How does discounting my rental rates affect length of occupancy?
Is a $1 move-in special more profitable than giving rental discounts?
What percentage of my tenants pay a discounted rent?
When does offering automatic rent collection make financial sense?
How many hours a month does my manager work on site?

Today's management software has some amazing reporting power, but to answer all these questions, you will need a report no one else has previously created. Microsoft Excel can provide the answers--if you know how to ask the questions.

This is the part one of a two-part column. At first, the procedures noted may seem a bit technical, but the step-by-step guidance will get you to the finish line in minutes. Best of all, you can save the finished report and update the information any time you need current answers.

Let's Get Started

First, create an easy export feature for your management software. You can do this by using your mouse to click on your computer's START button and selecting Control Panel to open a window with choices. Select Printer and Faxes, then Add Printer. The drop-down port selector must be set to File, and the location should be set to Local. Choose Generic as the manufacturer, with the model being Generic/Text only. Click on the OK button to complete the printer setup.

From this day forward you can send any printable report, from any program, to the "Generic" printer. The output will be saved to a text file you choose. You do not need to do this step again. Have your management software send the master tenant list to the generic printer and save the output as "Master_List.txt."

Click START, Programs, Accessories, then choose Wordpad. In Wordpad, choose File, then Open. Change the file type to All Documents (*.*), and locate the file called "Master_List.txt." You want to remove anything that is not in row-column format. Delete any additional information in the very top or bottom rows, such as your site name, address and anything else not relating to tenant data. When you are done, select Save from the File menu and exit the program.

Now open Microsoft Excel and choose Open from the File menu. Change the file type to All Files (*.*), and locate "Master_List.txt." The program will ask you to highlight the columns of information you don't need. Keep only three columns: Street Rent Rates (column A), Actual Rent Being Paid (column B) and the Tenant's Move-In Date (column C). Here is a short sample output representing a very small facility:

Excel will letter the columns and number the rows automatically. The intersection of each row and column is a rectangular area called a cell. The program lets you place a value or formula at any cell location. By creating your own formulas, you can extract patterns and meanings to the data table you just created.

What percentage of my tenants pay discounted rent?

Our sample table has only a few lines, so we can easily see we have seven rented units. But if we had hundreds of units, we would need a formula to quickly provide the answer to this question. We will place our formulas in column D and explain their meaning in column E.

Highlight cell D1, type =COUNTIF (B1:B9999,">0"), and press ENTER. The cell will display the total number of tenants paying any rent. This total will ignore vacant or damaged units, those being used for the company, and any others where rent is not currently being paid. So you remember what cell D1 means, move to cell E1 and type "Rented Units."

Now highlight cell D2, type =100*D1/ COUNTIF(A1:A9999,">0") and press ENTER. The cell will display your occupancy as a percentage of all your units. Move to cell E2 and type "Percent Occupancy."

Looking at our table, it is easy to see four tenants are paying less than the scheduled rent. We are comparing the value in column B to see if it is smaller than the corresponding value in column A, but only for units paying rent. To write this question as an Excel formula, highlight cell D3 and type =SUM(IF(B1:B9999>0,IF(A1: A9999>B1:B9999,10)),0). Then hold down both the SHIFT and CTRL keys while pressing ENTER. This last step instructs the program to use data sets. Curly brackets are automatically applied to the ends of the formula as confirmation. Move to cell E3 and type a definition, "Tenants Who Pay a Discounted Rental Rate."

The answer in cell D3 divided by the answer in cell D1 is the ratio of how many tenants are paying below the scheduled rent. Highlight cell D4, type=100*D3/D1, and press ENTER to see this ratio listed as a percentage--57.14 percent in our example. Move to cell E4 and type "Percent of Tenants Paying a Discounted Rental Rate."

How does discounting my rental rates affect length of occupancy?

Now that you know the percentage of tenants who have special pricing, let's see if those who pay a discounted rent stay shorter or longer than those who pay the standard rate. Let's only consider tenants paying a discounted rent and list the answer as the average number of months. Highlight cell D5 and type=SUM(IF(C1:C9999"",IF(A1:A9999>B1:B9999,DAYS360 (C1:C9999,"6/1/03"),0),0))/(30*D3). I used June 1, 2003 as our date. Be sure to use the current date, and don't forget to hold down both the SHIFT and CTRL keys while you press ENTER to submit this formula. Move to cell E5 and type "Months of Average Occupancy for Discounted Tenants."

We can change our focus to look only at tenants paying the scheduled rent by highlighting cell D6 and typing =SUM(IF(C1:C9999"",IF(A1: A9999=B1:B9999,DAYS360(C1:C9999, "6/1/03"),0),0))/(30*(D1-D3)). Hold down both the SHIFT and CTRL keys while pressing ENTER, then move to cell E6 and type "Months of Average Occupancy for All Other Tenants."

We are looking for the difference between these two values. Highlight cell D7 and type =IF(D5>D6,100*((D5/D6)-1),"NO"). Press ENTER, move to cell E7 and type "Percent Longer Tenancy From Discounting Rental Rates."

How much money are you giving away in rent discounts?

Highlight cell D8 and type =100-100*SUM(IF(B1:B9999> 0,IF(A1:A9999>B1:B9999,B1:B9999,0),0)) /SUM(IF(B1:B9999>0, IF(A1:A9999>B1:B9999,A1:A9999,0),0)). Hold down both the SHIFT and CTRL keys while pressing ENTER. Then move to cell E8 and type, "Percent of Lost Revenue on Units With Discounted Rent." Your spreadsheet should now look like this:

From our table, we can see the tenants who receive a rental discount are staying 4.32 percent longer but generating 8.62 percent below street-priced revenue. This is a significant income loss for minimal gain. The small increase in the length of occupancy indicates renters are not very price-sensitive. This facility is nearly 90 percent occupied, and it is time to raise rents. Excel took the guesswork out of our rent management. Now that's power.

Next month, we will use Excel to compare the value of the $1 move-in special, evaluate the real costs of offering automatic rent collection, and show how to analyze employee work hours.

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

The coalition forces won a decisive victory because they had great leadership. The campaign plan was communicated to everyone. It was bold, innovative and broke some old rules. But most important, everyone knew the part they needed to play.he war in Iraq has touched everyone in the world, directly or indirectly. Many of us sat riveted to our television sets watching embedded reporters feed us live pictures as our sons and daughters carried out one of the boldest, best integrated military campaigns in the history of warfare.

Those of us with stores in military communities watched our occupancy levels jump as deploying forces left in record numbers, leaving us to protect their belongings. The majority of us, however, have seen our inbound customer-inquiry calls drop, along with our occupancies. In my travels across the country and countless conversations with owners and managers, the universal sentiment I'm hearing is we are experiencing a soft market. If your rentals are up compared to last year and you got a 6 percent to 8 percent spring rate increase across the board, be ready for more competition.

Just like the coalition forces, smart bombs and cruise missiles played a major part in the Iraq campaign. Similarly, in self-storage, Yellow Pages ads, coupons and direct-mail play a role in our battle for market share. But in the final analysis, it took "boots on the ground" to win the Iraq war in such a decisive fashion. So it will be in this industry. It's time for our own "Shock and Awe" campaign, including the use of WMD: weapons of marketing dominance.

Our managers, assistant managers and part-timers are the secret. Their telephone skills and positive customer-service attitude will determine who wins and who continues to lose ground in the months ahead. As an owner, you must ask yourself, "Have I given them all the tools they need to succeed?" Better yet, have you even asked them what they need?

