Competition in self-storage isnt going away; its getting tougher. In many markets, storage is regarded as a mass-produced commodity. What sets your facility apart?   Dont hesitate to take a hard look at how you compare to the guy down the block, because potential clients surely will. Enhanced customer convenience and expanded services is a proven recipe for outpacing the pack. Those who exceed expectations by going beyond vanilla self-storage are more likely to be here tomorrow, and to enjoy higher profits. Current ancillary offerings include truck rentals, records storage, wine storage, mobile options, mailboxes and business centers and, of course, retail sales. One or more may be right for you.

UPWARDLY MOBILE

WHAT: A mobile-storage company delivers a box-like container to the customer who fills and locks it. The storage company picks up the container and returns it to the facility.

HISTORY:

A relative newcomer to the industry, mobile storage emerged less than a decade ago. Big boys such as Shurgard Storage Centers and Public Storage heavily invested in the niche, but in 2003 backed off due to poor profits. Customers simply didnt see the delivery service as valuable enough to justify the extra expense, according to Shurgard. Others, however, such as Door-to-Door Storage in Kent, Wash., and Storage Banc of St. Louis, have found success.

INSIDER ADVICE:

Try to target commercial businesses because they rent for long periods, a crucial element to success in mobile storage. The short-term renter is a real liability.

PROS:

Mobile storage sets you apart from the competition. Customers like the added convenience of delivery when they are moving, storing or both. It also allows expansion of the self-storage customer base beyond the typical 5-mile radius and competition with moving and storage companies. Some operators stack boxes not requiring climate control in previously unusable perimeter space.

CONS:

Obstacles include low customer awareness and high start-up, operating and labor costs. Insufficient cooperation between independent operators hinders the potential for one-way interstate business. Some potential clients find the rates intimidatingyou may have to charge double the rental rate to make up costs. Coordination of resources is a challenge.

NEW AND EXCITING:

The Mobile Self-Storage Association (MSSA) was recently created to facilitate interstate shipment of containers between operators and assist those entering the business. The associations goal is to foster cooperation and boost customer awareness. Charter memberships are $1,000. For more information, call 314.872.1600; visit www.ms-sa.org.

INVESTMENT CHECKLIST:

Start-up capital is needed for containers, tarps, flatbed trucks, forklifts, drivers and more. Costs vary but can be as high as $2 million. Alternative opportunities exist as an agent or cooperative network member for other companies.

VENDOR SAMPLING:

A)

DropBox Inc. provides containers made from sturdy steellife expectancy is 20 years and capacity is 30-plus tons. Also available are trailers with self-contained hydraulic power; guidance/support for industry newcomers. (888.388.7768, www.dropboxinc.com)

B) Havener Enterprises produces waterproof, rust-resistant steel containers, easy to set up and tear down. Assembly takes less than 30 minutes. Sizes range from 300 to 900 cubic feet of storage. (815.935.0138, www.havenerenterprises.com)

C) HomePak is an easy-to-use, exterior-grade, plywood container featuring a swing-open metal door. Also offered are consumer promotional materials; a lease-to-own program; and referrals to delivery systems. (800.566.8263, www.homepak.com)

QUOTABLE: If you havent done your homework [on mobile storage], youre going to have a hard time. You have to understand your resources and the logistics. Your capacity will be limited by the number of trucks, containers and labor you have on a given day. (Randy Weissman, president of Storage Banc and MSSA executive member.)

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WINE NOT?

WHAT:

Wine-storage units or lockers are created on the self-storage property, usually in a specially designed, insulated area with a dedicated HVAC system.

HISTORY:

Wine storage cropped up as a rare ancillary self-storage business in the mid-80s. Demand grows as more baby boomers collect wine and need a place to store and age their cases.

INSIDER ADVICE:

Unless youre sure of your market, start small and add on later if necessary.

PROS:

Wine storage can produce a per-square-foot return higher than traditional climate-controlled storage, and competition is still relatively low. Rental rates run about $1.50 per case monthly; an eight-case locker nets $144 annually. The service brings an upscale image to your facility, and may result in crossover customers.

CONS:

Success is defined by geographic locationif youre not in wine country, people must collect wine in your area. Wine storage is considered expensive to build due to temperature, humidity and light control, and top-notch security. Youll have to deal with government liquor regulations. The fill-up rate is slower than for self-storage. Plan for heavy marketing.

NEW AND EXCITING:

Interstate shipping of wine is limited or not allowed in most U.S. states, which hurts storage businesses. The U.S. Supreme Court is expected to re-examine interstate commerce regulations this fall, possibly lifting the ban.

INVESTMENT CHECKLIST:

For a wine room, youll need proper insulation, a dedicated HVAC system supplying precise environmental conditions for wine, a back-up system and generator, separate secure entry, and lockers. Security should include video-surveillance cameras and individually alarmed lockers or storage rooms. Example: One facility spent more than $70,000 to construct 640 feet of wine storage featuring 88 lockers.

VENDOR SAMPLING:

A)

Roll Right Industries Inc. of California includes locker boxes in its complete line of mini-storage products. (800.848.8106, www.rollright.com)

B) DHS Worldwide Software Solutions, based in Florida, offers software for wine-storage management. (800.377.8406, www.dhsworldwide.com)

C) Wisconsin-based Aprilaire supplies humidifiers. (608.257.8801, www.aprilaire.com)

QUOTABLE: Before starting, get out and talk to everybodymerchants and distributors. I did that, and everybody said it was the greatest idea in the world, but the biggest issue is how to get that to the public. (David Leonard, owner, Grand Central Self Storage, featuring Michigans fi rst wine storage facility. After one year, only seven of 54 lockers are rented.)

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KEEP ON TRUCKIN

WHAT: Trucks and trailers are rented to the public at your self-storage site. You have the option of owning the trucks, leasing them or becoming a dealer for a truck-leasing company.

HISTORY:

The jury is in: Truck rentals and storage meld beautifully. The 10 largest self-storage companies offer it, and upward of 50 percent of all facilities are believed to be in the business. U-Haul International estimates 3,500 of its dealers are storage operators. On The Move Inc. calculates 8 percent of the countrys 30,000 storage facilities lease or own its trucks.

INSIDER ADVICE:

Every truck-rental call is an opportunity to sell storage space and boxes. Comp your rental truck instead of a months rent for contracts and bolster your bottom line. Truck lease or purchase allows total autonomy over who rents and at what cost. Plus you can brand your truck and it becomes a moving billboard. However, leasing also requires a substantial monthly payment. As a dealer/agent, your cash investment is minimal.

PROS:

A successful rental business can bring in $1,500 a month per truck, and your customer is right there. U-Haul research shows 23 percent of customers who rent a truck from you also will rent a unit. The convenience of truck rentals on-site makes you more competitive. Some facilities offer free truck use to hook new contracts.

