ARE YOU GETTING ALL YOU CAN GET
from your management company?
So you’re tired of dealing with the day to day, or its time to step back and enjoy “the golden years”. Maybe you need help to get your self storage project more profitable. Just what should you expect from your management company?
Comprehensive management companies, such as Storage Investment Management, Inc. (SIMI), provide the entire gamut of management services. Basic services include weekly/ monthly reporting including balance sheet and P&L information. Staff hiring, contract services arrangements to name a few. Many of these services are now readily and easily available thru computer software programs for on-site information, as well as the likes of Quicken for full P&L capabilities. But these are relatively small operational items that could probably be addressed without a management company and the associated overhead. The real goal of any management company should be to increase the bottom line. How is this accomplished?
First and foremost on the list should be the staff. We know the person behind the counter is the true make or break of a self storage operation. Finding proper staff is, in and of itself, a difficult process. The reality is you have a 50-50 chance of selecting a person appropriate for the position. Through a series of hiring processes a good management company should be able to improve those odds substantially. Starting with a telephone interview and following up with an in person interview is a good beginning. Furthermore, there are other tools available to improve the process beyond the gut-level reaction to the interviewee. Personality profiles are an excellent tool to help insure the candidate has a personality conducive to the position. Drug tests, credit and background checks further insure the candidate isn’t an accident waiting to happen.
Once the candidate has been hired, the training process begins. Does the management company have a formalized training program? Does it include on-site training, addressing day to day operations; telephone skills and customer relations? A comprehensive two week training program should result in a manager capable of handling most day to day activities. But this is just the beginning. Our experience has shown it takes approximately 1 year to get a new manager running on “all eight cylinders”. Constant training on various skills is an ongoing process. And in reality, never ends.
Does the management company have incentive structure in place for the sales manager? These incentives should be income oriented, for both the manager and the facility. Every dollar paid in a well designed incentive structure will yield multiple times returns in actual income to the facility.
Once a good quality manager is on staff, what needs to be done to start improving the bottom line? The income side of the equation is the first area of attention. Supply and demand pricing can be implemented. Self storage has many similarities to the hotel business in this area. If a prospect shows up at the door at closing time and wants a unit, do you need to give them the same discounted price as someone that called and is obviously shopping? With today’s economy most of our prospective tenants are indeed shopping around for pricing. The internet has made it even more price competitive. So, meet or beat any price for a size in which you have excess inventory. Other income producers that are often overlooked include late fees, (5% of gross revenue) tenant insurance administrative fees, ancillary merchandise and administrative fees in lieu of deposits, just to name a few. Granted these items won’t pay your mortgage by themselves but they all add bottom line dollars and increase facility value. Remember $100 in added monthly income translates to around $1,500 increase property value in today’s market.
The other side of the bottom line equation is the expense side. Many expenses incurred at the facility can be controlled and/or reduced through bulk purchase programs. Removal of a 10 yard dumpster and replacing it with a small roll about for the site’s disposal needs, can save hundred’s of dollars monthly. Such items as resale merchandise can be obtained at discounted pricing by management companies. Property insurance costs can often be reduced substantially through the use of a management company’s bulk purchasing power. Yellow page advertising pricing has been a very aggressive cost reduction focus over the last couple of years. Yellow pages currently account for less that 30% of new business in the markets we service. With the internet currently accounting for over 60% of our new telephone inquiries, internet hosting, site design and search engine enhancement can see significant costs reductions from a management company. Credit card processing fees can also be substantially reduced by the management company. This reduction alone can also add hundreds of dollars a month to the bottom line.
Real estate taxes are another area where substantial costs saving can be derived. Although most management companies are not prepared to deal with the real estate tax process, they should have access to professionals that can provide these services without direct out of pocket costs to the owner. Income taxes and estate planning are other added areas where a management company should have access to true professionals.
What about the physical plant? Has the management company provided a detailed, short and long term, capital improvement plan? Although many of these items require the outlay of dollars to effectuate, many can be implemented over a period of time. Although painting , or seal coating may be an out of pocket expense, the increase in curb appeal and hence, added tenants, can impact the bottom line. Lighting is a significant operational expense that can be mitigated by the installation of high efficiency lighting. Often these costs can be offset through rebate programs from utility providers. Exterior security lighting is the single largest user of electricity on traditional self storage facilities. LED wall packs can significantly reduce these costs. Our experience has shown a 2-3 year payback on these types of capital lighting costs.
Your management company should provide a business plan for increasing revenue and decreasing expense for your project. It should be a comprehensive plan that addresses the entire spectrum of topics needed to improve the bottom line of your facility. Not only is the plan important, but the management company should have a proven track record at implementing plans. Additionally, they should have access to a wide range of other professional services needed to successfully navigate these economic times.
Yes a professional management company will initially increase operating costs . But the improved results you should expect will be achieved with time and attention to details. Your investment in an effective management company will provide a better return than your property.
Storage Investment management, Inc., a boutique management company that manages 31 facilities, totaling over 1.5 million square feet of storage, from the mid Atlantic region through New England. SIMI’s principles’ have over 75 years of successful self storage management experience throughout the US. More information can be found at www.simi.org