10 Ways for Self-Storage Owners to Reduce Expenses and Improve Cash Flow
|Copyright 2014 by Virgo Publishing.|
|Posted on: 12/19/2012|
By Aycha Williams
As self-storage operators, we continuously look for innovative ways to increase the cash flow from our properties and become more profitable. At my company, we use the annual budgeting period to first evaluate the success of the current year’s programs and revisit each property’s annual financial reports. How did our marketing investments benefit each property? Were we able to stay within budget for all expense items? What other methods can we apply to cut down on both recurring and non-recurring costs?
Based on this data, we’re able to make our new marketing and training-investment decisions and adjust budgets for seamless operation. We also look at each expense category to find new ways to decrease our costs.
Here are 10 areas on which we focus to minimize the expense of big-picture items and smaller costs. They can make a considerable difference in reducing the overall expenses for your property, too.
As a self-storage owner, you know quality site management is key to the success of your operation. Great managers will make the difference on your facility’s occupancy and profitability. Hiring capable, talented and experienced employees is crucial and, in most markets, will come with a higher hourly rate. On the other hand, the efficiency and success of qualified employees will considerably lower overtime costs and result in higher sales.
Consider hiring qualified employees who will increase profit through their superior abilities. While the hourly rate may be higher, you’ll benefit from increased income and save on high overtime expenses you would have otherwise incurred.
2. Administrative Costs
The cost of telephone and Internet access is constantly falling thanks to multiple carriers and technological advances such as Internet telephony. Whether you have multiple properties or one, taking the time to call a few competitors can save you thousands of dollars each year. Two years ago, we saved 50 percent on our phone and Internet costs across 15 self-storage properties by simply switching carriers. This year we’re forecasting 30 percent more savings.
While it’s a time investment to research and complete the change, the savings will make it worth your while. Consider price shopping for all your administrative needs, whether it’s for office supplies, print services or any other professional service.
3. Property Taxes
There aren’t many commercial real estate properties that weren’t affected by the economic crisis. The lowering of property values has one positive outcome and that’s lower property taxes. It would be wise to get your commercial property re-evaluated before the upcoming year’s property-tax period.
4. Recurring Expenses
There are also a number of recurring expenses every facility has such as utilities and maintenance. Utility expenses such as electricity, water and trash pickup make up a large percentage. Installing motion detectors on lights will reduce your electricity costs considerably. Similarly, setting the temperature at a regulated level for climate-controlled units can result in incremental savings over time. Watch your monthly accounting reports closely to catch a change in items such as water use. A sudden jump might result from a leak, for example.
Pest control, landscaping, alarm and maintenance companies all have a lot of competition. Therefore, it would be wise to price shop and get multiple bids each year before signing a contract.
5. One-Time Expenses
Your storage managers will agree that maintaining a property is one of their key responsibilities. While they will act with urgency to fix a broken gate, they may not pick the most cost-effective repair solution. It would not be surprising if your accountant received a bill for the broken alarm system you didn’t approve or an upgraded pest-control program you didn’t authorize.
Closely monitoring these expenses, especially if you have multiple properties, is crucial yet can be very difficult at times. Consider having an established purchase-order system with a minimum of three bids and official paperwork for each new job order. This way, you’ll ensure you monitor and approve the lowest rate for all repairs.
6. Do-It-Yourself Training Programs
It’s a given that your site managers need to know how to rent units, collect rent and otherwise run your facility. Are you willing to spend the time to assemble an effective training program that will work best for them? If you take the challenge, you can have overall control of your program and keep thousands of dollars in your pocket.
The same argument is valid for call evaluations. Consider using the real call recordings you already have through your call-tracking numbers. Use them to evaluate your managers instead of hiring a call-evaluation company for mystery-shop calls. Some of these companies charge a minimum of $30 per employee per month. Every dollar saved will help your bottom line.
7. Marketing Costs
Today, self-storage operators can hire someone to build them a website that is fully functional, user-friendly and optimized for search engines within days, all at the price of a car detail. Web and graphic designers and Internet-marketing managers are at your service right now. There are hub websites that bring you and your vendors together. You get to evaluate and pick suppliers, name your price, and pay when the job is complete to your satisfaction.
How closely are you monitoring the success of your cost-per-click (CPC) advertising? If you’re running Google CPC campaigns, knowing the number of clicks and dollars spent is only half the equation.
Do you know your “bounce rate,” which is the number of users who are immediately bounced back from the link on which they’ve clicked? This means the user isn’t using that page, advertising or product. If people are bouncing back from your CPC advertising, you’ve wasted your money. Google Analytics reporting will allow you to see the bounce rate of your CPC campaigns. Following these metrics closely ensures you’re spending your advertising budget wisely, creating the advertising that yields lower bounce rates and results in a higher number of quality leads.
Many operators are still spending a fortune on YellowPages.com. The easiest way to see if you’re breaking even is to get monthly reports via the tracking numbers provided. We’ve found that the total number of unique phone calls received per month that are over one minute long (conversations shorter than a minute aren’t considered quality leads) are not even close to justifying the costs. Curious to see what your research will show?
8. Ancillary Services
Additional services and products offered at storage facilities provide convenience for customers and can bring in additional revenue. Yet some larger operators do not offer onsite truck rentals, for example. Their argument is the time and effort spent on renting trucks take away from a facility’s storage rentals and profitability.
If your manager is attending to a truck-rental-only customer instead of answering a storage customer’s call, you could be leaving cash on the table. The money made from that truck rental will not make up for failing to rent a10-by-10 unit for three months. What other ancillary services are you providing at your site that might take away from your storage rentals?
9. Credit Card Processing
There are many new credit card processing companies available to the self-storage industry. Some have much lower transaction costs than others. Attending an industry tradeshow is a good way to compare each to select the most cost-effective solution for your property.
As small as they may look, other miscellaneous expenses such as merchant-association memberships or local advertising channels may add up to a big sum. Consider evaluating their benefits prior to committing.
These are some of the key areas on which my company focused in the past year to trim our facilities' fat. The accumulated should have a considerable impact on the bottom line of your self-storage facility, too, while increasing your cash flow and profitability.
Aycha Williams is a marketing and training strategist for AC Commercial Property Management, and has more than 15 years of commercial real estate, high-tech and consumer-products marketing experience. Founded in Orlando, Fla., AC Commercial manages more than 1.2 square feet of self-storage and other commercial holdings in Florida and Texas. For more information, calll 407.647.9800, ext. 111; e-mail firstname.lastname@example.org; visit www.accommercial.net.