CONS:

Truck rental requires more energy and salesmanship from a manager. Call volume for the service is generally higher than for storage alone, so time is a factor, too. You must have room at your site to park the trucks. Maintenance and insurance are concerns for those with their own trucks. Availability is a worry for dealers in summer months, etc.

INVESTMENT CHECKLIST:

Become a dealer, and all you need is space, Internet access and a dedicated phone line, according to U-Haul, which also will assist with an online billing system. Commission averages 20 percent. Cost to lease a truck of your from On The Move is about $875 a month and includes bells and whistles. Dont forget to set up a commission for managers who sell the service.

VENDOR SAMPLING:

A)

Texas-based On The Move Inc. supplies trucks (buy or lease), insurance, hand trucks, furniture pads and rental-form agreements. Graphics can be put on trucks to advertise a self-storage business. (800.645.9949, www.onthemovetrucks.com)

B) U-Haul International, headquartered in Phoenix, offers the opportunity to become a dealer with no investment.

Affiliation allows operators to save money on software and merchant fees. (800.528.0361, www.uhaul.com)

QUOTABLE: You can have a facility thats too small for trucks, but the biggest potential negative is the work, responsibility and due diligence that go along with offering a truck. (Kirk Nash, owner, On The Move Inc.)

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DOWN TO BUSINESS

WHAT:

Business amenities much like those at a Kinkos are offered to tenants. Services may include a copy machine, fax, phone, ATM, Internet connections, private work areas, conference rooms, mailboxes, packaging and shipping, and drop-off service.

HISTORY:

The concept is new, but industry research indicates business centers fulfill a growing niche of self-storage customer, such as the home-based business owner who is expanding.

INSIDER ADVICE:

Receiving and shipping packages is easy, profitable and a huge attraction to commercial customers. Coin-operated faxes and copiers dont get used; instead charge per page on a debit-card account.

PROS:

Most of the industry targets the residential customer, so a business center is rare and attracts valuable commercial clients. Diversification makes your investment more secure and helps level the winter seasonal slump with business tenants. Additional income can be made off copies, faxes and shipping. Mangers dont have to invest much time in the operation.

CONS:

Without a base of commercial tenants, a business center wont get used. The public likely wont expect selfstorage facilities to have such services, so lively marketing may be necessary.

NEW AND EXCITING:

Mini-offices are starting to be included in a few self-storage facilities that target the commercial client.

INVESTMENT CHECKLIST:

To position yourself as a business center, at least provide phones, faxes, shipping/receiving, copiers and e-mail. Private mailboxes, a conference room, notary service, mini-offices, a retail area with office supplies, and Internet connections are also possibilities (think Wi-Fi).

QUOTABLE:

The way I look at it, commercial tenants are the ultimate tenants. Typically, they pay on time, stay a long time, and arent as sensitive to price bumps. If thats the kind of tenant you want, its a minimal amount of work to give them a big benefit. (Mitch Rhoads, owner, Denver Storage Solutions of Colorado, on his popular business center and shipping services.)

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CHECK OUT THE MERCHANDISE

WHAT:

Packing supplies and security items are for sale in a facility area set aside for retail.

HISTORY:

Retail has increasingly become a part of self-storage as the industry gets more competitive, and ever-busier customers take advantage of one-stop shopping. They get convenience, and owners reap additional profits.

INSIDER ADVICE:

Once customers decide on a self-storage facility, they arent fazed by reasonable markups on locks and packing supplies. Ask your customers what products they need so you know what to stock.

PROS:

The majority of retail items can be marked up 100 percent and you dont need a huge investment to get started. Almost any size facility can make room for a display area, perhaps designating an empty, close-by unit. By advertising a packing-supply store, you surpass the competition by attracting leasers who want the convenience. Shoppers who come in for boxes may end up renting, too.

CONS:

Selling retail is more work for manager and staffproducts dont fly off the shelves by themselves. Planning should include marketing strategies, advertising, window signage and an attractive display. Other jobs are sales tracking, inventory, pricing, restocking, taxes and maintenance. Product that is chosen unwisely may have to be sold at a loss.

NEW AND EXCITING:

Some facilities are selling their moving supplies online or adding office products to the mix as a customer convenience.

INVESTMENT CHECKLIST:

Every facility should sell locks, tape, markers and three sizes of boxes. Other products to stock include bubble-wrap, packing paper, garage-sale kits, and sofa and mattress covers. An investment of $500 can get you off the ground with a few items and promotional aids, while $2,000 should outfit an attractive retail area. Factor in effective marketing and advertising tools. Staff will need sales training and an incentive program, i.e. commissions. You may want to buy software to track sales, etc., or work with a supplier who provides it.

VENDOR SAMPLING:

A)

Chateau Products of Florida has more than 400 self-storage products including disc locks, padlocks, retail-store fixtures and packing supplies. (800.833.9296, www.chateauproducts.com)

B) Ohio-based Supply Side manufactures, distributes and develops products and merchandising programs. (800.305.6110, www.suplyside.com)

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GO POSTAL

WHAT: Storage facilities offer private mailbox rentals.

HISTORY:

About three years ago, some self-storage shops began installing banks of postal boxes to rent to existing customers for additional income. Theoretically, with proper advertising and a high-profile location, postal-only customers would begin to crossover into storage.

INSIDER ADVICE:

If you dont have commercial renters, hassling with mailboxes is a big pain for a minimal profit, according to many facilities. As part of a business center, however, the service is a value-added incentive for commercial contracts.

PROS:

With a minimal one-time investment, owners and operators can boost their long-term monthly incomes. Once rented, the boxes pay for themselves quickly. Current tenants are prospects, particularly if they are small-business owners, marina users or college students. Manager time can be minimal, with about 30 minutes spent daily sorting mail for 30 boxes, and the postal boxes take little maintenance.

CONS:

Not every location is suited to private mailboxes (PMBs). Evaluate your tenant mix and location; few residential customers will be interested. Red tape and paperwork with the U.S. Postal Office is substantial. The service may attract shady customers involved in mail fraud. Mail forwarding, mail holding and lost keys are also hassles.

INVESTMENT CHECKLIST:

Mailboxes run about $500 for a bank of 30 and $400 for a bank of 10 larger compartments. Smaller boxes rent for approximately $15 monthly, though many stores are charging only $5 and swapping several months of free rental for a contract.

RESOURCES:

Research the trials and tribulations of commercial mail-receiving agencies at www.postalwatch.org, which includes links to official regulations.

QUOTABLE:

I dont like it one bit. I can be in the middle of a rental agreement, and a slew of people will come in not having their mailbox key, asking for help. You would probably make more money with a $100 banner saying We sell boxes than you would investing $1,000 in mailboxes plus an hour of your managers time per day. (Chris Sanders, manager, Foothills Self Storage of Upland California, which rents about 20 of its 70 boxes, many to outside customers.)

