Industry Overview: Fee Management
|Copyright 2014 by Virgo Publishing.|
|By: Mel Holsinger|
|Posted on: 04/09/2008|
The concept of third-party self-storage management started to become popular in the '60s and 70s when facility owners decided a) they had more important things to do; b) they did not like or were not capable of handling all operational functions; or c) they recognized that outside management companies had the experience and knowledge to do it better. The opportunity for third-party management has been growing ever since.
Many of the first management companies were rooted in apartments, mobile homes, shopping centers or other similar operations. As the concept of self-storage grew, so did the role of the management company, as numerous aspects of operating the business became more specialized and important to the profitability of a facility.
At first, most operators looked around and found "caretaker-quality" retired couples who were looking to supplement their income or work in exchange for free rent. For the most part, records were kept on a simple one-write bookkeeping system, and it was relatively easy.
Rental agreements were simple forms, often plagiarized from another industry and modified to fit the needs of self-storage. Buildings were simple, with garage-type and swing doors, usually selected for their inexpensive price and installation ease. Most self-storage entrepreneurs laid down gravel driveways, put up a chain-link fence and installed a manual gate that was closed at night. Manager apartments were small, offices were barely large enough to accommodate just one customer at a time, and our idea of security was to use the manager’s pet dog, which may or may not even acknowledge a stranger on the premises.
As the business concept caught on, owners were the management company, they hired their own bookkeeper to do the banking, pay the bills and keep simple records. As the demand for rental space became greater, more time was needed to ensure that the managers were collecting all the rents and depositing them properly. When tenants failed to pay rent, we had to devise a system to "go after them."
In time, the secret of self-storage got out and other entrepreneurs tried to get their piece of the pie. We also entered what has become our litigious society, or better put, if customers did not get what they wanted (free rent, free insurance, impenetrable security), we began to get sued. And of course, let us not forget that our respective governments—including the city, state and federal—wanted their share via property taxes, sales taxes, employment taxes, etc. This in turn created more work for the owner and made all operators wonder whether we should even be subject to these taxes.
Management companies were formed and began to put more emphasis on marketing the facility, setting up sophisticated reporting systems including inventory controls, auditing accounting and so on. They also recognized the need for better trained managers, for quality maintenance programs and the need to be pro active in getting lien laws passed in their states to assist in collecting delinquent rents and, if need be, auctions of customers goods or eviction processing.
Management companies were instrumental in helping to fight sales tax legislation, in forming local, state and national associations, and they continued to take an active role in all of these functions. The specialization of these companies has allowed the industry to evolve into a more professional status among the institutional investment world, and they have been effective in helping the industry grow to the size that it is today.
The role of the management company has changed considerably, along with the evolution of the industry. However, the basic concept remains the same as what it did in its original stages: to allow an owner to be free of the day-to-day operational functions while enjoying the growth and profitability of the business.
In return for a fee, management companies today facilitate numerous functions such as accounting, computer knowledge, legal understanding, marketing, maintenance, customer service, human resources, disaster (fire, flood, theft, etc.) management, etc. They have continued to help the industry develop into highly efficient and sophisticated organizations, challenging the industry to provide better products and services.
We all have been faced with competition, the challenges of improving hiring/training programs for onsite personnel, and creating innovative marketing programs. Management companies continually polish their credentials to meet the ever-changing needs of efficiently and proficiently operating facilities. And they can usually do it better because of their wealth of knowledge and experience in working with a wide variety of self-storage sites.
Good quality management companies will help the industry by continuing to provide professional services at affordable and competitive fee structures. These companies will be the foundation for facilities facing a highly competitive future. The expectation is management companies will rise to the occasion, improving services and bolstering the industry.
Take the time to interview several companies before you make your decision; it could be one of the most important decisions you make in your business plan. Not all management companies are the same, and owners should be very careful selecting the firm that will operate their facilities. A proven experienced, trustworthy and knowledgeable management company may often be the difference in facility’s profitability or failure.
As an owner of a facility, my role is to see that the management company fulfills its duties and manages my site in a professional capacity. As a management company owner, it is my role to see that we operate all the facilities for our clients in a professional manner and that, as much as possible, we alleviate the owners from the headaches associated with daily operations. It is a role I will continue to embrace.
Regardless of which hat I am wearing at any given moment in the day, I am excited about the challenges our industry is facing this decade. I hope that you are too, knowing you are making the best decisions for managing your facility, now and in the future.
Mel Holsinger is the president of Tucson, Ariz.-based Professional Self Storage Management, which offers self-storage facility management, consulting and development services. He is also a frequent speaker at industry conferences and a regular contributor to Inside Self-Storage. For more information, call 520.319.2164; visit www.proselfstorage.com .