the fact that self-storage facilities across the country have been able to make
substantial increases to rental rates due to high demand and somewhat stagnant
supply, storage operators should continue to find alternative ways to boost the
net operating income (NOI) at their properties. And increasing NOI becomes more
important during the slower rental season when occupancies may incur a slight
dip from move-outs.
a facility’s expenses are the first items to come under fire when attempting to
augment NOI. An in-depth review of each line item in an expense report may
reveal unnecessary expenditures as well as areas for potential cost savings.
Typically, there are items that can be cut or vendor rates to negotiate.
with vendors for the lowest price possible,” says John Eisenbarth, vice
president of operations at West Coast Self Storage, who adds that operators
need to be diligent and observant in regards to expenses. As an example, he
states that West Coast reduced the dumpster size at all of their facilities to
save money after realizing that the previous dumpster size was not being fully
addition to cutting expenses and raising rates, streamlining operations can
yield ample profits. Although there are an endless number of strategies for
increasing NOI through efficiencies, this article focuses on five techniques
utilized by some of the industry’s key players.
Get With The Times First and foremost, with the start of a new year, there is no better time like the present to bring your self-storage facility up to speed. “New technology can provide cost savings while delivering an improved customer experience,” says Guy Middlebrooks, CubeSmart’s vice president of third-party management. “Look for ways to implement new technology in both the back end and the customer-facing experience at your self-storage facility.”
you are doing yourself a disservice if your facility still relies on paper
ledgers and hand printed receipts to conduct business. “Today’s self-storage
customers expect a fast, easy, and paperless process, from start to finish,”
Middlebrooks says. “Streamlining your website, making it easier for a customer
to find what they need and to process their reservation or rental, is a great
place to start.”
more, if you are still digging in your heels, it’s time to fully embrace the
Internet and its copious advantages—especially the “free” ones such as social
media and customer reviews. “Operators need to have a good Internet marketing campaign,”
says Eisenbarth, who adds that West Coast Self Storage has successfully moved
its Internet marketing in-house to reduce expenses. The company also
streamlines its operations by utilizing the same self-storage software at most
of its facilities.
of in-house operations, Gary Sugarman, chief strategy officer for The William
Warren Group, Inc., advises storage operators to establish in-house call
centers to effectively handle incoming customer calls. “You need to have a call
center to be instantly responsive to customers,” he says. “A third-party call
center is not a good solution. You can’t farm out the call center to a company
that just handles calls and doesn’t know the business or the full scope of your
relationships with customers.”
should go without saying that simply having the latest and greatest in storage
technology does no good if you aren’t using it to its full potential. For
starters, take advantage of tech support and become knowledgeable about all of your
product’s offerings. Mark Poole, regional manager for Liberty Investment
Properties, which offers third-party management and operates facilities under
the name My Neighborhood Storage Center, suggests to “know your reports.”
to Poole, many reports remain unused. “Focus on the things that matter, and
simplify the complex,” he adds. Eisenbarth concurs with Poole, stating that
West Coast Self Storage has consolidated reporting to focus on its key
performance indicators. For example, utilizing software automation for reports
reduces the amount of time managers spend hunkered down behind computers,
enabling them to tend to customer-focused tasks and facility upkeep.
has become a key aspect of revenue management as well. And sophisticated
revenue management technology is being utilized by many of the industry’s top
operators. “Expense control is important, but focusing on revenue growth will
have a bigger and immediate impact on your NOI,” says Middlebrooks. “Sophisticated
revenue management systems can provide improved revenue growth.”
revenue management systems are a definite boon, Eisenbarth reminds operators
not to wash their hands of the task. “Review board rates on a consistent,
monthly basis,” he says. “You should consistently look at the rates for
opportunities.” In addition, all of the facility’s financials should be
reviewed monthly to keep on top of ways to increase income and trim expenses.
Economies Of Scale While all of the previously mentioned technologies and advancements are surefire ways to streamline operations for increased NOI, they can be expensive to implement, especially for independent operators with limited budgets. Therefore, many industry veterans suggest that small and mid-size operators seek out discounted or group rates for products and services through economies of scale. “Operators can take advantage of expense savings through ‘scale’ by joining organizations like the SBOA, or by selecting large operators to provide day-to-day management of their facility,” Middlebrooks says.
As a matter of
fact, economies of scale can provide cost savings for nearly every line item of
your expense sheet, from insurance to pest control. For example, most vendor
members of the national and state storage associations offer discounts to
members. Furthermore, many of those associations have various membership
benefits of their own. And, as Middlebrooks mentions, self-storage organizations,
such as the Storage Business Owners Alliance (SBOA), extend beneficial cost
savings opportunities to their members. According to the SBOA’s website, its
members “gain economies of scale and improve their negotiating position” and
take advantage of “pre-negotiated services and savings so that they can compete
more successfully with larger competitors and enjoy improved profitability.”
all of these options for economies of scale come at a price, the annual membership
fees are negligible compared to the available cost savings. “Partner with
somebody,” says David Decker, Extra Space Storage’s director of operations.
“It’s worth the cost reductions and increased NOI.”
On top of
discounts, most of these economies of scale provide their members with valuable
networking and learning opportunities, such as conferences, blogs,
publications, webinars, and training, as well as business exposure and legal
counsel. Certainly, the benefits are seemingly endless for self-storage
operators and their employees.