So far the mailboxes have not yet been a profit center. They are, however, a value-added benefit that we can offer to our tenants. I think that to be a true profit center, you would have to market them heavily. It appears that the United States Postal Service is moving more and more into these types of products and servicesmailboxes, boxes, moving supplieseveryday. (Scott Harris, president, Dana Management Group, one year after initiating mailbox service with self-storage.)

Some regular readers of the magazine and attendees of ISS expos already know this, since the preliminary event took place at our tradeshow in New Orleans last fall. But many do not and, ideally, you only enjoy such an occasion once, so here it is: Im getting hitched at the end of October.

That being said, those who have been through the process may well remember the crazy, out-of-the-blue questions your future spouse leveled at you during the frenzied months leading up to the ceremony. Most of them are innocent inquiries stemming from bizarre dreams or advice proffered by family and friends. The conversations run the gamut from names for potential offspring and the true story behind past loves, to the ultimate importance of ones physical appearance and whether macaroni and cheese constitutes an acceptable dinner.

But the real coup de grace, the question of all questions, is the one that goes something like this: Sixty-some-odd years is a long time, sweetie (honey, sugar, babe, etc.), and there are a lot of attractive men (women) out there. Are you sure youll still love me when Im old? You wont start looking around for a younger (better, etc.) model? A negative or uncertain response incites the expected hysteria. But even an appropriate answer, accompanied with the right assurances, gets you a raised eyebrow and the retort: How can you possibly know what you will feel (think, do, etc.) in 20 (30, 40, etc.) years?

Unlike marriage, there are situations in which it is perfectly acceptable, even encouraged, to get something going on the side, and that is in matters of business. When it comes to offering products or services to customers, there is nothing objectionable about venturing into unfamiliar territory and expanding the menu.

In self-storage, the most popular mistresses are merchandising, records storage, boat/RV storage, wine storage and truck rental. Now rivaling these are new beauties: high-security, upscale storage of valuables, small-business and postal services, moving services, and add-on businesses such as car washes and coffee stands. Pay the proper attention to these eye-catchers, and the savvy operator stands to satisfy customers and his own bottom line.

In past issues, weve included substantial articles on records, vehicle, wine and mobile storage, as well as truck rental and business-related services. You can find them in our online article archive at www.insideselfstorage.com. Also check out this editions add-on business overview, which highlights the pros, cons and pitfalls of popular ancillary options. In addition, this issue takes an in-depth look at car-wash operations, a venture operators like Sherman Self Storage Center in Coeur DAlene, Idaho, have found remarkably successful.

To whichever ancillary offering your particular eye wanders, always investigate potential partners and use caution before investing to avoid regrets. In self-storage, a little something on the side can be the difference between contentment and bliss. Just dont forget your true love in the process!

Best wishes,

Teri L. Lanza
Editorial Director
[email protected]

By Michael L. McCune

This month, I gathered real estate experts to discuss the state of self-storage in the North-Central United States. Lets hear what they have to say about their respective cities and regions. Our panel of brokers includes: Bruce Bahrmasel and Matt Libman, The Preferred Realty Group, Lincolnwood, Il.; Larry Goldman, Prudential CRES Commercial, Kansas City, Mo.; Peter Hitler, Investment Real Estate Specialists, Mequon, Wis.; and Robert Off, Coldwell Banker Commercial, Cincinnati. These are interesting times, so I wanted to ask our brokers straightforward questions every owner and potential buyer will find pertinent.

1. Is this a good time to sell self-storage?

Bahrmasel: Now is an excellent time. Cap rates in self-storage are generally more favorable to investors than those in apartment buildings and other investment properties. In addition, low interest rates have continued to buoy the market.

Goldman: Yes, though there are some fundamental changes in the business some owners may not want to confront. Specifically, increased competition has made responsive, effective management far more critical. The inevitable rise in interest rates in the near future brings an increased urgency to sellers who are planning their short-term exit strategy.

Hitler: Storage facilities are still selling at all-time-high prices. If an owner has good reason to sell, such as a health issue or retirement, the time could not be better. If a seller is trying to reproduce his income in the stock market or other investments, it probably is not a good time to sell, as alternative investments do not offer good returns at this time.

Off: I think now is an excellent time to consider the sale of your self-storage facility. The economy is, by almost all accounts, on the rise. Sales prices have never been higher and capitalization rates more favorable. The housing market continues to be strong despite a bump or two. Vacancy rates remain at generally acceptable levels, even with high levels of new construction. Money and loans are still available on favorable terms and at low rates. What could be better? Unfortunately, everything has its time, and all real estate has its cycles. As the old Wall Street proverb suggests, Buy low and sell high. Or as Obi Wan Kenobi said to Luke Skywalker, Sell now, and may the cycle be with you.

Heres an example to demonstrate what the change in cap rates has done for you in the past year. If your project generates $100,000 of net operating income annually, your property value went up $150,000, or approximately 15 percent, just based on the change in cap rate. And if you had the property financed at 75 percent, your equity went up 75 percent. Is it time to sell? You tell me!

2. Why should potential investors buy self-storage at this time?

Goldman: Storage is still a favored product type because of its relative ease of management and diversifi cation of risk, despite overbuilding.

Hitler: The reason to buy is the same as why a seller may not want to sell. Self-storage is offering very good returns when other investments are not.

Libman: Self-storage has an overall better return on investment than alternative real estate investments.

Off: Having just said now is an appropriate time to consider selling, I also think its a great time to buyprovided you are buying for the right reasons and at a price that makes economic sense for your specifi c business. A few reasons buying today might make sense are you can: 1) leverage your operating experience by turning around an existing facility or one which is still in the development stage; 2) round out your market/territory by filling in particular market hole/ void; 3) increase your advertising, financing, expense and management efficiencies; 4) eliminate competition, thereby possibly increasing rental rates in your market; and 5) quickly break into a new marketplace.

The reason to buy is the low interest rates make your investment work harder for you. This very positive leverage will increase cash-on-cash yields dramatically. It is clear the interest- rate environment is quickly evaporating, so not only is now a good time, it may be the last time for a while.

3. Are other types of real estate underperforming and driving buyers to self-storage?

Bahrmasel: Yes.

Goldman: Most product types, including self-storage, are producing far lower returns than in the past. Some product types, such as offi ce buildings and distribution facilities, are perceived to be riskier, due to corporate downsizing, bankruptcies and, in the case of industrial properties, inventory controls.

Hitler: Some other types of real estate are underperforming. Industrial and office properties are still soft. The apartment market in the Milwaukee area is getting better. I have had many apartment owners look at buying self-storage because they are tired of the management problems of residential real estate. The condo market is very strong in this area.

Off: Without a doubt, all other types of commercial real estate seem to be operating in a marketplace where owners are chasing fewer and fewer rent-paying tenants. Making those traditional real estate product types work today is worse than playing a zero sum game.