The coalition forces won a decisive victory because they had great leadership. The campaign plan was communicated to everyone. It was bold, innovative and broke some old rules. But most important, everyone knew the part they needed to play.

Have you created a similar campaign in your self-storage business? Do all of your employees fully understand what you expect to achieve this year? As we pass the mid-point of the year, it is not too late to get everyone together to assess the first half of this year's campaign and evaluate, as one team, the flexible strategies necessary to achieve your goals in the next six months.

It is time to shock and awe those potential customers--not with discounted prices, but superior skills and attitude. If there has ever been a time in the brief history of our industry when excellence in day-to-day operations will separate the winners from the losers, it is now. Which line will you be in when they are handing out victory ribbons at the end of December? Your entire team's actions will decide.

Overtime Clarification by U.S. Labor Department

By the time you read this column, the U.S. Labor Department will be finishing its official comment period on sweeping new federal regulations governing employer requirements for paying overtime. The proposed changes outlined in March's rule-making process represented the first update in salary levels in the wage-and-hour rules in the past 28 years. For example, the last revision to the job-description categories in the 1938 Fair Labor Standards Act was 54 years ago.

In a press release from late March, Tammy McCutchen, administrator for the Department of Labor's Wage and Hour Administration, called the revisions "moderate and measured." "Easy, clear rules mean employees will understand when they're entitled to overtime; employers will know what their obligations are," she said.

The release went on to say, Other proposed changes include revising job duties required to qualify for the exemption to better correspond to 21st-century workplace realities. The old regulations, written in 1949, mention job classifications that no longer exist, such as key-punch operators, straw bosses, leg men and gang leaders. Clarifying which job duties qualify for overtime pay will help workers and employers easily determine overtime entitlement for millions of workers whose status is currently unclear.

In the new proposal regulations, any worker earning less than $22,100 a year would automatically be entitled to overtime pay, regardless of whether he is paid hourly or earns an annual salary. This same worker would be exempt from this overtime-payment requirement if he manages more than two employees and has authority to hire and fire, or if he has advanced training--a technical degree, works in a specialized field, or works in the operations, finance and auditing areas of a company. An employer could also simply increase the base pay above the $22,100 annual level to remove the employee from the mandatory overtime category.

I wanted to bring this issue and these pending regulations to the attention of owners and mangers as well as all store employees. Could it change how you are being paid? Maybe. Could it mean every self-storage owner in America will need to rethink his management structure and employee work hours? Possibly. Is it worth everyone's attention? Definitely.

While the U.S. Labor Department feels it is making a quantum leap with these proposed changes, I feel it will take several years to fully understand the direct impact they may have on the entire self-storage industry.

Motivation and Inspiration for the Taking

Everyone can use a supply of motivation and inspiration from time to time. I would like to recommend one of the best sources I have found over the years: the writings of Og Mandino. Mandino, a widely read inspirational and self-help author, has written 18 books that have touched the lives of an estimated 10 million readers around the world.

Books such as The Greatest Salesman in the World, The Greatest Secret in the World, The Choice or The Return of the Ragpicker all have lessons to teach. I must admit, The Spellbinder's Gift has special meaning for me. I have found Mandino's writings to contain subtle nudging and meaningful encouragements, not finger-pointing. You can pick up one of these books 6 months or even years later and get a completely new insight you missed or did not fully understand from your first reading. Many of these stories can be read in a single night, yet have a profound way on how you view the morning.

In his introduction to The University of Success, Mandino writes: Forget yesterday and last month and last year, with their gloomy diary of failures and disappointments. All that is in the past. This is the day you were beginning to believe would never arrive and yet it is here! This is the day you begin to turn your life around. This is the day you commence learning the greatest secrets of success from experts and, more important, how to use what you learn to make a better world for yourself and those you love.

Now 79, Mandino lives with his wife, Bette, in New Hampshire. Anyone looking for a wellspring of words for personal motivation and inspiration need look no further than the pages of his works. You can also gain some insights from his website at www.ogmandino.com.

The Passing of Ron Alton

I cannot finish this column without a brief word on the death of Ron Alton. Those who knew and worked with Ron and considered him a friend have lost a unique person. He was a hardworking man who was constantly urging those around him to realize their full potential as he pushed himself toward that same goal. Our thoughts and prayers are with Pam and her family, including everyone at Mini-Management Services.

Ron, you will be missed. May God be constantly at your side.

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

The self-storage industry has undergone a tremendous transformation over the past two decades. In its infancy, developers could build a facility at just about any location and reach stabilization in a relatively short period of time. However, as land prices continue to escalate and zoning restrictions become more stringent, site selection has become paramount in constructing successful facilities.

While a number of markets have become saturated due to high construction levels over the past several years, there are still many locations that are underserved, particularly in secondary and tertiary markets. New development is expected to continue to decline over the next year, which should help stabilize occupancies and strengthen asking rents. Sales activity will benefit as investors seek higher returns than those offered by mainstream real estate products with minimal management requirements.

Self-Storage Goes Mainstream

The acquisition of Storage USA by General Electric has lifted the self-storage industry into the big leagues. For years, the industry was dominated by mom-and-pop operations; however, the entrance of GE is certain to take the industry to a new level. Currently, only 11 percent of the industry is controlled by the top five largest self-storage companies, leaving nearly 32,000 facilities under the control of private ownership. Slightly more than two decades old, the self-storage industry is sure to undergo many more transformations.

Historically, self-storage facilities have been financed by local banks; however, the popularity of these facilities will continue to attract new sources of financing. Consolidation of the industry will continue to gain favor as competition increases. Although new construction of self-storage facilities is expected to continue to decline due to lower occupancies, a lack of affordable land and more stringent zoning restrictions, larger, well-financed companies will be able to capitalize on the segregated industry.

One example is the new emphasis placed on customer service. Customers are demanding a wider array of services, such as rental vehicles, 24-hour service and high-tech security systems. Larger, better-financed companies that are able to provide these services in a consistent, high-quality manner often achieve a competitive advantage over their smaller counterparts, resulting in higher values when the former properties are sold.

West

The West will once again set the bar for sales activity in 2003. This region led the nation during 2002 with nearly 45 percent of all self-storage construction, totaling approximately 6.2 million square feet. The lion's share of the new construction was concentrated in California, where more than 4.6 million square feet was completed. Despite the elevated level of construction, strong in-migration and a transient population kept occupancy levels stable at 88 percent.

Although it is difficult to compare rental rates among properties due to the large discrepancies in unit size, unit mix and services rendered, rental rates realized an increase across the board. (Note: For the purposes of this report, only three unit sizes were analyzed: 5-by-5s, 10-by-10s and 10-by-20s.) Rents grew at an impressive rate of 10 percent for 5-by-5 units, to an overall average of $35 per unit. However, rent growth would be considerably less if rental concessions, which are often offered on the smaller, more abundant units, are included.

As land prices continue to escalate, many developers have been inclined to add smaller units to the mix due to their higher rent per square foot, which makes the facilities more attractive to investors on a pro forma basis. Average rents realized an increase of 8 percent for 10-by-10 units, to $72 per unit. However, rents for the larger 10-by-20 units grew at a rate of only 3 percent, to $109 per unit.

The escalation in rents and a larger pool of real estate investors in the market helped push the median sales price per square foot up nearly 9 percent, to $57. The price per square foot has been skewed upward, however, due to a large percentage of sales occurring in California, which boasts a median price of $65 per square foot.

