you don't need to lock your doors? Of course not. So why install a gate, cameras and door alarms, and then secure units with the cheapest locks you can find?

Every electronic device can be compromised or fail for one reason or another. Remember, security is like a chain. Why install a weak link at the door? The industry has recognized the value of the disk lock, with its hidden shackle, as a crime deterrent. But a disk lock is general category and can offer many different levels of security.

How can you judge a disk lock? Ask vendors for samples. Compare them, first by heft, weight and appearance. Which one feels stronger, has better looking welds? Which keyway fits snugly and sounds and feels secure when it locks? A smooth action usually means loose fitting parts, making the lock easy to pick or pry apart. Ask how many key codes the lock has. If you have 500 units, your locks should have at least 2,500 usable key codes. Look at the key. Is it the same type you see with padlocks? A disk lock's key doesn't trip a spring like a padlock's key. It has to push the shackle over--in the rain and in winter when it's icy and slushy. You may want a heavy-duty or even a thicker key, such as a tubular or dimpled key that won't stick or break in icy, wet or dusty conditions.

Some law-enforcement agencies and security consultants have been promoting the disk as the answer to theft, and it is much greater deterrent than most padlocks. But it, too, can be compromised. When you put a good disk lock on a self-storage security latch, the latch becomes the weaker link. A bolt cutter can cut both sides of a slider latch about as fast as it can cut most shackles. You don't cut a disk lock, you just bypass it. With all your other security links in place, you can certainly reduce the chance of this happening, but the fact remains: The disk lock is not the final answer to securing a door.

While law-enforcement and security consultants have viewed the disk as the highest possible security lock, they have begun to recognize its limitations. When presented with the cylinder lock-and-latch system, which eliminates the weak point of the latch, they have come to recognize that higher levels of door security are possible and practical.

Consider Upgrading With a Cylinder-Latch System

There is a way to secure a door by moving the lock inside the door with a cylinder-latch system. A cylinder system mounts flush on a door, so there are no locks or latches to cut. It presents a uniform front to a thief, so he cannot tell which units look more promising. But just like disk locks, cylinder locks have a number of levels of performance. Some cheap, prepackaged locks may be pickable. Cheap materials, especially cheap pins and springs, can compromise the design advantages of the cylinder. The cylinder should be punch-proof as well as drill-resistant.

There are two types of keyways commonly available for cylinder locks. The medium security option is a tubular type key, similar to the type found on many vending machines. This type of keyway is pick-resistant, but because of its popularity in many other applications, there are now dozens of books, tools and websites devoted to teaching thieves how to open it. It is not easy to pick a tubular lock, but it can be done by an experienced thief.

For a few dollars more, it might be worthwhile to consider a cylinder lock keyed with a restricted key blank, one that works with rotating disks instead of pins, or with some other method that is not so common. A restricted key blank allows for millions--not thousands--of potential key codes, to eliminate the possibility of duplicate codes that can be a problem in large facilities. With each cylinder individually assembled and recorded, there is no possibility of a duplicate code. With a hardened steel front and internal rotating disks, this type of cylinder is virtually drill- as well as punch-proof.

Take Advantage of Low- and No-Cost Security Programs

Stay in touch with local law enforcement. It can keep you up-to-date on criminal activity in your area. Some operators offer their facility for drug- and bomb-sniffing training. A picture of you, the local police chief and Rex the Wonder dog in your lobby can have a powerful effect on the wrong guy who is thinking of moving in. Just remember to put a big sign that announces "Training Session in Progress" outside your facility to remind patrons real drugs and bombs are not being used!

You should also participate in your local and national self-storage organizations. Security is one area in which we all have common interest. The public perception of self-storage remains positive. It will stay that way if every facility takes security seriously.

Set and Follow Regular Security Procedures

Conduct lock checks daily at different times every day. A visible manager promotes a feeling of security for renters and is a real deterrent to illegal behavior as well--you win on two fronts. Make sure your manager's behavior does not become too predictable. You don't want the bad guys working around his routine. You should also have a regular routine for rotating your surveillance tapes.

In an article of this length, there is only room to touch on the basics. Each security vendor of various system components--gates, access-control hardware and software, alarms, cameras, locks and latches--can present you with options. Just make sure there is a consistent level of security for each component or link in the chain. It is important to compare the products and their price tags and, most important, to make your security program part of your marketing. The right security package for your market can be a significant sales advantage.