Many other real estate types are experiencing high vacancies and declining rents that make the underlying stability of the income less secure than well-located and operated selfstorage facilities.

4. Are buyers having diffi culty getting loans for self-storage?

Bahrmasel: No, buyers in Illinois have not been having any difficulty getting loans.

Goldman: Lenders are still very eager to lend on compelling self-storage transactions. They just may not be as willing to accept overly optimistic projections in their underwriting as they may have been in the past.

Hitler: There is plenty of money available, although rates are creeping up a bit.

Off: No, the money is out there for the taking. Lenders are happy to talk with buyers with a good story, particularly if they are experienced in self-storage.

Not only is money available, but it is the cheapest it has been in 40 years.

5. Are cap rates dropping in your market? What impact does this have on buying and selling self-storage properties?

Goldman: Ironically, as the economic fundamentals have weakened, cap rates have also dropped dramatically. This more than offsets the drop in value due to the deteriorating performancefor now. As interest rates (hence cap rates) increase while the fundamentals continue to decline or stagnate, valuations will very possibly decline.

Hitler: Cap rates continue to fall in the Wisconsin market. I would say properties are on the market longer, but they still seem to sell. Sellers are tougher on their price, and buyers dont have a lot of alternatives because of the lack of available properties.

Libman: Yes, cap rates have dropped in the Illinois and Indiana markets. However, cap rates for alternative real estate investments are significantly lower than what we are seeing in storage. With this in mind, self-storage remains a very good buy.

Off: The lower the cap, the higher the price. The higher the price relative to the net income of the facility, the more buyer resistance increases. The higher the buyer resistance, the slower the market becomes. Sad, but true!

All things being equal, lower cap rates mean higher values. It appears that in some places, not all things are equal. Its just like your mother told you, Life isnt always fair.

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 1994, he created the Argus Self Storage Real Estate Network, now the nations largest network of independent commercial real estate brokers dedicated to buying and selling self-storage facilities. For more information, call 800.55.STORE or visit www.selfstorage.com.

RentPlus Terminal Services Edition

Central server, many sites

By Kimberly Hundley

Got internet? If so, you also have the capacity for a centralized data/program locale linking to multiple sites. This fall, Hi-Tech Smart Systems Inc. released the Terminal Services Edition (TSE) of its popular RentPlus Windows self-storage software. TSE lets companies manage any site from any location with an Internet connection. Unlike similar types of server software, Hi-Techs new edition features the rich, full-featured interface of a Windows application. Its the best of both worlds, says Michael Richards, president of the Kailua, Hawaii-based company.

Designed for companies with five or more facilities, TSE runs on a single server instead of individual site computers. Under the old scenario, copy of RentPlus Windows would have to be installed at each facility. TSE, however, uses the Internet to link software and data from the home server to remote sites as well as local area networks.

In addition to geographic convenience, TSE gives systems the power to quickly and easily access data. The home office has all the information under its control, explains Richards. It can run reports and do backups and updates as needed without having to travel to the site and do the work there. It really is a big revolution in the whole way people operate.

Improved speed across the board is a factor because data doesnt have to be exchangedall work is done on the server side. Technical issues such as backup and restoring will basically leave the managers hands and become the responsibility of home-office staff. Managers, who arent necessarily technically oriented, can focus more on customer service and not whether the backup has been done or the update has been installed. And, of course, when you have that scenario over multiple facilities, it becomes more of an issue, says Richards.

Midsize businesses in such sectors as apartment management and healthcare have been using technology similar to TSE for years. Its relevance to self-storage has grown along with the surge in multifacility owners. Increased reliability of the Internet has also driven demand. These days, its rare for DSL or cable to go down. In cases where it does occur, clients can dial up through their phone lines to reconnect to the TSE system.

Ultimate Access

TSE costs a bit more upfront than standard editions of RentPlus; the more sites that participate, the more economical it becomes. Long-term savings come through easy access to data, enhanced information management and labor reallocation.

Richards points to a current industry pressure: Central offices are expected to have better and more combined reports as well as information access in near to real time. Though its obviously possible to retrieve data from numerous sites on a daily basis without a central clearinghouse like TSE, mistakes are bound to occur. Youll never have 100 percent reliability that way, because there is no such thing as a perfect system, Richards says. With our Terminal Services Edition, you have no loss of speed or functionality, yet you have all the data where you want it, in one place.

Operators neednt be in the office to enjoy wide access to any facilitys data either. They can be anywhere an Internet-linked computer is available. If you get a call from a manager having a problem with customer Jones, you can be in your office or at home in the evening, and look at that customers data and fix the problem, Richards says.

Subscribers find overall IT costs are reduced for remote sites because only thin client computers are needed vs. fully equipped PCs with bulky hard drives. If a company needs to add new sites and users to the system later, no problem; the process is easy and painless. VPN, or Virtual Private Network, security is fully supported, and TSE furnishes two additional levels of access control to ensure information is protected.

Because TSE isnt web-based, it provides the same experience to users as a Windows program. For instance, users control the printer directly without having to use the browsers web button to print, and frames arent lost during back-and-forth page navigation.

Tech Advantage

Hi-Tech developed TSE in conjunction with the Microsoft Empower Program, which supports small companies by providing access to development software and technical expertise. The collaboration protects Hi-Tech customers, says Richards. Were committed to developing products we believe are the industry standard, and our solutions are based on technology thats not going to go away or be bought out by anybody else, he explains. That adds stability to our products.

Two main companies provide server software; Hi-Tech recommends running TSE with Microsoft Terminal Services. The server itself can be in a home office or outsourced to a host. A lot of people we are talking to are not putting the server in their office but a server farm, which is outfitted with generators and back-up emergency equipment, says Richards. Those are a good way to go, particularly in areas with power issues.

Launched in 1998, RentPlus is a complete self-storage management system featuring more than 100 reports and graphs, onscreen interactive maps of facilities and their rentals, multiple collection and discount plans, and automatic charges and printing of notices. The software comes in four editions: Standard for small facilities; Professional for the majority of storage companies; International for operators outside the United States; and TSE. Each package includes technical support, updates and a guarantee. Also available are corporate-office software, interfaces with popular security systems, and automatic credit-card payment options.

Hi-Tech will exhibit at the Inside Self- Storage Expo in Miami, Nov. 17-19. Attendees are invited to visit the companys booth for a detailed explanation of TSE and how it can benefit their enterprises. For more information, call 800.551.8324; visit www.hitechsoftware.com.

Performance Précis is a new quarterly column based on the detailed findings of Self Storage Data Services Inc. and its newly developed National Operating Performance Reports. The complete reports, available via paid subscription, give account of how self-storage is performing in the nations top 50 MSAs (Metropolitan Statistical Areas). These findings are unprecedented, and Inside Self-Storage is pleased to be the exclusive host of quarterly previews.

