Jump-Start a Records-Management Business
Copyright 2014 by Virgo Publishing.
By: Cary F. McGovern
Posted on: 12/01/2001



 

There has never been a better time to enter the commercial records-management business. There are several factors at work that make this the precise time for such a business opportunity. But records management is not for the faint at heart. It requires hard work and capital to reach the intermediate goal of 100,000 cubic feet of box storage ($500,000 in gross annual revenue) in 30 months. The return on initial investment can exceed expectations, but it requires very careful planning and the right set of resources.

Why Now?

1. The future of the "paperless office" is questionable.

The paperless office is a myth. It has not and will not exist for a very long time. Most industry observers believe it could take many years or may never come to fruition at all. There are numerous technological and sociological issues at play in this concept. In the meantime, the rate of paper-records growth is enormous. In an article titled "The Evolving Commercial Records Center Industry," Michael Faber, certified records manager, wrote, "The 'paperless office' remains an elusive target for most companies and organizations ... The commercial records industry should continue to function traditionally for the next 12 to 15 years."1

2. There is still availability in 60 percent of the U.S. market.

Richard Reese, CEO of Iron Mountain, presented this year's keynote address at the PRISM International Conference in Bal Harbor, Fla. (PRISM is the trade association for the commercial records-management industry. For more information, visit www.prismintl.org.) He pointed out that in a study commissioned by Iron Mountain, it was confirmed only 40 percent of the U.S. market and 10 percent of the European market have been captured by commercial records-management businesses. The study also shows the industry should expect peak growth years for the next 10 to 15 years.

3. Industry consolidation has produced some key effects.

Iron Mountain, Pierce-Lehay, Recall and other records-management companies have purchased many of the largest commercial records businesses in the United States and major markets around the world. In fact, Iron Mountain merged with Pierce-Lehay last year to become the giant of the industry. This majority of the consolidation is basically over, although there will be more acquisitions in time. The consolidation has taken most of the competition from the market, leaving room for entrepreneurs to develop new businesses. Studies have concluded most business owners prefer to do business with local companies. The locals, therefore, have a key advantage over the international giant--as long as service levels are maintained in line with client expectations.

4. Paper-storage volume continues to grow.

Regardless of the impact technology will have on business as we move into the future, the pure mass of paper records is increasing every year. As Faber pointed out in his article, the number of tons of paper stock made into file folders increases every year (per the American Paper Institute), filing cabinet sales increase by 18 percent each year (per the Business Equipment Manufacturing Association), and the sales of paper-fed fax machines grew by 16.5 percent from 1998 to1999, and continuing increases are likely through 2004 (per the Associated Press). Next to nearly every PC are a printer, fax machine and copier--and people will continue to use them.

5. Disaster-avoidance issues are increasing.

The Sept. 11 tragedy has given additional cause to send more and more active records off-site. There has been a trend in many industries to take files typically considered active off-site because of the cost of storage and, now, because of disaster-related issues. As long as access to the records can be ensured, more commercial records centers will see active records-management opportunities.

I could go on about the reasons ensuring continued business for traditional records management, but neither time nor space allow. I must emphasize that businesses offering commercial records-management services will be required to provide high levels of service and use technology-related techniques. The industry has changed and delivery systems have improved. But this business opportunity is excellent for those willing to take the right steps. There are several requirements to meet the goals of this growing business.

Business Requirements

1. A full-time sales effort.

Records management is sold best using a consultative-selling method. It has a long sales cycle and requires diligence in the sales effort. One full-time salesperson who has no other responsibilities is absolutely necessary.

2. A sales-cycle process that works.

The sales method for selling records management requires managing 100 or more prospects through a seven-step consultative-sales cycle. It cannot be done manually to produce the results you want. The selling process leads the client through a method that can ensure a 75 percent close rate for those prospects that make it though the third step of the process.

3. Sales management.

Selling requires management--simple as that. An unmanaged sales process never achieves the results you expect. The problem lies in the fact companies typically can't afford a sales manager to oversee one salesperson. A new concept called the Distance Sales Manager2 allows for traditional sales management from afar via coaching, mentoring and closing assistance using an Internet-based tool.

4. Capital.

How much is enough capital? That depends on you and your current business circumstances. If you already have a self-storage operation or a moving and storage company, your capital requirements are far less than if you do a traditional startup. I have developed financial models for both scenarios. Either way, the return on initial investment is quite considerable and may even amaze the nonbelievers. This business is not easy. It requires diligence in sales and operations, patience and a great deal of management; but the returns are surprising.

1 Faber, M., "The Evolving Commercial Records Center Industry," The Information Management Journal, ARMA International, July 2001.
2 The Distance Sales Manager concept and process is a copyright of Amalgam Solutions LLC, a FileMan and FIRMS Services Resource Partner.

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