South Central

Declining construction levels will allow occupancy to rebound in 2003, but it will remain under the national average. In 2002, developers kept construction levels on par with 2001, bringing approximately 2 million square feet to the area.

Texas led the region, with almost 1.5 million square feet completed. Occupancy levels also remained constant at 84 percent during 2002; however, occupancies fluctuated greatly depending on the time of year and the state. For instance, 2002 numbers dropped to 81 percent occupancy, but then rebounded in the third quarter to 86 percent. Alabama had the lowest occupancy in the region and the nation, at 74 percent, while Louisiana had the region's highest occupancy, at slightly more than 88 percent.

Although rents remained flat at $26 per month for 5-by-5 units, average rents jumped 9 percent for a 10-by-10, to $52 per month, and 7.5 percent for 10-by-20s, to $77 per month. This increase appears aggressive at first glance considering the stagnant occupancy levels; however, much of the gain can be attributed to higher demand and a smaller supply of larger unit sizes.

Median sales prices slid more than 15 percent in 2002, to $29 per square foot. The decrease is attributed to a higher proportion of older facilities, which traded at an average price of $1.5 million, down from $2.2 million in 2001. However, investors continue to show strong interest in self-storage facilities due to their high cap rates, which are hovering around 10.5 percent, and the relatively small amount of upfront capital required to begin investing. A lack of for-sale inventory continues to limit investment activity due to the large percentage of owner/operators who view their properties as long-term investments.

Southeast

Values in the Southeast are expected to increase in 2003 as occupancies continue to improve and positive rent growth materializes. Nearly 3.9 million square feet of storage space was brought to the market during 2002, down from 4.8 million square feet in 2001. Florida was surpassed by only California for the most self-storage construction in the nation, with nearly 2.5 million square feet completed in 2002.

The large amount of new construction has lengthened rent-up schedules; only 17 percent of facilities reach 70 percent occupancy during the first six months of operation, compared to the national average of 29 percent. Although occupancy levels improved by nearly 200 basis points during 2002, average occupancy in the region, at 83 percent, remained nearly 250 basis points under the national average.

Average rents for 5-by-5 units increased by a moderate 2.5 percent, to $32 per unit. Relatively low occupancy levels also kept average rents for 10-by-10 units stable, at $60 per unit. However, 10-by-20 unit rents actually declined 1.5 percent during 2002, to $92 per unit.

Low occupancy levels and stagnant rent growth translated into a reduction in sales prices and rising capitalization rates. The median sales price fell more than 10 percent, to $42 per square foot. Meanwhile, cap rates increased 100 basis points, to an average of 11.3 percent, to offset the increased risk associated with these investments.

Inclement weather has translated into increased expenses for operating and maintaining facilities in the region. Damage from an unusually severe storm season caused insurance claims--and later, premiums--to spike. Maintenance expenses also rose as owners swallowed deductibles and funded repairs themselves in an attempt to reduce premium hikes.

Northeast

An abundance of affordable financing and high barriers to entry will translate into buyers paying premium prices for well-located facilities in the Northeast. The scarcity of affordable land surrounding highly populated areas has kept development under control.

Construction declined by nearly 400,000 square feet during 2002, to 1.45 million square feet. States like New York and Massachusetts have an average of 1.6 and 2.4 square feet per resident, respectively, compared to the national average of 4.3 square feet. Furthermore, many of the swelling units in these large metropolises often have very little storage space, creating a greater demand for off-site storage. As a result, the Northeast region boasts the highest occupancy level in the nation. High demand and limited supply have kept average occupancy elevated, at 88 percent.

Relatively high occupancy rates allowed owners to raise rents considerably in 2002, particularly for larger, more popular unit sizes. Rents grew at a moderate 4 percent for 5-by-5 units, to $35.50 per month. However, 10-by-10s and 10-by-20s realized dramatic increases of 31 percent and 36 percent, to $93 per month and $145 per month, respectively.

Rents in this region have historically been the highest in the nation. Much of this is attributed to the many climate- controlled facilities in these densely populated areas. In response to skyrocketing rent growth, the median sales price increased by 35 percent, to $55 per square foot. With an average-sized transaction at 76,000 square feet, the Northeast region boasts the highest average price per transaction, at nearly $4.7 million.

North Central

A limited amount of new supply will boost occupancy levels and rent growth in 2003. Construction fell dramatically during 2002, with the completion of only 600,000 square feet of storage space, compared to 1.3 million square feet in 2001. Nearly half, or 270,000 square feet, was built in Illinois, which led the region for the second straight year. Despite higher levels of construction, however, Illinois continued to lead the region in occupancy, recording a healthy 92 percent, which is 7 percentage points above the region's average of 85 percent.

On the whole, occupancy in the region slipped 300 basis points during 2002. There are, however, large fluctuations in renter demand depending on the season, which pushed average occupancy from a low of 78 percent in the winter to a high of 88 percent during the summer.

In spite of faltering occupancy growth, rents managed to grow at a healthy pace. The average rent for a 5-by-5 unit increased by 12 percent during 2002, to $30 per unit; however, it remains below the national average of $32.50 per unit. The average rent for 10-by10s grew at about half that rate, to $54.50 per unit. Likewise, remuneration for a 10-by-20 grew at a similar rate of 6 percent, to an average of $80 per unit--again, well below the national average of $98 per unit.

Investment activity slowed slightly during 2002, as many owners elected to hold on to their properties during the uncertain economic conditions, which contributed to the 25 percent increase in the median sales price, to $58 per square foot. Meanwhile, average cap rates remained steady at levels between 10 percent and 10.5 percent.

Records-management in self-storage operations has always included minimal service options. Today, with new methods and technology, you can offer higher levels of service if you choose. This article discusses the value of adding services to your records-management portfolio.

If you are in the records-management business, you must provide a minimum of three levels of service: storage, retrieval and delivery, and indexing. These services separate you from simple records storage. There are additional levels that can be added to your service portfolio. Each can contain many variations and be delivered in several ways. The following paragraphs define and explain each service level, along with their components and your options for implementation.

Storage

The most obvious of the service levels is, of course, storage. This is your base service and where the annuity value of the business is found. Since records tend to stay in storage for long periods of time and retrieval fees deter movement, the base of storage grows each month from existing and new client accounts. There are several storage service options:

Box storage is the most common records-storage type. It is the simplest to provide and easiest to control. Box storage is usually charged by the cubic foot, and boxes vary in size. Odd boxes are charged at a higher rate than standard ones.

File storage is typical for medical records. These are maintained on open shelving and in the same order the medical client has maintained them. File storage provides less dense storage and is, therefore, charged at higher rates than box storage.

Film-media storage is very common. It includes microfilm, microfiche, X-ray files and videotapes. It is advised that this storage be maintained in air-conditioned space, since temperature and humidity have dramatic effects on the quality and rate of degradation of the film. It is also common for clients to not want to pay for air-conditioned space; consequently, many records centers store X-rays in open warehouse space at the request of the client.

Data-media storage is by far the most volatile records-storage medium. Data media is usually considered a vital record and acts as a back-up and history of computer systems. Casual storage of data media is not recommended by anyone. Storage of this media requires stringent controls and high costs.

Retrieval and Delivery

Retrieval and delivery services are relatively mundane and generally simple when controlled with a barcode records-management tracking system. This level of service generally includes four services, all of which can be outsourced if managed properly:

• Retrieval is the act of pulling a box or file from existing storage while maintaining a history of the activity and receipting for the unit of storage.
• Delivery is provided to the client on a standard, emergency or after-hours basis, depending on the level of service you define in your agreement. Nonstandard deliveries are always charged additional fees. Standard delivery is typically next-day service.
• Pick-up service is best provided as a scheduled event to pick up new items and return items to storage.
• Refile service is the replacement of items back on the storage shelving. This is usually done at scheduled times. Boxes are not generally returned to their original location, although files are always returned to their original box.