The operating performance for most types of real estate is measured by studying the revenue generated per square foot. Hotel real estate analysts coined the phase RevPar, which stands for revenue per available room. Regardless of the type of real estate, the goal is the same: to measure operating performance over time.

The technique used to measure performance in self-storage facilities is simply to multiply the asking rental rate by the facilitys physical occupancy. The result is an index called rent per occupied unit, and it is used to judge performance in the current quarter vs. the same quarter in the prior year, thus accounting for seasonality. For instance, if the asking rent for a 100-square-foot unit is $75 per month and the physical occupancy is 90 percent, the rent per occupied unit would be $67.50.

This number is used to compare performance to prior periods and is referred to as the rental rate impact as shown below. While concessions and rental discounts have a direct impact on revenue, they vary in amount depending on the unit size; and they are offered infrequently depending on occupancy, thus they are difficult to measure.

Performance Reports Published

Using the data available, Self Storage Data Services Inc. (SSDS) started measuring the performance of the 100-square-foot units in the nations top 50 Metropolitan Statistical Areas (MSAs) during the fourth quarter of 2003. The company is now publishing the results on a quarterly basis.

The table below reflects the operating performance of facilities nationwide. Detailed reports are also available for each individual MSA, which allow the analysis of market conditions down to the county level. It also allows comparison of the relative performance of one metropolitan area to another.

The following table illustrates how the Miami/Ft. Lauderdale/Miami Beach, Fla., MSA performed. Note the premium for upper-level, climate-controlled units vs. non-climate-controlled units: 54 percent. However, note the continued downward trend in rental rates for those units. In the Orlando, Fla., MSA, the trend is just of opposite, but the premium is lower.

Sample Size

All too often, articles that report trends in rental rates and occupancy use results based on statistically insignificant sample sizes. SSDS has made every effort to use a substantial sampling technique. The margin of error is estimated to be within plus or minus 2.7 percent.

The companys quarterly findings are based on an approximately 25 percent sample of the 17,000 facilities in the top 50 markets. To gain a better understanding of the physical characteristics of the marketplace, it collected data from 6,902 facilities during the second quarter of this year, which represented about 41 percent of the facilities in the top 50 MSAs. (See chart below.)

The new operating performance reports are a first for the self-storage industry. Their real benefit lies in their ability to follow market trends over time. To developers, they offer current data on performance trends to assist in the development decision. They provide construction lenders an unbiased source of information. To owners and investors, they offer a benchmark by which to judge performance.

Self-storage will continue to be built. Now, however, owners, developers, lenders and investors have a source of data on which to base their investment decisions.

Self Storage Data Services Inc. (SSDS) is a market-research company specializing in the publication of site-specific and market-performance reports for the self-storage industry. SSDS maintains the nations largest database of self-storage operating statistics. For more information, visit www.ssdata.net.

By Bob Copper and RK Kliebenstein

Storage 101 is a new bimonthly column dedicated to exploring the common business issues of self-storage operators. To suggest topics for this space, send an e-mail to [email protected].

Auditing your self-storage facility is one of the most important tasks you can perform to deter employee theft, increase operational efficiency and ensure employees are trained to follow policies and procedures. Whether you are an owner, district supervisor or third-party manager, thorough and periodic operational audits are vital to maximizing your propertys success. Audits have a bit of mystery to them. Since most owners have never conducted one, they do not know what they entail or what to look for. As a result, too many choose to avoid the process. This article will point you in the right direction and give you the inspiration to add regular operational audits to your priority list.

Why Conduct an Audit?

Audits should be done for several reasons, including the fact the owner of a property has a multimillion-dollar investment at stake. He is entitled to protect his interests from theft and neglect. In this highly competitive business, the value of a property can be severely affected by managers who are dishonest or fail to properly maintain a facility. Audits are done as a matter of course in every industry, whether it is manufacturing, retail or entertainment. Self-storage should be no different. Regular operational auditing is an inexpensive way to give ownership assurance that everything at the site is being done by the book.

Most self-storage managers are honest, and the backbone of our great industry; but there are always exceptions. Auditing performs the function of keeping an honest man honest. If managers know they are subject to random operations and paperwork inspections, they are more apt to remain trustworthy and reliable.

Some owners are reluctant to have their facilities audited because they are happy with the way they are running and dont want to rock the boat. Some are concerned the onsite managers will feel their trust has been violated. Others worry a problem might be found and managers will have to be replaced. Too bad! This is a case of the tail wagging the dog. Owners have a right to know with 100 percent certainty that their best interests are being protected.

Does a third-party company manage your facilities? Who audits its work product? Are your sites being managed to your high standards? At least twice per year, you should enlist the services of an independent auditor to report his findings directly to you or your representative.

Who Should Perform an Audit?

Audits should be done by the owner of the property or a qualified representative of the owner. This representative can be an independent audit specialist, a district or regional manager, a third-party manager or even an accountant. Onsite managers should know who has the authority to perform an audit at the bequest of the owner.

Third-party management contracts should include specifications regarding operational audits. The scope, frequency, timing, protocols and consequences of the findings should be defined.

When Should an Audit Be Performed?

There is no set answer to this questionit varies based on the needs and goals of the individual owner. At the very least, however, a thorough, comprehensive inspection should take place annually. The yearly audit is best used by an owner who has a constant presence at the site, regularly reviews operations, and has a long-term relationship with strong trust in his onsite managers.

A more accepted and typical timetable for a complete audit is twice per year. This is the so-called norm in the industry. Some owners even require a quarterly inspection, which can uncover problems before they cost the owner money. Here are some other guidelines:

• Conduct an audit every time there is a management change, including relief and assistant managers. This reveals what issues the new regime may be inheriting.
• Perform audits randomly. Managers should have no suspicions their site is going to be inspected.
• Audits should be conducted immediately before annual salary and performance reviews (and after, as a surprise tactic).
• Times when managers may be short on cash are good times for an audit, like the Christmas season, tax time and right before payday.
• Conduct audits right after monthly or quarterly bonuses, especially if an employee feels he received less than he deserved.
• Since an audit will disrupt the daily work flow at a site, try to do it on a Tuesday, Wednesday or Thursday during the middle of the month. Those days see the least amount of phone and foot traffic.
• Try to pick a day when the managers are present. You may have questions a relief manager is unable to answer. This will also minimize any hurt feelings and trust issues.
• Some owners like to audit a site soon after one has just been completed. This is done to follow-up on a bad audit or can be done to surprise a manager who thinks he is in the clear for a while.

How Long Should an Audit Take?

Typically, larger sites take more time to audit than smaller ones. Facilities with lots of issues take longer than those that are orderly and well-managed. The audit field-work will generally take a full day. If it takes less, thats great; however, the audit may require a second day. An auditor should make the following day available if necessary. Ideally, the person performing the audit should arrive 15 to 30 minutes after the store is opened; this allows the manager the chance to perform the regular opening procedures uninterrupted.