Rich Morahan is the managing editor of The Self-Storage Telegram, an industry magazine that focuses on security, operations and marketing for the self-storage industry. Mr. Morahan is a frequent presenter at self-storage conferences. He has more than 20 years or experience as a marketing and communications consultant. He can be reached at 617.559.0177 or [email protected].

Christopher Shope is the national marketing and sales director for Lock America Inc. (d.b.a. L.A.I. Group), which manufactures a complete line of security locks and custom-designed security hardware for self-storage and other industries. The L.A.I. team is committed to taking knowledge gained from other security industries and applying it to the self-storage market. For more information, call 800.422.2866; visit www.laigroup.com.

The following article is published in response to an abundance of questions generated by the author's March 2002 article, "Contending With a Lawsuit," which addressed employment-law issues and, specifically, salary vs. hourly-wage requirements for facility managers. It is also in response to a recent lawsuit filed by a group of self-storage managers and former managers who have sued for a violation of the Fair Labor Standards Act. They claim their employer failed to pay overtime, alleging they were not exempt employees, and were required to work more than 40 hours per week without appropriate compensation. The suit seeks class certification for approximately 60 parties (John Whithouse, et. al. v. Ash Properties, d.b.a., Atlantic Self Storage).

Thank you all for the e-mails and phone calls regarding my March 2002 article. I cannot recall a topic that has generated even close to the same response as this one. While I am not an employment-law expert, I want to use this month's column to revisit the issue, and reprint and answer the questions some of you have asked.

First, let's review. The issue of exempt and nonexempt employees, and the requirements of paying overtime to nonexempt employees, is governed by the Fair Labor Standards Act. This act, in part, sets a minimum wage and a maximum number of hours that can be worked in a week by a nonexempt employee before overtime has to be paid. In theory, depending on how you operate your facility, your manager may be exempt from the requirement to pay him an hourly wage and overtime for any work performed over 40 hours a week or, in certain circumstances, eight hours a day.

Recently, I have been seeing many cases involving the issue of manager wages. In certain industries, such as apartment-management, some managers are filing claims for overtime when ownership treated them as salaried-exempt employees. Courts are finding the managers were not actually exempt and entitled to compensation in the form of overtime for all additional hours of work. From the response to my recent article, I gather this is also a hot issue in the self-storage industry.

Generally speaking, for a manager to be exempt from the requirements of the Fair Labor and Standards 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 work week. An executive must manage at least two other employees and exercise a significant amount of discretion and independent judgement in doing his job. The administrative exemption is more like a project manager rather than a manager of employees. Still, an administrative 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 exempt employee's work must significantly relate to the success or failure of the business. If a self-storage manager is managing two other people and exercising a significant amount of independent judgment and discretion in doing his job, and his decision-making truly has an effect on the success or the failure of the facility, he may be exempt. If you want to be certain about this classification, seek advice from an employment- or labor-law attorney.

For most of you, however, your manager will not be exempt from the act and, among other things, must be paid overtime if he works more than 40 hours in a given week. The particular complication in this industry is managers often live on site in an adjacent home or apartment, and part of their compensation package is free or reduced rent. This benefit complicates the overtime question. Listed below is a smattering of the questions I have received from several readers since publication of the March issue.

Q: What if I have a manager who works a 40-hour week but also closes the gate and walks the premises at night, and/or fields phone calls forwarded from the office at night?

A: In this general description, those services provided after hours would have to be compensated at an overtime rate of pay--assuming the manager is a nonexempt employee and works a 40-hour week in the office.

Q: Suppose the same manager does some work around the premises of his own volition--for example, tending to the front landscaping and walking the premises at night for his own comfort and security. We have a time clock. What if he clocks out before performing these duties or does not clock back in when he does them?

A: Obviously, the best defense to a wage-and-hour claim is a time sheet or card, verified by the employee, showing a 40-hour work week and 40 hours of pay requested. However, a time card is not indisputable. The employee could come back later and say you told him he had to do this extra work off the clock by threat of losing his job or having his hours cut. In the end, the time records should carry the day; but please understand I am not recommending you allow nonexempt employees to work more than 40 hours a week while filling in a time card for only 40 to avoid potential liability.

Q: We have heard some owners in the industry have instituted a policy that the employee may only work in the office 36 hours a week so the extras of night phone calls, gate shutdowns and other emergencies will not cause the employee to exceed 40 hours. Is this an acceptable alternative?

A: This is a perfectly legitimate policy and will avoid the requirement to pay overtime--so long as the "extras" do not allow the total hours to exceed more than 40 hours of work in any given week. Keep in mind you are required to keep records of all hours worked by your nonexempt employees.