Engage Personnel With employees in mind, Sugarman emphasizes the value of engagement, stating that the best way to streamline operations is to engage personnel. “Treating them well is an effective formula. It’s our ‘secret sauce’,” he says. “We pay close attention to the workplace culture. We establish and cultivate ownership. Our managers are engaged, treating the locations as if they own them. They ensure the facilities are well maintained. Our people are motivated to perform and watch expenses.”
William Warren Group, which operates its portfolio under the name StorQuest Self Storage, does this by creating an environment
that keeps priorities in check. For instance, the company recognizes that family
comes before work for the majority of its employees. Therefore, as an employer,
flexibility is crucial. “We are a laidback company,” says Sugarman. “We want to
ensure that our people are happy and having enjoyable experiences.”
In turn, the company’s
employees perform better. “We have full engagement from our staff,” Sugarman
says. “They improve and embrace processes. They care about the results. The net
effect is that our top line is higher.”
However, these efforts
would be in vain without the right people in place. Hence, it is vital to have
a good grasp on recruitment efforts. Sugarman says that entails hiring
sales-oriented personnel with can-do attitudes.
Moreover, Decker warns
that even the most brilliant ideas for streamlining operations will fail if
they are too confusing to the facility managers or if they create additional stress.
“Be sure to get your managers on board,” he says. “You need to have champions
on the frontlines who will buy into it.” Decker adds that any change you plan
to implement should be an emotional sell for the managers. “Explain why it is
beneficial to the managers,” he says.
In addition, Eisenbarth
suggests creating a hands-on approach that enables district managers, assistant
managers, and facility managers to make on-site decisions without requiring
approval from higher-ups within the company. This form of engagement instills
managers with confidence and establishes trust. Keep in mind: A work
environment that is supportive of everyone’s unique capabilities is beneficial
for the entire company.
Of course, there is
always the option of hiring a third-party management company if you are unable
to motivate your staff. Third-party management companies provide a wide array
of beneficial services, such as education, training, and recognition/incentive
programs, as well as economies of scale and assistance with the daily
requirements of facility management. Third-party management companies can provide
all-encompassing services or a la carte services; do some research to determine
which would best suit your needs and your budget.
A Culture Of Innovation One way to engage personnel is to foster a culture of innovation. According to Decker, there is always a better way to do something, and managers are usually enthusiastic about developing and implementing innovative ideas. “There are opportunities in every little aspect,” he says. “It’s a simple business, but there are always ways to make the company more efficient.”
is why Extra Space encourages its employees to look for non-traditional methods
for streamlining operations. “A bunch of little things add up,” Decker says.
“We consistently have record performance because we are always looking for new
ways to do things in every department. Keep an eye and ear open for
innovations. Challenge the norm.”
states that this can be achieved through a grassroots, bottom-up approach. He
suggests having the facility managers ask their customers what they want, and
then request input from the managers. “Breakdown the steps of the whole
customer experience to streamline the process,” says Decker.
couldn’t agree more. “Ask a lot of questions,” he says. “Push to do better. Ask
why things are done that way and how you can do them better.” My Neighborhood
Storage Center also promotes the sharing of information among employees through
an internal company blog. “It’s a great resource for them,” says Poole. “It
enables the team to share info, tips, and ideas.” The company blog is “live”
and updated often to maintain effectiveness.
Maximize Space Square footage is an item that every self-storage facility has at its disposal, yet some fail to maximize its potential. Decker suggest that operators find ways to “squeeze more out of the property” by providing more services that streamline the moving process for customers. Two of the most common forms of ancillary income are selling retail goods and offering truck rentals—both of which are pretty much industry standards nowadays, and not having these items available is a disservice to your customers and your bottom line.
an example, units that are difficult to rent can be utilized for storing excess
retail items or transformed into display areas. Some operators have even opted
to provide appreciated community services by turning odd-sized units into
donation locations for various items such as recyclable electronics, unwanted
household goods and/or furniture, clothing, and toys. The collected items are
then donated to local charities or auctioned off as a charity unit. Either way,
it’s a win-win scenario for community members who are looking to dispose of
items and the non-profit organizations.
other appropriate types of ancillary income with minimal implementation costs include
packing/shipping centers, eBay selling services, business centers, propane
stations, record storage, document shredding, and tenant insurance programs. While
it’s wise to start by asking your customers what services they would find to be
beneficial, ancillary income opportunities are truly only limited by your
available space and creativity. However, just don’t forget to charge for the services
you provide as well as late fees and administrative fees. “Every penny earned
has a reward,” Poole says. “Maximizing every square foot is essential.”
indoor space is limited, consider finding ways to make use of your parking lots
or excess acreage. “Renting” space for billboards and/or cell phone towers can
provide income without necessitating additional manpower. Additionally, unused
parking spots can become profitable when rented out as basic spaces for RVs,
boats, or other vehicles.
Final Thoughts Regardless of how you decide to streamline operations at your self-storage facility, these industry experts have a few pieces of advice. First of all, timing is of the essence when it comes to implementing new procedures, policies, or services. “We prefer not to implement large scale changes to our customer or store manager processes during the busy rental season,” Middlebrooks says.
wholeheartedly agrees. “There is some seasonality to storage,” he says. “Avoid
busy seasons to launch something. Make sure it’s at a time when managers aren’t
under a lot of stress.”
adds that nothing should be put into place until robust training programs have
been completed by all responsible parties and the risk has been assessed. “Keep
in mind that there could be a negative impact on morale even if there is a
positive impact on NOI.”
Shatzer is a freelance writer and the editor of Mini-Storage Messenger, Self-Storage
Now!, and Self-Storage Canada.