What Comprises an Audit?

An audit is a review of all operational functions and a statistically relevant sampling of tenant leases and ledgers, daily summaries, and bank-deposit slips. It does not solely examine the way money is being handled but covers each operational area. Every managerial procedure and function should be scrutinized. By expanding the role of an audit beyond money-related matters, the report provides the owner with valuable operational information. This data can be used to make changes at the facility and can also be useful for employees performance evaluations.

The following items should be a part of every audit:

• Balance the petty cash and drawer.
• Perform a complete unit inventory/walk-through.
• Review bank deposits and credit-card batches.
• Review discounts and fee waives.
• Review the alterations/reversed-transactions logs.
• Review the rate-variations report.
• Review tenant files.
• Review vacate files.
• Review all units not in the rentable unit mix (i.e., those that are reserved, damaged, held for maintenance, unavailable and company units.)
• Review the handwritten receipt book.
• Inventory retail merchandise.
• Inspect the facility for maintenance needs, potential liability issues, and neglect or abuse.
• Conduct a personal-property inventory.
• Do an inspection of the managers apartment.
• Conduct random tenant-courtesy calls.

An audit might also cover other items. For example, if there is a moving truck for tenant use, its mileage and use should be checked. An owner may want to have the auditor review which tenants are due for a rent increase. Rates and specials can be monitored, and an apartment inspection may be required.

The Before and After

Before the audit is conducted, the owner, management company and onsite management team should know what the standards are, what are considered egregious violations, and what are the consequences of those violations. The audit process starts with good policies and procedures. Although they do not have to be detailed, there should at least be a clear cash-management policy in place. On day one, your staff should read and acknowledge that they know what the companys expectations are, and that if any modifications to cash procedures are called for, ownership and management approves them.

The only way a comprehensive operational audit can help you more effectively manage your facility is to review and use it as a training mechanism. A thorough audit will indicate suspected or real theft and operational deficiencies and recommend improvements to help your bottom line.

Once the audit is complete, review the documents and contact the auditor if necessary. A professional independent auditor will expect to consult by phone or in person to adequately explain his findings. You may also want the auditor to review the findings with your third-party management contact.

The most important step of the audit process is the review with the onsite manager. This should be treated as a valuable training opportunityunless theft has been detected or serious issues have gone unresolved since the last audit, whereas disciplinary action may be more appropriate. A specific and uninterrupted time should be set aside for the review, which will indicate the audits importance.

After the issues have been reviewedincluding negative and positive findingsthe owner or his representative should commit to follow up on items requiring attention with specific remedies. The agreed solutions and timelines should be reasonable and documented in writing.

For less than the cost of a few missed rentals, you can have your self-storage facility audited regularly. An independent audit specialist can help ensure that your site is being managed to your standards and can potentially find that extra revenue youve been seeking.

Bob Copper is the founder of Self-Storage 101, a provider of do-it-yourself management tools. The company empowers managers and owners to take control of their assets and compete with institutional players at a fraction of the cost. For more information, call 866.269.1311; e-mail [email protected]; visit www.selfstorage101.com. RK Kliebenstein is the president of Coast-To-Coast Storage. He can be reached at 561.638.1851 or via e-mail at [email protected].

By Amy Brown

Trees and shrubs contribute to property value by enhancing appearance, reducing noise, cutting energy costs and blocking unsightly views. Unfortunately, trees meant to be part of a facilitys permanent landscape are often vulnerable to damage during construction and storms. Careful planning and maintenance can help reduce property damage and liability claims that result form damaged and neglected trees.

Planting and Replacement

When planting trees on a new site or replacing older ones, take precautions. Planting the appropriate trees is important, so get the facts. Research how a tree will look five to 10 years down the line. Knowing what height it will reach at maturity will help you decide where to plant.

Trees should not grow within 25 feet of a power line, due to increased fi re hazards and the possibility of extensive damage during windstorms. Large trees should be planted at least 50 feet from your facility, as those not properly anchored can be knocked over or weakened by storms and tornadoes. They could subsequently fall onto buildings, causing structural damage and injury to tenants. Heavy limbs can break off and damage roofing and vehicles parked on site.

Check with city or state officials before planting trees on or near a public right of way, such as a street, sidewalk or parking lot. They should not obstruct the visibility of traffic signals for motorists or pedestrians. They will also require routine maintenance and trimming so they dont have protruding and low limbs that can cause injury to passers-by. You also dont want to be responsible for people having to walk around a tree and into a busy street.

Maintenance

Every year, insurance companies see thousands of dollars in damage caused by fallen or uprooted trees. Proper maintenanceand removal when necessarycan significantly lower the risks of property damage.

Older trees should be routinely inspected for damage and disease, especially during construction, heavy storms and floods. Construction of a new facility, expansion of an existing one, or utility installation can weaken trees and damage limbs. Excess water from storms and flooding can cause tree roots to suffocate and rot. Consistently wet soil may cause erosion, which could make even large trees unstable.

A tree that is sickly and shows signs of rot or decay may need to be removed if it poses a threat to the facility. Trees whose trunks have large cavities with extensive decay should be eliminated, as the trunk will be weak. Lopsided trees or those with excessive lean should also get attention. Having a tree pruned can relieve the weight on the heavier side and balance the tree top. Following are tips on how to care for and maintain trees on or near your facility:

• Check all trees for healthy roots. If you are unsure how to do this, contact an arborist or landscape company.
• Follow recommended fertilization practices.
• Stake newly planted trees.
• Thin out thick canopies of trees to reduce limb breakage from heavy winds.
• Remove old trees or those weakened by construction, insects or disease.
• Contact the local utility company to remove limbs that hang over power lines or roofs, or any others that risk damage to structures.
• Inspect drain lines and channels and remove any obstructions to avoid soil saturation.
• Remove dead leaves, branches and broken tree limbs from your site. Allowing buildup of such refuse increases the potential for fire and bodily injury.

If a Storm Hits

If a storm does damage your trees, analyze your site and perform any necessary repairs to trees and structures. But take safety precautions when cleaning up, such as being on alert for downed power lines and hanging branches. Always keep storage tenants away from damaged areas until they are deemed safe. Other guidelines include:

• Document property damage with photography.
• Submit a written report to the insurance company.
• Prune storm-damaged trees. It may be best to hire a contractor to ensure trees arent over-trimmed.
• Remove all overturned trees and those with damaged trunks.
• Replace damaged fence panels or boards.
•  If you are unable to conduct tree maintenance for any reason, consider using the services of a professional arborist.