Indexing

Indexing services, sometimes called cataloguing, can be provided simply or in complex form. They are the primary difference between records management and records storage. Indexing is the means of finding record items, and it can vary in quantity and value to the client.

Numbering is the simplest form of indexing. Assigning a unique number to each item is absolutely required. This necessitates the client keep his own information database about the contents. This is a minimal service level and of relatively low value to the client.

Standard indexing is the best way to index a box. Generally, there are a standard number of fields entered into the client database relative to the item being inventoried. This could include record name or series, dates from and to, ranges from and to, owner or department, and destruction date. This has high value to the client and generally excellent profit margins for the records center.

File indexing is provided to some file types that are difficult to arrange in an orderly fashion within a box. Some record types require file-level indexing, the most common of which is legal files.

Document indexing is provided on a rare basis, when the indexing of key documents may reduce the cost of another business process. Litigation support is an example of this.

Professional Records-Management Services

Professional records-management services (PRMS) range greatly from mundane to highly sophisticated. These have the greatest value to the client and higher yield and margins to the commercial records center. Many of these services can be outsourced to records-management professionals in your community. A few of these are listed below. This is not meant to be a full catalog of PRMS services but merely a sample:

• Repackaging is a warehouse service, but it can assist in the management of the records, since improperly packaged records are difficult to handle.
• Re-indexing and homogenization services are very valuable and give the client a better understanding of what records are being maintained. This service has high value and high yield to the client and the records center. This activity can easily be outsourced.
• Retention-scheduling services may, at first glance, seem antiproductive to your storage goals. Indeed they are not--attention to retention issues ensure long-term relationships with clients.

The list goes on and on and on. There are perhaps 100 or more PRMS services that can be offered through your center.

Digital or Electronic Services

The future of commercial records management does not exist within the paperless office, scanning or enterprise document management. The future for commercial records-center automation is already here. The value is in providing services valuable to your client and profitable to you. Records-management software already contains the solutions that bring this high value and improved profitability. These are simply a few of the more obvious services--there are many more:

• Internet-based access to client information is perhaps the most important innovation in commercial records-center history. It is available in the primary software products on the market.
• Scan-on-demand service includes the retrieval of indexed files, scanning them and sending them via e-mial as a file attachment. This avoids delivery by courier and is high value to the client and high profit to the center.

There are many other services that allow commercial records centers to become one-stop records shops for clients. The service levels you offer are entirely optional. The higher the service levels, the higher the value to the client and the more profit to you.

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

In the February issue of Inside Self-Storage, I published an article titled "Valuation of Self-Storage Facilities." Since then, I've received many calls from people interested in financing, real estate tax issues, estate valuation or selling. Most are looking for a ballpark value for their facilities for planning purposes. Several have asked for a simple worksheet they can use to develop a value range.

Appraisal and valuation are a professional art, and while mechanical number manipulations are a very important part of the process, there is also a large measure of real estate judgment and experience in developing a precise value. I cannot impart such a judgment in a brief worksheet, but I can give you the basics of the number-crunching mechanics that may get you into the general vicinity--I can also point out some anomalies in valuation that can take you right out of it. Since few of these exceptions are easily understood or straightforward to evaluate, I will simply note them and encourage you to seek further advice if they exist in your facility.

It should also be noted a true appraisal takes an in-depth look at value, not only based on income, but from a cost and a market-sales basis. The cost-basis method looks at the price of replacing the facility in the particular market. The market-sales approach compares the values actually achieved in the market by similar facilities in recent sales.

Without reconciling the values from each of these methods, one cannot be sure the right value for the property has been identified. It is a complicated process requiring expertise and experience of a professional active in the business. Regardless of your need for the information, shortcuts to developing the right value can lead you to erroneous conclusions. As you follow the steps outlined in this article, you must be aware the answer number-crunching provides is merely an estimate of potential value and may be subject to a wide range in actual figures.

With all of the caveats stated and the exceptions to be noted hereafter, the following exercise is designed to show you how cash flow largely determines the value of a facility and the potential sensitivity of value to various operating results. As you work through the numbers, try changing some--such as dropping rates 5 percent or occupancy 7 percent, or raising real estate taxes by 20 percent--and see what happens to the values. You will learn why good operations are often the most important factor in creating value. It is important to remember a buyer determines price and is really buying income, not "bricks and sticks." The iron rule of value is, "If there is no income, there is no value; if there is less income, there is less value."

The "worksheet" provided at the end of this article is where you will write all numbers and develop a value range; but first you have to determine where you will get the numbers and how to use them. A good place is your most recent tax return or your last 12 months of operating statements. With this information in hand, you are ready to begin your investigation and fill in the worksheet, carefully reading the admonitions in the instructions.

Rental Income

Since self-storage is a seasonal business, you must consider a full 12 months of actual business rather than extrapolating the best three. An appraiser would also look at the trend over the last few years to see if it is declining and, if so, might adjust the final price or capitalization rate. If there is a significant vacancy--say more than 15 percent of potential rents--there may also be an adjustment.

Very few appraisers will count revenues in excess of 90 percent of potential rents, except in very unusual circumstances. When evaluating vacancies, it is very important to compare the actual rent received to the potential and not just the physical occupancy. It is very possible to be 92 percent leased physically and only 80 percent occupied economically. If there are many (or even one) new facilities nearby that are about to open or in lease-up, all bets are off until it is very clear rates and occupancies will remain stable. This is a good place to test the sensitivities by changing the revenue to reflect the potential competition.

Miscellaneous Income

This is the catch-all category for late fees, net box sales, truck-rental commissions, and lock and insurance sales. If this number is more than 10 percent of the rental income, it is possible a different valuation may be required to properly evaluate this source. As the amount grows larger, it may represent "another business," and not miscellaneous income. Such business income is usually valued much lower than real estate income, and is often not counted by appraisers for loan purposes.

Operating Expenses

It is considered a rule of thumb that operating expenses run between 30 percent and 40 percent, with many in the 35 percent range. If your project falls out of this range, further analysis may be required. The following items describe the expense categories in more detail:

Real Estate Taxes. This looks simple, but it really isn't, because real estate taxes can change dramatically if the property is reassessed. Properties are usually reassessed at time of sale, often resulting in a higher tax based on the new price. A buyer will often evaluate the property based on the "new potential" taxes rather than the actual, which will cause the price he is willing to pay to be lower. Additionally, some taxing jurisdictions may reassess every three to five years, so you must figure out where you are in this cycle and adjust accordingly. If, at the end of this exercise, you find the computed value range greatly exceeds the value shown on the tax bill, it is a good indication you may have a problem with increased real estate taxes and, thus, a lower value.

Salaries and Benefits. This is where salaries, fringe benefits and employee bonuses are accumulated. If someone works on site unpaid--including yourself--calculate what it would cost to replace this person and add it to the category. These numbers will vary significantly based on facility size and locale. Skip this last step only if you are willing to stay working on the project for free, forever. Don't include excessive benefits, such as generous pension plans, auto leases, silver-plated medical plans or key-man life-insurance policies.

Insurance. This category should include all costs for property and liability insurance. If you believe you will be receiving a significant cost increase, use the larger number.