Q: Does vacation pay count as hours in the calculation of a 40-hour work week?

A: The answer is no. Let's say a manager takes a vacation day on Monday and then works eight hours a day Tuesday through Friday. If you ask the manager to work on Saturday, up to eight hours of weekend work can be performed at the straight hourly wage, even though you are technically paying for 48 hours that week.

Q: I provide an apartment for my manager to live in on site, as a result of which, the hourly rate I pay him is significantly reduced. I know for the purpose of taxation the employee does not count the residence as income, but does it count in the calculation for overtime hours and, if so, how?

A: The Department of Labor is very clear on this issue. The answer is that the fair market value of rent for the apartment is calculated in the formula to determine the overtime rate of pay. The department assesses a fair market value to the apartment if you have not already done so. You take the rate of rent and divide it by the 173 hours on average that would be worked in a month. Then add that amount to the wage to determine the "real hourly wage." The amount of overtime would be one-and-a-half times the amount of the real hourly wage, not the actual paid wage.

This is an interesting and complicated issue from our industry's perspective because self-storage is unique in providing this benefit. It gives you two alternatives. First, you can have an agreed fair market value (as low as possible) stated in your employment contract or lease agreement. If you end up having to pay overtime, it will be based on as low an hourly rate as possible, as opposed to allowing the Department of Labor to assign its version of a fair market value. Alternatively, it may be cleaner to simply pay the employee the normal hourly wage and deduct fair rent from his earnings to pay the rent back to you. This option may have a negative tax implication to your employee; however, it certainly makes the issue of the calculation of overtime much simpler.

The Department of Labor actually has very helpful people in its Wage and Hour Division. You can call them in Washington at 866.487.9243 or 877.889.5627. Unlike in many government agencies, the people at this particular department really do seem to know what they are doing and wish to help employers obtain proper answers to be protected. I am also happy to field questions as best I can via phone or e-mail.

If you are not properly paying overtime, the issue may very likely be raised by a former disgruntled or dissatisfied employee. Once that type of investigation or litigation is commenced, the Department of Labor can look back two and three years in the event of a willful violation. Not only could you be facing a large legal bill but a large penalty to the Department of Labor and money due to the former employee.

If, after reading this article and speaking with your attorney, you realize you have not been properly paying a nonexempt employee, the worst thing to do is ignore it and hope your employee never catches on. The first thing you should do is switch that employee to an hourly system with appropriate pay for overtime. If he remains employed with you for at least two years after you have corrected the problem, it would be hard for he or the Department of Labor to sustain any charge against you.

You can also get a release from the employee for appropriate and adequate consideration. If you have an employee you have been paying incorrectly, but you don't think he is going to last another two years and are afraid of facing charges, you can settle the claim with him directly. This type of arrangement must be negotiated through your attorney. Proper and enforceable releases need to be executed to protect you from being sued after you have paid money.

Finally, remember exemption status is a sticky and fact-specific issue. The determination of an exempt or nonexempt employee is not an exact science, but you should try and make that determination as honestly and appropriately as you can. If you have nonexempt managers, you should be paying them overtime if they are working more than 40 hours a week. The cost of not doing so and getting caught can be severe.

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.

JUST THIS MORNING I RECEIVED AN E-MAIL from the Los Angeles Police Department's Art Theft Detail. The detective was seeking information about a burglary suspect who targeted self-storage facilities, taking unique movie memorabilia and other items. Once I followed the provided link for more information, I learned the suspect, 33-year-old Wade Justin Halverson, had in fact been arrested for a series of burglaries that took place at a Public Storage facility in Studio City, Calif., where he rented. Halverson had also rented units in Westlake Village, Calif., and Las Vegas.

The culprit rented units using sham California driver's licenses under different names--including Jack Steel, William J. Curtis and Dr. Steel Halverson--and entered adjacent units either by tunneling through or dismanteling wall sections. He would then return to his unit, repair the wall, and leave his unit abandoned and empty. Sometimes he cut off another renter's lock, looted the space, and replaced the lock with one of his own. According to LAPD, Halverson also gave fictitious phone numbers and forged checks. He is 6 feet, 4 inches tall, weighs 240 pounds, has dark buzz-cut hair, a goatee and multiple tattoos.