This article was written as a guideline to aid in minimizing risk in self-storage facilities. The information contained in this document is intended to be of general interest and does not address the circumstances of any particular individual or entity. Nothing in this document constitutes legal advice, nor does any information constitute a comprehensive or complete statement of the issues discussed or the laws relating thereto.

Universal Insurance Facilities Ltd. offers a comprehensive package of coverages specifically designed to meet the needs of the selfstorage industry. For more information, or to get a quick, no-obligation quote, call 800.844.2101; e-mail [email protected]; visit www.vpico.com/universal.

By Jeffrey Greenberger

Ten years ago, people who wanted to store vehicles at self-storage facilities found themselves relegated to a grassy or muddy lot along the back fence or had to place their vehicles in a standard storage unit. These days, however, vehicle storage is big business, with buildings constructed solely for the purpose of storing large RVs, boats, antique cars and more.

Over the years, self-storage owners have expanded their operations to make them more attractive to customers. Those who store boats and RVs now offer all sorts of services, including vehicle maintenance, repair and restoration; oil changes; chemical-toilet cleaning and washing; and boat launching and retrieving. Some offer to gas up vehicles as well as stock them with food and beverages. But while offering these customer conveniences may seem smart, they change the nature of your relationship with customers.

The Danger of Creating a Bailment

Providing additional services for RVs and boats through your storage operation can put you in a valet-type arrangement, making you a bailee of stored vehicles. Having a bailment means you have control over what happens to an item while it is in your care. In a typical selfstorage arrangement, operators seek to avoid bailmentsthat is, they rent space and, for all intents and purposes, what happens to what is stored there is the business of the occupant only.

This sort of freedom can also be the case in RV, boat and vehicle storage if you simply let tenants park and lock. However, if you have additional control, i.e., you hold the keys or park or rack vehicles for tenants, you have a greater degree of responsibility for the care, custody and control of stored vehicles.

Typically, the duty you assume is that of ordinary care. It is similar to that of a valet at a restaurant or shopping center, for example. People expect a valet to carefully park their cars somewhere reasonably safe and return them in the same condition in which they left them. Otherwise, they expect him to be responsible for his own negligence. Obviously, if the valet willfully damaged a car, he would be liable. Conversely, he would generally not be liable for extraordinary or unexpected events, such as a car being stolen from its safe parking space. In short, as a bailee, you are solely liable for ordinary and foreseeable damage.

Lets say you keep keys so you can park vehicles or have them pulled up, warmed up or cooled off for tenants when they arrive at your facility. During storage and delivery, you have an ordinary duty to take all caution and avoid damaging the vehicle. Normal damage that occurs on your watch is your responsibility.

Similarly, if you gas up the vehicle, you are liable if you use the wrong type of gasoline. If you undertake to have repairs or restoration made to the vehicle, you are responsible if they are not made properly. In a far more extreme case, if you stock a vehicles refrigerator with food or beverages for a customer, and someone takes ill or has an allergic reaction, you could possibly be held accountable.

Fear of Finger-Pointing

In general, you are liable for any damages or dissatisfaction a customer has with the services you provide. Sometimes, however, you become the victim of things that arent your fault, as in the case of a vehicle owner who blames you for damage he inflicted himself. For example, a tenant backs his RV into a tree or a bollard, causing $10,000 in damage to the vehicle. He then pulls the RV into his space and parks it. You have a key because of services you provide, so you have a bailment. The owner comes into your office a week later and asks how his vehicle got damaged, attempting to hold you accountable for his blunder.

In this case, there are several simple steps you can take to minimize your liability exposure. First, you must have the appropriate insurance, in adequate amounts, to cover you for losses arising from your bailment. Remember, RVs and boats can cost upward of $500,000. Having regular self-storage insurance is not enough, since that policy presumes you are not assuming care, custody or control of tenants property.

Second, having digital video cameras that record the comings and goings around your vehicle-storage area is critical. If you can show proof a vehicle was damaged prior to being parked in your spaceor have the incident in question on filma tenant will be less likely to succeed in his claim that you caused the damage (or theft or vandalism or whatever it is causing the dispute).

Third, make sure the rent you charge is commensurate with the value of services you provide so you can afford the liability you accept. Do not take on a bailment gratuitously. If you are going to provide a gas service in which one of your employees drives vehicles to a gas station to fill them up for tenants, make sure your charge reflects all of the additional costs of insurance and liability.

If your employee is hit by a drunk driver on the way to the gas station, his injuries (in most states) will count against your workers- compensation rating, and the damage to the tenants vehicle will apply to your insurance. If the driver who hit your employee is insured, you may make a recovery; but you must price your services to recognize the risks.

Fourth, form separate entities to perform certain types of services. That is, while you store a vehicle as ABC Self-Storage, subcontract the repair or moving functions to ABC Transportation Co., a separately owned LLC or corporation responsible for the moving of vehicles. That way, if there is a catastrophic loss or you are not adequately insured, you may still be able to protect your investment in the facility.

Releases of Liability

People often ask whether they can have tenants sign a release of liability to absolve them of responsibility in the event of a vehicle-storage incident. Generally, these releases are ineffective in the case of a bailment. If they worked, every valet-parking service in the world would have you sign a two-page release before they took your car. The case law usually holds you cannot be released from this type of liability because you are undertaking the bailment for a charge. If you assume the bailment, you are liable for the ordinary and normal consequences if damage occurs.

While you may include releases in your self-storage contracts (and I still recommend doing so), do not rely on a release as your sole protection. Remember that while all of your services represent a benefit to your tenants and make wonderful marketing statements, you must be aware of the liability you assume and be ready for it in advance.

This article is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.

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, call 513.721.5151.

Whether offered as a stand-alone business or part of a traditional self-storage operation, boat and RV storage is on the rise, and one of the primary questions of operators in the industry is: How can I make this kind of storage work on my property? Land costs are also climbing throughout the nation, so before committing to the business, you must determine if your site will attract enough clientele to make a boat/RV-storage venture profitable.

Boat, RV and other vehicle storage can yield many benefits to the savvy operator. The most notable are:

• Customers tend to be long-term, resulting in low turnover and high occupancy rates.
• Facility management is less intensive (reduced customer turnover equals fewer operational issues and paperwork).
• There is usually less competition for this service in most markets than for self-storage.

But there are also drawbacks:

• Boat and RV storage is land-intensive.
• Depending on your location, business may be only seasonal.
• Rental rates are usually lower on a per-square-foot basis than traditional self-storage.

Design Options

There are three basic design options for boat and RV storage: complete outdoor parking, canopy parking (or roof-only storage), and fully enclosed storage. Outdoor parking is the simplest and cheapest choice, as it involves only paving and striping for spaces. Land parcels often have some amount of "dead space," meaning a piece of land that may be unsuitable for enclosed storage or traditional self-storage. These plots may work well for outdoor boat and RV parking.