Utilities. This category is relatively straightforward. Include costs for electricity, gas, fuel, oil and water.

Maintenance and Repairs. This category should include painting, door repairs, asphalt repairs, structural and roof repairs, and other things routinely repaired during the course of the year. Snow removal and landscaping maintenance may also be put in this category, as well as other routine maintenance contracts such as HVAC or pest control. If you have made major capital replacements or additions, delete them. This may include things such as a new gate, software, roof replacement, major landscaping or fence replacements. The general rule is if your accountant requires you to capitalize the expenditure, do not include it here. If your property has excessive deferred maintenance, an adjustment will be deducted in the final valuation to compensate for these items.

Capital Reserves. To account for these capital items, an artificial reserve is usually included in the computation of 10 to 15 cents per square foot. This is not an actual expense that will show up on your statement, but rather a number you should compute and deduct here.

Management Fees. If you pay a management fee to a third party, include it in this category. If you don't, you should add a management fee to your expenses of between 3 percent and 6 percent of gross revenue depending on the size and location of your facilities. This additional expense is necessary because value is based on investment returns and must include all management costs for the investment.

Marketing and Advertising. This category includes Yellow Pages, radio, TV, newspaper and Internet advertising.

Office Expenses. This category includes telephone services, supplies, software repairs and fees, bank fees, and other miscellaneous office expenses. Operating and business licenses can also be entered in this category.

Miscellaneous. This is the category where other necessary but minor expenses are included. Don't include your convention, travel or other personal charges, such as lunches or massages.

Depreciation. Do not include depreciation. Depreciation is not included by definition. For a detailed explanation as to why, read the article at www.selfstorage.com/argus/articles/valuation_0203.pdf.

Interest. Do not include interest, as it is not a charge against operating income. However, if you have a loan and it has a prepayment penalty, lock in or yield-maintenance requirement, see your appraiser or broker, as these loans may affect value and marketability significantly. The devil is in the details with regard to loans with these provisions, and they must be reviewed very carefully to determine the nature and magnitude of the impact.

Land and Building Lease Payments. Land and building leases can negatively impact value. Because the terms vary as to rent, length of term and other important clauses, any generalization is inappropriate, and you should confer with a highly qualified appraiser or broker to determine the significance of the lease. Unusual easements on the land can also have a major impact on value, as can nonconforming zoning, flood planes or environmental concerns. Each of these issues deserve very careful analysis and may impact the values, negating the ranges contemplated in these calculations.

Net Operating Income

After subtracting operating expenses from revenues, you have what is known as net operating income (NOI). This is not cash flow, as it is sometimes erroneously called. Cash flow is NOI minus debt service (both principle and interest).

Real estate is often valued by a process of capitalizing the NOI at what is called a capitalization rate. The capitalization rate, or cap rate, is the approximate rate an investor would receive without a loan on the property. (For a fuller discussion of cap rates, you can read the article at www.selfstorage.com/argus/articles/caprates.htm). Since this is a complicated subject, I will stick to the math. Suffice it to say great properties in great locations have lower cap rates and higher prices, while less-desirable properties have higher cap rates and lower prices. Most properties sell between a 9.25 and an 11.0 cap rate.

For our example, we will use a 9.5 cap rate and an 11.0 cap rate, which will define the range for about 80 percent to 90 percent of all facilities. To find the estimated value, divide the NOI by .095 and .11. The resulting numbers will give you an approximate range of value. If your NOI is $251,000, the range of value may be between $2,642,000 and $2,400,000.

Remember, this only applies if all of your assumptions are correct and there are none of the special considerations discussed in this article. You should never price a property based on this analysis, but confer with an appraiser or experienced broker. You may be too low and miss a profit, or too high and not make a sale. Use these value ranges as a general planning tool only.

The ultimate value may be influenced by many other factors beyond the scope of this exercise, such as extra land, excessive overbuilding, deferred maintenance or a changing location preference such as a new freeway, to name a few. Knowing the math mechanics of value will be useful when talking with a valuation expert; but in the end, as your science teacher said, this may not be something to try alone at home. ­

Michael L. McCune has been actively involved in commercial real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In January 1994, he created the Argus Self Storage Real Estate Network, now the nation's largest network of independent commercial real estate brokers dedicated to the buying and selling of self-storage facilities. For more information, call 800.55.STORE or visit www.selfstorage.com.

Valuation Worksheet

Revenues

Rental Income $____________

Miscellaneous Income $____________

Total Revenues $____________

Operating Expenses

Real Estate Taxes $____________

Salaries and Benefits $____________

Insurance $____________

Utilities $____________

Maintenance and Repairs $____________

Capital Reserves $____________

Management Fees $____________

Marketing and Advertising $____________

Office Expenses $____________

Miscellaneous $____________

Depreciation N/A

Interest N/A

Total Expenses $____________

Net Operating Income (NOI) $____________

Value-Range Computation

9.5 Cap Rate: Divide NOI by .095 $____________

11.0 Cap Rate: Divide NOI by .11 $____________

A first-generation door the owner attempted to repaint, with poor results.

The best time to think about maintenance of your doors and hallways is at the point of purchase. Wise purchasing can do much to prevent future maintenance problems. All products are not the same. Some people think they are being thrifty when they buy at the lowest possible price, but there is a big difference between being thrifty and being cheap. Being cheap means buying inexpensively without regard to quality, value, and the long-term consequences of the purchase. Being thrifty means getting the most value for your dollar.

Don't be a cheap buyer of doors if you intend to keep the project. An informed buyer will know the differences in quality and will set his price accordingly. Maintenance and other problems will cost more money in the long run.

Some manufacturers still use low-quality paints that don't provide a 20-year warranty. Paint finishes that do offer this guarantee are called siliconized polyesters and are available as a standard paint finish from the best door and hallway suppliers. Most manufacturers have gone to grade E or F steel, which guarantees 70,000- to 80,000-PSI strength. This makes the doors harder to damage.

Door latches are made of stainless steel, and the slide part of the latch should be magnetic stainless steel to work with the security system. All springs should be lubricated with a heavy coat of white, lithium grease from the manufacturer. All exposed fasteners should be stainless steel. All of the drum wheels should be protected from scoring and wear from the axle with prelubricated bearings. Tension should be adjustable in increments of 16, adjusting each spring evenly, not individually. The astragal should be a bulb type for a continuous seal at the floor and should be UV-protected.

If these purchasing specifications are followed when orders are placed, many maintenance problems will be eliminated. A considerable amount of money will be saved by the owner in the long run.

First-Generation Doors

Doors belong to one of three generations. First-generation doors were available between l969 and l976, and were heavy, hard to operate, and used grease on guides and axles. The doors had old paint systems designed to last only five or six years without extensive chalking and fading. The locking system added virtually nothing to security, as it was held on to the curtain with small pop rivets. There was no thought given to the replacement of worn-out parts. The lock system was not secure and easily broken. The door required constant maintenance.

In some cases, people used sectional doors that were field-painted and consumed valuable head room inside the unit. These doors also had an inferior locking system offering little security. In many cases, these doors have already been replaced; if there are any still around, they should be swapped for new. By this time, they will have been painted at least twice. The painting adds about six pounds per application, making the doors heavier and more difficult to operate as well as being dangerous to adjust.

Second-Generation Doors

Second-generation doors were supplied between l975 and the present. The paint system was upgraded by most manufacturers in l998. Any manufacturer not using a 20-year guaranteed paint should not be considered as a good supplier of doors.