The burglaries, most of which took place in December, netted memorabilia, costumes and scripts from Forrest Gump, Who Framed Roger Rabbit, Romancing the Stone, Back to the Future and other films. These were then sold to antique stores, animation stores and pawnshops in Los Angeles and Las Vegas. LAPD is requesting anyone aware of other storage units rented by Halverson contact the Art Theft Detail at 213.485.2524.

This is our annual security issue. I share the above information not only to alert operators in these areas of potential theft, but to demonstrate the importance of onsite security precautions. These days, it isn't enough to have access-controlled gates and individual unit alarms. Your biggest enemy might be one of your own customers! So, while you'll read here about all the lastest security features, keep in mind the importance of background checks and follow-up on phone numbers and addresses. The more obstacles you present Mr. Slim Shady, the less likely he'll rent from you or steal from your tenants.

Best wishes,

Teri L. Lanza
Editor
[email protected]
Website: www.insideselfstorage.com

Inside Self-Storage is proud to welcome a new addition to its staff this month: Elaine M. Foxwell, editor for the magazine's U.K. and Europe edition. Last year, ISS published its first-ever Europe supplement issue, which was circulated to more than 3,000 self-storage owners, operators, managers, suppliers and related companies throughout the United Kingdom and Europe. This year, there will be two such issues; by 2003, it is our goal to publish a bimonthly magazine specifically catered to our U.K and European audience.

Elaine's role is two-fold: First, she will serve as the primary correspondent for our overseas readership. This will provide her keen insight to the wants and needs of the audience ISS U.K./Europe will seek to serve. Second, as a native of Great Britain, she holds a special awareness and understanding necessary to fully address cross-cultural business issues. "World Watch" will be her way of communicating those issues to our American readership each month. We continue our commitment to industry evolution and progress, and wish you all the best in the next frontier for your business.

Best wishes,
Teri L. Lanza
Editorial Director

CHATTING ACROSS THE "POND"

Hanging in my office is a photo of Her Majesty that has accompanied me through a couple of trans-Atlantic moves. Coworkers occasionally comment on it. Even though I live on this side of the "pond" (as my mum says), my heart still fondly remains in my small village of Pyrford, Surrey, where I grew up. There, my brother and I attended private school--muddied up in blue, silver and gray uniforms--and struggled with math, French and, for me, girls' field hockey. Then we emigrated to the United States. What a culture shock! Here were big cars, country music, hot dogs and driving on the "wrong" side of the road. Life here moved considerably faster.

Patient university professors struggled with my insistence on spelling things differently, but with my first writing job, my conversion was complete--almost. My 20 years of experience writing about construction, engineering and mining achieved my immersion in American journalism; but when writing letters home, I'd revert to my English lexicon. If it weren't for my trusty copyeditors, the occasional word would wander into my articles.

Differences in language notwithstanding, there are distinctions in commerce and culture to be acknowledged by businesses venturing toward the international scene. This is part of the mission of "World Watch": to bring you news of companies abroad, as well as address the issues encountered by U.S. companies eyeing the lucrative and booming world of international self-storage. In the United Kingdom and Europe, it's an industry still in its infancy. U.S. suppliers and the worldwide public will experience quite a learning curve as they investigate new business territory. We aim to help shorten it.

Over the months, this printed dialogue will grow as we respond to reader input. Feel free to contact me with questions, comments and other observations. Regardless of spelling or differences in language, integrity will be maintained in the industry through the exchange of ideas and information.

Best regards,
Elaine M. Foxwell
Editor, U.K/Europe

WORLD WATCH WRITERS

Andrew Donaldson, Active Supply & Design Ltd.
Andrew Donaldson is the chief executive officer and founder of Active Supply & Design Ltd., a storage- equipment business in Cheshire, England. In its 11 years of operation, the company has been responsible for the design and fit-out of more than 100 European self-storage facilities and has established a chain of self- storage warehouses.

Donaldson also founded the Self Storage Sentinel newsletter, Rent-A-Space Ltd. and selfstorage.uk.net. He served as a director of the Self-Storage Association of the United Kingdom for three terms and was recently made chair of The Prince's Trust Cheshire Business Division. He is the recipient of several awards, including the Shell UK Livewire National Entrepreneur of 1992, Kidsons Impey Pacesetter Award 1995, Duke of Westminster Special Award 1996, Arthur Anderson and The Prince's Trust Regional Award 1996, and the Shell UK Livewire National Significant Progress Award 1999. His company is listed in the Top 10 Businesses Ever in the History of The Prince's Trust. Donaldson is judge, mentor and guest speaker for Livewire, The Prince's Trust and Young Enterprise, which helps 16- to 18-year-olds learn about business.

