Budgeting for Technology
|Copyright 2014 by Virgo Publishing.|
|By: Michael Richards|
|Posted on: 05/01/2004|
Technology is a key part of running any self-storage business, whether you have a single site or many. It allows you to reduce the time spent on manual, repetitive tasks and increase time spent on more productive ones, such as selling units and helping customers. As with any other business expense, you should understand the costs of its benefits. The purpose of this article is to describe much of what goes into your technology budget and realistically define the short and long-term costs associated with it.
Do I Need a Budget? How Do I Create One?
Creating a budget for technology has the advantage of forcing you to plan; and your plan provides a road map to meet your long-term goals and a guide by which to measure performance. The costs associated with technology should never be a surprise. Budgeting saves you money in the long run. Let’s say you decide it is necessary to upgrade your computer equipment for better speed or additional capabilities. Budgeting will help you determine the best time during the year to do so, based on cash flow and other purchases you have planned.
There are two keys to creating a budget. First, break your costs into categories; then divide each category into individual components until you can easily assign a cost to each. For example, it is difficult to estimate an overall budget for “training,” but it is easy to assign costs for something defined, such as “sending two people to a software seminar and one person to a class on Windows.” You can find out the costs of the seminars and classes and estimate travel or other expenses. Another key to creating an effective budget is to involve all the stakeholders. In self-storage, this includes managers, supervisors and owners.
The key to learning how to budget effectively is to measure your results. Each quarter, compare your actual against your budgeted expenses. Were you over or under? Was there an expense you did not anticipate? Are you under budget because you didn’t spend the money? This can be a good thing (e.g., the printer is lasting longer than you anticipated), or it could mean you are failing to take the steps needed to realize your long-term goals.
Budgeting is not an exact science. It is unlikely you will ever spend precisely what the plan says you should. However, a budget that is wildly off the mark will do you no good. The key is to try to stay within a range that is reasonable, usually within 10 percent to 15 percent of projections.
The Self-Storage Technology Budget
The chart accompanying this article describes a typical budget for a self-storage facility. The key components are computer equipment, management software, training, consulting, technical support and Internet/website/e-mail services. The chart describes typical costs over a five-year period on an annual basis. When creating your budget, you should further break this information out by month or quarter.
An important function of the budget is to provide you reasonable projections of the life expectancy of each type of equipment. You should always plan to replace aging equipment on a schedule— never wait for things to break. For one, when you have to get something immediately, you will usually pay more for it than if you have a chance to shop around. Second, the disruption to your business caused by equipment failure can be great. Planning for change should allow you to replace the equipment seamlessly. It is useful to note that U.S. tax laws have changed to make it very easy to write off equipment.
Management Software and Tech Support
Management software is probably the biggest technology expense for a self-storage company. However, it is usually a one-time purchase that will last for many years. What makes this possible is the policy most software companies have to provide you a continuous stream of updates to your existing product, thereby keeping it up-to-date, fixing any problems, and adding new features and capabilities.
Technical support is usually provided on an annual agreement, which will allow you to contact the software company for assistance when necessary. While all facilities may need support from time to time, the frequency naturally increases with certain events: a change in managers, equipment failures, equipment updates, etc. A support agreement is essential because, in the event an operator has a problem with the software, you want him to ask for help rather than muddle through or make the situation worse by trying to fix things himself. Most software vendors provide agreements for technical support and regular updates. Often, they are included in the same agreement.
Our industry has a lot of managers who have learned to use DOS-based management software, but DOS is becoming obsolete. The transition from DOS to Windows can be extremely difficult unless training is provided. A good source for this training is your community college.
The transition to Windows creates other challenges. While most Windows-based software is actually easier to use than DOS, it often interacts with many programs, such as your e-mail program, Internet browser, credit-card software, access-control software, etc. Getting all these programs to work together requires a greater understanding of each component. This is where training is essential to getting the maximum value from the technology in which you have invested.
This part of your budget includes costs of accessing the Internet and hosting and maintaining your website and e-mail. Internet access will be through a dial-up connection, which uses your phone line, or a broadband connection (cable or DSL). If you are on dialup, you will have to pay for access from an internet-service provider (ISP) such as MSN, AOL, Earthlink or a host of regional companies. Costs are typically around $20 per month. Broadband connections cost anywhere from $30 to $70 per month, but are 10 to 25 times faster.
Your website will usually be “hosted” by a company that specializes in this service. This company will store your website on one of its servers and take care of all of the details, such as registering your domain name and making daily backups. E-mail service is usually included. Web-hosting can cost as little as $10 per month. You will also need to pay someone to handle the initial setup and design of your website. Most operators want the site’s look and feel to match their company’s logo, brochures and signage.
I often hear storage operators say they don’t want to provide Internet access at their sites because their staff will “waste time” on the Internet. My response is if someone is going to waste your time, they don’t need the Internet to do it. Giving your staff e-mail and Internet access will allow them to better serve customers and attract business away from your less-tech-minded competitors.
Ongoing or occasional consulting services can help you get the most from your technology investment. Examples include improving and automating home-office reporting and auditing procedures, consistently improving your website, and adding customer conveniences, such as the ability to rent a unit or make a payment online. Another valuable service is to use current, previous and prospective customer information to identify and make the most of marketing opportunities.
A Final Note
The budget discussed in this article does not include access-control technology. There are two reasons for this. One, it should actually be a part of your security budget; and two, the security needs of storage facilities vary greatly.
To summarize: A budget is a road map that describes the steps, timing and costs to realize your long-term goals. Create your budget by breaking expenses into their component parts so costs can be established for each. Compare actual results against your budget as a measure of performance and to improve your budgeting abilities. Do this regularly to meet changing realities and goals.
Michael Richards is the president of HI-Tech Smart Systems, maker of RentPlus® and Mini- StoragePlus® software for self-storage. Mr. Richards has been involved in the self-storage industry for more than 20 years, and has been a frequent speaker at industry events and a contributor to industry publications. He can be reached via e-mail at firstname.lastname@example.org; phone 800.551.8324; www.hitechsoftware.com.