In many cases, the plastic used as an astragal on the bottom bar and in the guides as a wear strip has completely deteriorated. There is metal-to-metal wear between the axle and the door-support bracket, which, if a door has heavy use, often causes the bracket to erode through the axle and make the door impossible to open or close.

Springing on second-generation doors was generally poor and the springs were allowed to rust without any lubrication from the factory. In many cases, this has caused spring failure, which can be quite expensive to correct and makes the doors dangerous to operate. Springs on these doors were not designed for long operation.

None of the doors introduced up until l999 had any kind of tension-adjusting device. Adjusting spring tension could only be done by factory-trained installers. The inside stops at the top left and right inside corners were often bent out by the installer, causing the door curtain to go past the stop and flip around, possibly hitting the person operating the door. This situation has caused several serious injuries.

The locking device, while more secure than that on first-generation doors, was zinc-coated and subject to severe rusting. In l999, one manufacturer introduced stainless-steel locks, which are presently the industry standard. The second-generation door was not designed for heavy use and will not sustain it.

Third-Generation Doors

Third-generation doors have only been available since 2002. These doors all have bearings between the axle and the drum wheel, making them maintenance-free. Improved 20-year, guaranteed, siliconized polyester paint is a standard feature.

All of these doors have an easy tension adjustment, which does not require removal of hitch pins. A bar can be inserted in the fixture and turned to the proper tension. A bulb-type astragal of improved or UV-resistance plastic is used.

All springs are prelubricated with a heavy coat of white, lithium grease and are designed for higher cycle life of 15,000 operations. The door-latch system is stainless steel, with the slide being made of magnetic stainless steel to accommodate various security systems.

Anyone not using third-generation doors is likely facing future maintenance problems. These are costly and have a negative effect on property value. Don't be caught in the lack of value trap.

First-Generation Maintenance

A second-generation door with a missing pull rope and worn-out astragal.

If an owner has first-generation doors, there are several things that can be done to improve their operation. First, remove all the old grease in the guides as, by now, it is dirty and acts as a glue would, impeding operation.

If the doors are chalky and faded, the chalky film will need to be removed with Armor All auto cleaner, available at most auto stores. After they have been cleaned, a layer of auto wax will help make the appearance more acceptable. If the finish is too far gone, it would be best to repaint the door with a good, industrial-quality enamel.

After refinishing has been completed, it is best to add more tension to the door to help its operation. This can be done by holding the axle with a pipe wrench and releasing the axle clamps that hold the spring tension. Probably one-quarter to one-half turn of tension will be required.

As these doors are 25 to 30 years old, it might be wise to consider replacing them. The liability created by their poor operation and the detrimental effect of their appearance will offset the cost. When replacing doors, most owners will contact their tenants to obtain a key for a short period of time. Tenants may want to attend the door-replacement procedure. They will then hire a security officer with a video camera to film it. This procedure should take no more than 20 minutes per door and will protect the owner against possible future litigation. When first-generation doors were first installed, they were not expected to last more than 20 years, so a functional life has been fulfilled, and the time has come for an owner to improve his property.

Second-Generation Maintenance

A scuffed hallway needs a kick plate installed.

Second-generation doors supplied in the '70s and early '80s used much of the same technology as their first-generation counterparts. Again, they are 20 to 25 years old with deteriorating paint and plastic that needs replacement. New doors may be the best option.

Plastic used on the bottom bar and inside the guides can be removed and replaced by simply opening the raceway with a screwdriver and pulling it out. The material is available from any door manufacturer and can be replaced by a manager as units become available. With the raceways open, the astragal may be pulled out through the mini-lock-latch side hole and a new seal reinserted.

From the inside of the door--with the door curtain within 4 inches off the floor--white, lithium grease should be applied to the exposed springs and the axle where it goes through the support bracket. Greasing the rusty spring will not completely stop deterioration, but should allow a few more months of operation before it breaks. This spraying of the rusty spring and axle can be done on any unrented units by the manager. As units become available, the manager can take care of the need to grease the springs and axles of the doors.

When viewing the door from the inside, make certain the inside stops at the top of each corner of the door are bent in and fully engage the bottom bar. There have been many cases of the door coming out of the tracks and hitting the person trying to operate it.

Clean the guides with a soft cloth and apply a coat of Armor All. If the door latch or outside lift clips and handles are rusty, they can be replaced with new parts made of stainless steel. As noted above, this can all be accomplished by the manager using products that are readily available at an auto store or even Wal-Mart.

Third-Generation Maintenance

A bent inside stop and loose bottom bar going past the stop.

Third-generation doors only need to be cleaned and Armor All applied to any exposed plastic parts, probably no more than once a year. These doors have been designed for low maintenance and long life expectancy.

Hallways need to be cleaned and any areas of wear or damage replaced. Most of the time, damage occurs at the bottom of the door as a result of being hit by carts. This damage can be covered with a Galvalume kick plate about l4 inches from the floor. Corner guards can also be applied at corners showing damage or wear.

Investments should be protected using continuous maintenance and cleaning procedures. It is important not to settle for products that are less than the best, as these will cost more in the long run. When the time comes to recoup your costs, the money will be returned with profit added. A good-looking project, even if it is l5 to 20 years old, will rent better and keep its value longer.

Some people think one door is just like another, but that is not true. Look for the features mentioned above when selecting doors and eliminate future maintenance problems.

Dan Curtis is president of Storage Consulting & Marketing in Atlanta, which specializes in market studies, feasibility, site layout and design, marketing, conversions and climate control. He is also vice president of Janus International Corp., of Temple, Ga. Janus manufactures self-storage doors, hallways and partition systems. For more information, call 770.432.2417 or 404.427.9559; e-mail [email protected].

Maintenance Challenges

Refinishing doors with a protective coating is a sound alternative to repainting.

Sun, salt air, acid rain and other damaging elements take their toll on the paint on metal doors and buildings. Ultraviolet rays will eventually fade and chalk even the best paint. Salt air can oxidize and pit the metal, causing ugly corrosion. Acid rain can streak and ruin doors. Dirt and dust will settle and stick on chalky or oxidized doors. Metal doors and buildings can remain dull and dingy even after being cleaned.

Acid rain can wreak havoc on your metal doors and buildings, even if you are not in an area with refineries, factories or power plants. Acid-rain damage creates dark streaks on the metal that are permanently etched and cannot be removed. This damage cannot be reversed, but it can be prevented.

Dirt or grit in the door guides can gum up the mechanisms. With more commercial customers renting storage units, the doors may get more wear. If they do not have bearings, the steel-on-steel friction may cause excessive wear if maintenance is neglected.

The effects of acid rain on a standard metal door.

The original paint on metal buildings and roll-up doors is baked on in the factory. Many times, doors will get scratched when they are installed and the contractors will touch them up with matching paint. But paint that isn't baked on will oxidize and fade more quickly than the original, causing blotches to appear. Some swing doors come with nonbaked paint, causing them to fade faster than the surrounding roll-up doors. While some doors and buildings require little or low maintenance, there are some periodic procedures you can use to ensure they are better-looking, longer-lasting and well-working.

Fading and Chalking

Door and building manufacturers are constantly working to offer better paint finishes. Even though metal doors and buildings will eventually fade and chalk from sun exposure, the good news is there is still good paint under the chalk that can be refinished to look new again. If you clean the doors or metal buildings and don't seal or protect their surfaces, they will soon fade or chalk again.

Touch-up paint fades faster than the original paint baked on at the factory.

