Price and Yield Differences
|Copyright 2014 by Virgo Publishing.|
|By: Cary F. McGovern|
|Posted on: 05/01/2003|
One of the misunderstood characteristics in commercial records management is the difference between price per unit and yield per unit of storage. This article discusses the difference and how to improve yield.
In the business of commercial records management, a contract is an absolute requirement. The contract of choice was promulgated by PRISM International (www.prismintl.org), the trade association for commercial records management. Ongoing assessment of the industry proves the vast majority of commercial records centers throughout the world use some form of the PRISM contract. The document invariably employs a Schedule A, an attachment to the contract that represents the price list for services to be rendered.
Services include storage, retrieval and indexing, at a minimum, and may include hundreds of products and services related to your prime service: storage. The price for each service is listed on the Schedule A and is usually described on the reverse so all understand the exact nature of the service. Since an attachment referred to in the document becomes part of the contract by definition in the Uniform Commercial Code, it can be different for each client and circumstance. This is often the case. While service prices are generally (but not always) the same, storage rates vary greatly based on the size and complexity of the client.
Prices for storage average about 25 cents per cubic foot throughout the United States. I have reviewed hundreds of price quotes by commercial records centers and seen prices ranging from 16 cents to as much as 50 cents (sometimes more) per cubic foot of storage.
It is generally true to say the smaller the volume of cartons in storage, the higher the price; and the larger the volume of cartons in storage, the lower the price listed on the Schedule A. However, the yield per unit in storage can range to more than 80 cents when the commercial records-center vendor understands the nature of the difference between price and yield.
A Primer on Boxes and Sizes
Why is the records manager the "Statue of Liberty" of boxes? Like this symbol of America, records managers "take all your poor and downtrodden"--boxes, that is. Why? The good, the bad and the ugly generate revenue each month.
Records-storage cartons come in all shapes and sizes, ranging from a size-9 shoe box to a large clothing carton. The odd-size boxes are generally the rule rather than the exception. New accounts use either cheap throw-away cartons or poorly constructed single-wall boxes widely available in office-supply stores. You will receive whatever the client has, and you can do little about it on the front end of your contract.
The standard records-storage carton in the commercial records industry is the 1.2 cubic foot letter/legal box. Clients can use the same carton to file letter-size documents in one dimension and legal-size documents in the other. This is generally the right box for most business records because it is easily portable. This is the "prime unit of measure" in the industry. Everything else is considered odd--with a few exceptions, such as x-ray boxes.
As a general rule, the industry charges by the cubic foot or the unit. At 25 cents per cubic foot, the standard carton would be 1.2 times 25 cents, or approximately 29 cents, each month. However, other boxes are charged differently.
Price vs. Yield per Unit
With this information in hand, let's take a look at some of the things that can affect yield, regardless what the Schedule A quotes for price.
 Defining the carton size. You can define the carton size in your schedule as whatever you want. Some major commercial records centers have exaggerated the carton size to penalize the client for using boxes larger than 1.2 cubic feet and encourage box sales.
 Raising to the next cubic foot. One of the most common practices in the industry is to round the size of odd-size boxes to the next cubic foot. This effects yield positively.
 Charging for boxes out of storage. It is normal and acceptable to charge for boxes out of storage. Over time, a significant number of cartons are out of storage, but they still yield monthly revenue.
 Charging for tracking of files out of storage. Some commercial records centers charge a monthly fee for files out of cartons. This raises the charge for a carton in storage and improves yield.
 Under the minimum accounts. Commercial records centers generally charge a minimum monthly fee for the storage component of their services. This is usually something less than the cost of a 10-by-10 storage unit. If your 10-by-10 rents for $100 per month, the minimum would be something like $75 per month. When the client has 100 1.2 cubic foot boxes in storage at the rate of 35 cents per cubic foot, the price would be normally $42; but when raised to the minimum, it is $75, which increases the yield to 63 cents per cubic foot.
 Adding value-added services. The average of sixty-five cents of service revenue for every dollar of storage revenue is the low industry average. Many centers range between one and two dollars per carton by offering services provided by resource partners with no additional staff or capital expense.
The cumulative effect of this strategy across the account base you have can improve your yield on a price basis of 35 to 80 cents or more. Let's look at the 10-by-10 unit you rent for $100 as an example. The unit will hold as much as 360 1.2 cubic foot cartons, or 432 cubic feet of storage, in racking specifically designed for records management in self-storage. These 432 cubic feet at a yield of just 60 cents equals $259.20 vs. the $100 you would earn for storage alone.
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@example.com; www.fileman.com.