Graham Lomax, Rabco Europe Ltd.
Graham Lomax is a founding director of Rabco Europe Ltd. in Essex, England, which was opened in August 2001 by Olando, Fla.-based The Rabco Corp. Lomax and his partner, Kevin Lennie, met Rabco representatives while on a research trip spurred on by the phenomenal growth of the self-storage concept in the United Kingdom. Rabco is a full-service supplier of pre-engineered single- and multistory self-storage buildings in the United States and now Europe.

After finishing college in 1987 as an architectural technician, Lomax worked as a trainee surveyor/estimator for a specialist industrial and commercial refurbishment contractor. He moved on to a well-known and established international contractor and worked on large, new-build projects including refineries and prison facilities. During the six years prior to joining forces with Rabco, Lomax worked for a large, multidiscipline, public-limited company, in a division that specialized in commercial and industrial refurbishment. In addition to working on contracts for U.S. Air Force bases in the United Kingdom for the Ministry of Defense, he was responsible for converting existing buildings to self-storage facilities.

When he converted an old pole barn into a building for subcontractors to store their equipment in 1990, Jim Bishop took his first unexpected step into the world of self-storage. Nine years later, Cardinal Self Storage of Grayslake, Ill., opened its doors on his five-acre lot. The facility's name is a wordplay on the ranks of the Catholic church. A Cardinal under a Bishop? A barn into self-storage? Whoever heard of such a thing?

"I originally bought the land as an investment and had no idea what I was going to do with it," says Bishop. But as a small contractor, he had several subcontractors who needed space to store their trucks and equipment. The 5,000-square-foot pole barn was originally converted into Contractor's Storage.

"I had a little one-line ad in the Yellow Pages, but people were constantly calling us for public storage," Bishop explains. Even as construction equipment filled his yard, people in the nearby community were asking him for space to store personal items. "There are always those surprise situations like a death, divorce or inheritance that leaves people with goods they just don't have any room for," says Bishop's fiancé, Kim Klammer. The idea for a complete self-storage facility was born; but the road from inspiration to initiation was a long one with some major trials.

Raising the Roof

Bishop did his homework, attending self-storage tradeshows and seminars. Surprisingly, there was a precedence for working in self-storage in Bishop's family. He sought advice from his uncle, who was one of the pioneers of the industry in Panama City, Fla., and owns more than 400 units.

Bishop knew his facility's location was ideal--next to the College of Lake County, minutes away from the tollway and in the heart of Grayslake's shopping district. And the village, as locals refer to Grayslake, is only a few miles from the port-town of Waukegan and Lake Michigan.

The road to completion began with overcoming zoning hurdles. The county had changed its zoning from agriculture to suburban, which created more restrictions and requirements for development. Because the college, adjacent to Bishop's property, was able to annex to Grayslake, Bishop petitioned to do the same with a general business zoning. Additional zoning changes then forced him to petition for a special-use permit suitable for public storage. The plan review started, and after six years of battling and giving up some right of way, the facility was finally approved. It was then time to obtain financing to get the project started.

"After a feasibility study, various environmental audits, appraisals and some point money, Jim was able to begin the process of building Cardinal Self Storage," says Klammer. As a general contractor and carpenter, Bishop had developed small subdivisions, two townhouse complexes, greenhouses and individual homes. "Being in the trade and having the site- development experience, it was a cake walk," he says. He took two years off from his contracting business and built a 40,000-square-foot self-storage facility with about 50 boat-parking spaces.

Daily Operations

Cardinal Self Storage opened for business in June 1999. The facility has 48 climate-controlled and 200 standard units. It is comprised of four buildings, each 150 feet long by 65 feet wide and ranging in height from 9 to 20 feet. Units range from 5-by-5 up to 30-by-70, and the largest units contain a bathroom. Klammer reports occupancy rates run consistently between 85 percent and 95 percent.

Currently, marketing is done through a listing in the Yellow Pages, and ads in local consumer guides, sports-event brochures or seasonal brochures put out by the village. Klammer and Bishop live on the grounds. "If a customer has a problem with the gate at 8:30 at night, we're right there to help them," Bishop says. During the day, Klammer is assisted by Bob Blasius, a retired postal worker.

"Kim and I pretty much work together on this," says Bishop. "We consider ourselves a ma-and-pa operation, and we like this industry a lot." Klammer concurs, "We have met a lot of wonderful people in the couple of years that we've had public storage available."