Some owners repaint their metal doors or buildings to brighten them. There are, however, problems with repainting the metal. Moisture can get between the original baked-on paint and the softer, newer layer, causing bubbling and peeling. Paint that is not baked on will also oxidize much faster than the original, bringing back the chalking and fading problem you tried to resolve.

Instead of using paint to brighten faded metal doors and buildings, refinishing with a high-quality protective coating is a good alternative. Once the surface is cleaned from chalk and other soiling agents, a good clearcoat can restore the doors' former appearance. Make sure the coating will bring back the original color; is easy to work with; will not crack, peel or discolor with exposure to the elements; and will protect from sun, salt air, acid rain, moisture and other damaging elements. A good protective coating will also make the doors much easier to keep clean by repelling dust and dirt. You want to choose a clearcoat that is nonflammable and able to flex with the roll-up door.

If your metal is already peeling or you want a color change, repainting is the only option. Make sure you have the surface properly prepared and use quality materials. If you are planning to slurry coat your property, have the refinishing or painting done first. In either case, the chalky oxidation will have to be removed and can cause stains if not washed off the slurry immediately.

Salt-Air Oxidation

The effects of salt corrosion on a standard metal door.

In areas close to the ocean or even by Salt Lake City, pay particular attention to the tops of doors--especially on buildings that don't get very much sun. Even if you are miles from salt water, you can get oxidation from fog. Rub your hand along your doors. If they are rough, you are feeling salt-air oxidation that can cause extreme corrosion and damage to your doors and buildings.

Similarly, if you use salt for snow and ice control, keep an eye on the bottom of your doors and metal buildings for corrosion. This decay needs to be stopped before it does major damage. Paint alone cannot stop rust or corrosion. Paint breathes and will allow moisture to penetrate, and rust can travel underneath or quickly penetrate back through. In areas where salt air is a problem, check your interior doors for corrosion as well, especially if your hallways are open. The moist salt air can settle on the doors and corrode the interior doors. A quality protective coating formulated to stop salt oxidation will halt additional damage.

Door Numbers

Door numbers will eventually fade and crack, creating a poor impression for potential tenants. When replacing numbers, use the highest-quality vinyl numbers possible in an easy-to-read, block style. Otherwise, you will be replacing your numbers more often.

Periodic Maintenance

When a unit is vacated, there are several procedures to ensure your doors remain in good working order:

• When you sweep out the unit, sweep any cobwebs and dirt out of the guides on the door. You may want to wipe them down with a rag to remove dirt that will interfere with the smooth operations of the door. Do not use grease or WD-40 on the guides, as it will attract dirt and grime and gum up the rollers.
• Check to make sure the door is securely screwed into the wall. The screws may have backed out after excessive use. Sometimes none of the screws are in place.
• Oil or lubricate the springs with a very light coat of oil to reduce friction and prevent rust. Check the tension and adjust according to the manufacturer's directions. Maintaining the spring tension and making sure they are balanced is critical. People who hurt their backs trying to raise doors that stick or open unevenly can file lawsuits.
• Check the pull cords, especially if they are on the outside, as they wear very quickly. Frayed cords do not give a well- maintained image. Nylon rope is very durable when used for pull cords, particularly in colder areas where routine winter maintenance (i.e., snowblowing) can damage them. The cord ends can be melted or singed so they won't fray.
• Inspect the unit for signs of leakage, and replace worn weather seals as necessary.
• If your doors are dented, dent tool kits are available that fit the doors of several manufacturers.
• If you must paint older doors, make sure to readjust the springs to compensate for the extra weight of the paint.

Building Maintenance

Metal buildings can be refinished. Stucco, wood or block buildings can be maintained by painting. Start by thoroughly cleaning the area to be painted. Paint won't stick to dirt, grease, grime or dust. If mildew is a problem, a bleach and water solution can be used to kill it. Always use quality materials.

Tenants tend to run into corners of buildings with moving trucks. Any broken corners should be repaired before painting. Any cracks in stucco should be filled with caulk or elastomeric paint. Broken or bent gutters, metal trim or downspouts can be replaced, which will not only enhance the look of the facility but increase the life of the roof. Broken gutters can contribute to roof problems by allowing water to pool on roof surfaces. Not only is water itself detrimental, but its weight can be a serious problem.

Also pay attention to your signage, gates and fencing. First impressions are extremely important. If you have rusty gates and faded signs, what impression are you giving about the rest of your property? Painting your curbs and bollards can also make a huge difference in the overall appearance of your facility.

Roof Maintenance

The best preventive maintenance one can do is perform quarterly or semi-annual inspections to identify and solve problems as they occur. Roofs get more abuse from the elements than any other part of the building, and preventive maintenance is a key element to saving money by providing a longer service life.

• Clean all debris from the surface of the roof. This includes debris that has gathered behind HVAC units, pipes and pitch pans, and any other roof penetrations. Debris has a tendency to hold water, and water will expedite roof deterioration.
• Make sure water does not pool on your roof. This adds to the weight of the roof and can cause major problems.

The appearance and smooth operation of your facility projects your image to the public. Maintenance does not cost you money, it makes you money, and keeps your customers and employees happy. Preventive maintenance is a service to your customers and is not an option when it comes to maintaining a profit.

Teresa Sedmak is the president of Everbrite Inc., which manufactures and markets Everbrite Protective Coating, and Pacific Pride Products Inc., the company's contracting division. She is also a licensed painting contractor with extensive experience and knowledge of protective coatings. For more information, visit www.renewstorage.com or www.everbritecontractor.com. Call 800.897.9659; e-mail [email protected].

With the self-storage industry becoming increasingly competitive, it is vital we develop the ability to overcome customer objections. On the average, customers call four to five stores before making a decision on where to rent. They have more choices than ever and are doing their homework before selecting a location.

As customers conduct a more comprehensive search for self-storage, they become more educated about the product. This is critical to understand, as knowledge provokes customers to ask more questions and challenge self-storage representatives to alleviate their concerns and anticipations. This is a great opportunity to overcome objections and educate prospects on why you are the best choice for their storage needs.

Price Objections

If you know how you stack-up against the competition in your marketplace, this will give you an advantage in effectively overcoming customer objections. For example, if a customer said, "You are $8 higher on a 10-by-15 than everyone else I talked to," what would you say? If you know your competition, it would be wise to ask the customer whom they called. If they mention a specific competitor, ask him if he had had a chance to visit the location. More than likely, he will say, "No, I am calling from the Yellow Pages and checking around for prices."

If you have a thorough understanding of the competition, this is a great opportunity to build value and educate the customer on the differences between your store and the specific competitor he mentioned. It is important not to bash the competition--this will turn off the customer. Instead, point out the differences in what you offer and why they are important.

Your presentation will be even more effective if you never give out your price until you have built the value of your store in the customer's eyes. In other words, if "What is your price on a 10-by-15?" is the first question a customer asks, it is important to refrain from giving the price until after you have provided the most important features and benefits that pertain to his specific needs. This will minimize any pricing objections, as the customer will understand the value of storing with you.

One way of overcoming a pricing question might be, "Are you sure you need something that large? What will you be storing?" You have now taken control of the conversation and can steer the sales presentation to your advantage. This becomes even more vital if you are the price leader in the marketplace. By knowing the competition, you have given yourself the ability to overcome objections.

Know Your Advantages

It is also useful to understand the advantages you offer over your competition, as they give you a greater ability to overcome customer objections. For example, if you are the only store in the market that offers an on-site manager, insulated units, truck rental and moving supplies, it is imperative you educate customers on the benefits of these wonderful features. The value of these benefits might overcome a customer having to call any other stores when he realizes your features cannot be found anywhere else. In other words, you have made the choice easy for him.