Canopy parking can be surprising to developers when it comes to cost. Depending where your facility is located, "roof only" structures may still need to comply with local building codes. Even though there are no walls, the footings will need to be deeper and the roof may require additional bracing to handle the uplift loads. With these two factors combined, fully enclosed structures begin to look more attractive at least from a cost standpoint, since you'll be able to charge more for the rental of the unit.

When building fully enclosed storage for boats and RVs, carefully consider your layout and unit mix. You'll fi nd you are able to use approximately 35 percent of the land parcel for actual storage. The remainder will accommodate aisles and turnarounds. It's crucial to give amateur drivers enough room to safely maneuver their vehicles. Driveway widths average between 55 and 60 feet. Bay widths are usually 13 feet, with building heights of 16 feet to accommodate 14-foot doors.

Staying Atop the Market

While operating boat and RV storage may mean you have fewer competitors in your market, it does not mean you can just sit back and watch the profits roll in. Marketing and competitive rental rates are critical.

There are two key elements to keeping your boat and RV storage consistently full. First, visit other facilities in your area. Talk to managers. Find out what unit sizes are popular. Are customers being turned away because unit sizes are too big or small? Are their access doors big enough to accommodate larger vehicles? What rental rates does the market support?

You should also visit local marinas and campgrounds to find out what potential customers desire in a storage facility. What features are most important to them? What do they consider to be a reasonable cost? What is an acceptable distance between the storage site and their home or place of play? While visiting these places, make contact with the on-site management. They may be willing to produce referrals on a commission basis.

The second key to success is diversification. People with "big toys" usually have big wallets to match. Help them spend their money! If market research and property allow, provide all three types of storage to accommodate different needs and budgets. Offer a variety of unit and door sizes. You can also offer amenities such as vehicle washing and maintenance, ice service, dumping stations, gas stations, parking services, or whatever else you can do to make things easier for customers. This range of products and services will help your manager sell your facility to prospects and create better relationships with clients.

Boat and RV storage is a booming business that can be combined with conventional self-storage or stand on its own. As community restrictions and homeowners' associations increasingly prohibit storage or parking of leisure vehicles at residences, people will need storage for their expensive hobbies. Today, demand for this type of storage exceeds supply in most areas, creating tremendous opportunities for wise investors.

Caesar Wright is president of Mako Steel Inc., which designs, supplies and installs steel buildings for the self-storage industry, including boat/ RV storage, multistory and custom buildings. Mr. Wright has been in the steel business for his entire career and is respected in the industry for his ability to manage, negotiate and succeed without compromising his integrity or sense of humor. When not ruling his business empire with an iron fist, he can be found on the river, at the golf course or following his beloved Pittsburgh Steelers. For more information, call 760.634.5495; visit www.makosteel.com.

By Cary F. McGovern

This article discusses why small records-storage clients may be more valuable than large accounts in a self-storage records center. It is possible to yield three to four times per unit of storage compared to the local full-service commercial record centers in your town.

For several years, records-storage providers operating within the walls of self-storage have discovered the amazing yield of the small-business client. In fact, the smaller the client, the greater the yield per unit of storage. How can this be? It is an interesting phenomenon that has escaped the notice of major industry players. As a self-storage operator, you actually have several advantages over the big guys:

• VisibilityYou have curb appeal and high visibility in your storage location and Yellow Pages advertisements.
• Walk-In TrafficYou have a steady flow of prospects and clients through your facilities.
• Turn RateYour units usually turn over in seven to 12 months, so you service a constant flow of new prospects.
• Business ClientsDepending on your location, you could already be servicing many businesses.
• Sales OpportunityYour walk-in clients may not be looking for records storage, but nearly every one will be either an employer or employee, both of which are prospects for records management.
• MarketingSelf-storage operators know their markets within the five-mile radius of their operations. Depending on your location, there could be hundreds or even thousands of small businesses in your area. You already have a focus market.
• Target-Market IdentificationSince small businesses are strung together in neighborhoods by block, it is possible to market records storage to these groups using guerilla marketing.

The Convenience Store

Why do people choose to go to a convenience store instead of a supermarket, especially when they know theyre going to pay more for the things they need? Its fast and easy to get in and out. I like to compare commercial records centers to supermarkets and self-storage facilities to convenience stores. There are several good analogies at work here:

• Closer to Your ClientsProximity allows the client to avoid delivery costs. He can easily come to your facility for his records.
• Neighborhood BusinessesSmall companies like to do business with their neighbors and form relationships with others in their same shoes.
• FlexibilityUse of small-business packages (as described in last months column) allows customers to choose a service that fi ts their budget.
• Same Value but Less HassleYou can offer the same value as full-service records centers but with much less trouble for the customer. His records are out of sight but well-controlled and in a safe place.

Small-Business Clients

The traditional, full-service, commercial records center markets its services to larger businesses because of the relatively high cost of sales. A sales call and client-needs assessment can cost between $100 and $500 or more depending on the size of the business. For this reason, commercial centers cannot waste their time on 50- to 100-box accounts. Remember, prospects do not go to them, and rarely does a small business even know or understand the value of the service.

According to the most recent census data, small business enjoys the largest market share in the American economy. It remains virtually untouched by traditional commercial records centers. It is easy to identify small businesses in your area: Simply go to www.superpages.com, type in the city, and select a business type. The results are your prospect database. Of course, there are many other options for finding prospects to whom to market your services.

Smaller but More profitable

Your records-storage volume could be one-tenth the size of the full-service commercial competitor in your town. You could also earn more profit, make a greater return on your investment and diversify your services. There are several important things to keep in mind:

• Yield is Different than PricePrice is the amount stated on your price list. Yield is the actual amount each storage box generates. A previous column discussed the differences between price and yield. You can read more at www.insideselfstorage.com by entering price and yield differences into the keyword search.
• Small-Business PackagesDevelopment of these packages is crucial to improve yield in records storage. You must understand how to present, offer and bring value to your client while maximizing your return.
• Simplify Your OperationYour operation must be simple and easy for clients and staff to use. It must also minimize your expense and overhead while improving yield.
• Offer Ancillary ServicesBuild your base revenue and add value by offering services through outsourced resource partners who do the work for you.
• Create Permanent Annuity RevenueUnderstand the principles of customer service and follow through so you never lose a client.
• Creep GrowthCreep refers to the annual internal growth rate that normally occurs in the records-storage industry. Creep averages as much as 13 percent to 17 percent a year from existing accounts.
• Minimize Labor-Intensive ServiceLabor costs are your primary enemy in the records-storage business. Operating practices must be designed to eliminate or reduce labor costs.
• Minimize Delivery and Fuel CostsWill-call pickup and courier delivery reduces or eliminates the high cost of resource-intensive delivery options.

The most misunderstood area of records storage is the small-business concept. It is a gold mine for those who put this to work in their facilities. If you have multiple store fronts, there is an even higher yield potential.

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.