Are Monthly Rates a Thing of the Past?
|Copyright 2014 by Virgo Publishing.|
|By: Jim Chiswell|
|Posted on: 03/01/2003|
My life and its events are always in a state of flux. The only constant is change itself. Our self-storage industry is no exception.
One thing I thought was a rock-solid foundation of our business was the concept of monthly rent. Whether you prefer the first of the month or the anniversary date of a customer's move-in as the starting point of occupancy, paying a monthly rent has been the standard. Sure, prorating for partial months upon move-in has been industry practice, but even charging a minimum of one month's rent may be changing.
I mystery shop hundreds of stores each year and, ever so slowly, I am seeing changes in this fundamental principle. A number of stores also appear to be willing to prorate for a customer as he moves out. This creates a daily rental rate. This is not just reserved for the larger companies--single-store operators are doing it as well.
If you ask those managers for their rental rates, they will still reference the monthly cost of $150 for a 10-by-10. Perhaps they should be offering a 10-by-10 for $5 per day, assuming a 30-day month. I know this flies in the face of our normal business practice, but being willing to prorate in and out establishes a new reality: a daily-rental system. The customer only pays for the days he uses.
I know there are a few stores out there that charge a full month no matter how many days are left when a customer vacates. I remember having a customer move out on the 14th after having paid for the month and being able to rent that same unit on the 15th, effectively doubling the rent on that unit for a period of 15 days. I remember having greater than 100 percent financial occupancy some months at stores when I managed Sovran's portfolio of properties years ago. I do not think most of us will see those days again.
There are a few operators who have set up daily rates for a prospective customer who insists he only needs the unit for 10 days. But in every instance I know, they applied a premium daily rate. Instead of $5 a day for that 10-by-10, they asked $8 or $10 per day. A 15-day rental of $10 per day would generate the same monthly rate you could hope to achieve. The major benefit to this practice is human nature, because people generally stay much longer than they initially anticipate.
During my two visits to London last year, I spoke with many operators renting spaces on a weekly basis. They, however, had a different motivation. Follow the math with me: If you charge a monthly rate of $150 for a unit, that earns $1,800 for the year. Most people consider a month to contain four weeks, which would mean your weekly rental rate was $37.50. If multiply that $37.50 by the 52 weeks of a year, however, you actually earn $1,950. If the unit remained full for four weeks, this is an 8.3 percent increase over the monthly rate. Across the United Kingdom and Europe, entrepreneurs are building a new self-storage industry. Their weekly-rental strategies appear to be something we should all at least consider.
I realize most operators experimenting with alternative-period rentals are doing so because of competitive pressure. I urge you to put together a spreadsheet to calculate the positive or negative impact a shift away from monthly rents could have on your bottom line.
Employment Potential Increases
I have watched the transition of store managers during my 18-year participation in the storage industry. In my early years, I was never able to walk into a self-storage store without finding a senior couple behind the counter. In many cases, they presented a folksy image and a laidback style.
Then industry articles and speakers voiced concern over the lack of professionalism they thought the industry's managers portrayed. Many said, "You can't have a professional manager who lives on site!" My conclusion is a manager can be on a second or third career living in the store's residence and provide just as professional an image and positive overall rental experience as a younger, nonresident manager. All along, the truth has been it is the individual that matters. It is their knowledge that counts. The direction, support and tools they are given make the difference from one manager to another. Some owners have yet to discover or appreciate these facts.
The great news for successful managers across the country is there are many more opportunities for them to consider. Managers at smaller stores with smaller budgets can advance to larger stores with larger budgets. Talented managers can move to regional- manager positions and from there to vice president of operations. I know owners don't want to hear this, but there are opportunities for personal and financial growth, regardless of a manager's age. I am excited about the future and promise of our growing, multibillion-dollar industry for skilled managers with a customer-service attitude of success.
You Don't Need Oprah to Have a Book Club
Although there are many social and political issues on which Oprah and I disagree, I admire her. No matter what your viewpoint about all she does, no one can take away the fact she has been more instrumental in encouraging people to read books than any individual in the history of the United States. Many others, like Kelly Ripa from Live with Regis and Kelly and Katie Couric from the Today Show rushed into the void created when Oprah announced she would choose random rather than monthly book selections.
But you don't need anyone's help to create a book or article club for yourself. Consider teaming with other managers or owners to read a book or industry articles. Then compare notes by phone, fax or e-mail--or even at the corner coffeeshop. Ask each other what you have learned. What motivated or inspired you? Are you planning to do something different in your business or personal life as a result of what you read? This can be a great way to build new relationships and will certainly help enrich you as a person.
Statistically, very few people read books following high school or college graduation. Those not reading are missing a great chance to continue to learn and profit from the experience. Please let me know if you get back to the books. As the first selection for your book club I suggest Rudy Giuliani's Leadership. You won't find checklists of things to help you in the office, but you will find insights into one of the people who led our nation through some of its darkest hours.
Jim Chiswell is the owner of Chiswell & Associates LLC. Since 1990, his firm has provided feasibility studies, acquisition due diligence and customized manager training for the self-storage industry. In addition to contributing regularly to Inside Self-Storage, Mr. Chiswell is a frequent speaker at Inside Self-Storage Expos and various national and state association meetings. He has introduced the new LockCheckTM inventory data-collection system to the self- storage industry at www.lockcheck.com. He can be reached at 434.589.4446; visit www.selfstorageconsulting.com.