For example, explain to the customer he can take care of all his moving needs in one place by renting a storage unit and truck, and purchasing all his moving supplies at your store. This added value can make a difference because the customer likes convenience. This will also help in overcoming pricing objections, as the customer will pay extra for this additional savings of time.

If you are the only store in the market that offers invoicing and 24-hour access to commercial customers, this can become a tremendous advantage if communicated properly. These features can help entice a small business owner to drive a bit farther if you are the only store to offer these conveniences. If you know and understand how to use your unique advantages, it will help tremendously in surmounting customer objections.

Mystery Shopping and Role-Playing

Another method of drive back customer objections is through proper employee training and development. It has always been said, "Practice makes perfect." Mystery-shopping services and role-playing are great approaches to consider for perfecting your staff's sales presentation.

A professional service is an excellent way to learn how to overcome objections. Most of these services will phone-shop a storage representative as often as you like. It is recommended each person involved in the selling effort be shopped on a monthly basis to develop consistency in the overall sales program. In most cases, the mystery-calling service will provide an audiotape and evaluation with each call. This is a great opportunity for the person being shopped to evaluate how he articulated the sales presentation and how he could have overcame any objections that occurred during the call. This will provide excellent feedback and give the representative the ability to continually improve how he overcomes objections from customers. This is also a great tool for owners to identify areas in the sales program that need improvement.

In addition to mystery calls, role-playing the sales presentation with other storage representatives can be very effective in learning to repel objections. It gives everyone the opportunity to learn from one another and discuss areas for further development. It also gives employees the ability to practice and make necessary changes to their presentation. Always remember, "To grow any organization, we must grow the people within it."

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

When I was two years old, my parents purchased a lime-green Dodge Dart with dark-green interior. It had a beautifully smooth bench seat in the back on which I would slide from one end to the other every time we went around a sharp turn. It had a black hard top and sweet white-wall tires. It smelled like vinyl.

My father loved this car, and babied it, and carried on over it. He washed it at least twice a week and was meticulous about its service schedule. In fact, he took such amazing care with this vehicle, it was still in fantastic working condition when I tested for my driver's license at the tender age of 16. I drove that car until I graduated from college--no lie. I was none too thrilled with having to drive the "snot-green boat-mobile." But it got me from point A to point B, it was free, and damn if it wasn't the center of much attention.

Now, had my father been more lax with his vehicle maintenance, I might have been tooling around in a Chevy Cavalier or Ford Taurus. OK, maybe that's not glamorous either, but the point is, care and attention earned my family a car that lasted more than 20 years--much to my chagrin. And I learned a great deal about taking pride in ownership.

This is a good lesson for owners of self-storage, whose facilities project a message to the public on a daily basis. Your curb appeal, building exteriors, office environment, etc., communicate information to prospects about your business. What would you like them to say?

A well-maintained, clean and inviting property tells prospects you are conscientious and organized. Care for your property translates into care for their goods. On the other hand, cracked and broken pavement, chalky and faded doors, soiled carpeting and a foul restroom convey an apathy and disregard for tenants and prospects. If you treat your buildings with neglect, why would anyone believe you treat your customers differently?

In this issue, you'll find articles on ways to maintain building exteriors and doors, as well as the proper way to refurbish a roof with elastomeric coatings. ISS has also provided a series of handy maintenance checklists to help keep managers on track, from day-to-day practices to larger, less-frequent tasks. Maintenance is truly an area in which an ounce of prevention equals a pound of cure; and there is no better way to sell prospects on your facility than to present them an attractive, well-preserved and notable site.

Happy upkeep,

Teri L. Lanza
Editorial Director
[email protected]

Licensed vendors and professional contractors are hired to provide materials, equipment, supplies and services. Vendors contribute to the daily operation of every facility. For example, trash collectors properly dispose of garbage. A lawn service may be used to cut grass and maintain landscaping. Pest control rids units of pesky rodents and insects. Roofers ensure tenants' stored property is protected from leaks, and mechanics fix malfunctioning gate controls. Are you adding a new building to your grounds? If so, you most likely hired a builder to do the job for you. These are just a few services used to keep your facility running and well-maintained.

When it comes to protecting yourself against liability for property damage and bodily harm, it is necessary to keep your storage facility in top physical condition and proper working order. Hiring vendors is a convenient, economical and usually appropriate way to repair and maintain areas of a facility. Keeping up on a facility's maintenance not only increases the quality of appearance but reduces your risk of liability as well.

When hiring a licensed professional contractor or vendor, you assume the work performed will be competent and the supplies used of professional quality. In most cases, this is true; however, bad fortune or coincidence can happen to anyone, even the most reputable companies. Accidents involving vendors that result in property damage or injury to tenants, employees or even the general public are known to happen. Hiring contractors that have proper insurance coverage is a good way to protect your facility from such vendor-liability exposures.

Vendor liabilities can be complicated and expensive if not handled properly. For example, let's say you hire a painter to paint the doors of your facility and he knocks over a ladder that happens to fall on a tenant walking by. The tenant, who was injured by the ladder whose clothes were ruined by paint, now wants you to pay for her medical expenses and a new outfit. Trying to determine who is responsible for the damages is complex. In this case, the tenant may hold you and your contractor liable on the grounds that you allowed dangerous conditions to exist at your facility or that you hired an incompetent vendor.

The best way for self-storage owners to protect themselves from vendor-liability exposure is to take appropriate measures when hiring professionals. Seek out reputable vendors and contractors who are licensed, bonded and insured. You should be able to get references from business associates or friends who have had good experiences with various companies. Also, request the vendor for hire to provide you a certificate of general liability and workers' compensation insurance.

A certificate of insurance is evidence the vendor is insured by a financially stable company and carries adequate amounts of insurance for the type of service being performed. The certificate should have information on the insurer, insurance agency, types of insurance, policy numbers, effective dates, limits, certificate holders and any special provisions it may have. Check to see the policy limits of the vendor's policy are at least equal if not greater than your facility's policy limits and that the policy effective dates are current. Hiring licensed professionals with proof of insurance may drastically reduce your liability (in terms of negligence) in a vendor-exposure claim.

Keep vendor certificates of insurance on file during projects and even years after project completion. This will benefit you most if an incident should arise after a project is completed. For example, you hired a roofer to replace parts of your roof and it turns out he used defective materials. Because of this, the roof caved in and damaged many of your tenants' stored property. If you have the certificate of insurance on file, you prove yourself to be non-negligent in the situation. You can forward the insurance information to your tenants so they can seek reimbursement for damaged property.

If you have vendors and contractors who provide services on a fairly regular basis, you may want to require them to name your storage facility as an additional insured on their liability policies. A huge benefit for being an additional insured is it provides your facility additional coverage. In addition, you will be notified if the coverage is cancelled for any reason.

In today's world, it is best to exercise caution when outsourcing services to vendors and contractors. Recognizing the risks associated with contracting professionals whether property damage, personal injury or negligence is an absolute step towards protecting your storage facility.

Universal Insurance Facilities Ltd. offers a comprehensive package of coverages specifically designed to meet the needs of the self-storage industry. For more information, or to get a quick, no-obligation quote, write P.O. Box 40079, Phoenix, AZ 85067-0079; call 800.844.2101; fax 480.970.6240; e-mail [email protected]; visit www.vpico.com/universal.