Records Management 2003
Copyright 2014 by Virgo Publishing.
By: Cary F. McGovern
Posted on: 10/01/2003



 

Records management has become a dynamic revenue producer in self-storage. Technology, competitive advantage, access to clients, simple solutions and low entry cost all add up to big bucks for operators willing to add this service. This article focuses on why 2003 may be the year to consider it. There is no better time than now to add records management to your existing self-storage operation—for several very important reasons. This article attempts to provide the advantages of building or operating a joint self-storage and records-management operation within the same facility.

Over the past seven years, I have written a monthly column on records management for Inside Self-Storage. And in that time, I have touched briefly on many of the considerations for building a commercial records-storage business in self-storage. At first, many people were skeptical because the two do not seem compatible.

Yes, it is true records-management services require active participation with clients’ business records. Yes, it is quite different from self-storage. Nonetheless, records storage can be a maximum provider of ancillary revenue if you approach it with your eyes open and a focused business strategy.

There are two primary records-management strategies that can be implemented. Each has several potential tactics that can be employed. Let’s take a look at the two and how they differ.

Nontraditional Strategy

This strategy has the lowest cost and is the easiest to implement. Although it’s certain to work in others, it succeeds in four business types that most often extend themselves into records storage:

  • Self-storage
  • Moving and storage
  • Courier services
  • Document-destruction services

Each of these business types has its own advantages, but they all have one thing in common: Their customer base includes businesses that need records-storage services. Self-storage facilities have a huge advantage over the other three. They already have records in passive storage in some percentage of their existing storage units.

I estimate between 5 percent and 10 percent of the selfstorage units in North America are already storing some business records. If we do the math for the number of potential boxes, we find between 40 million and 60 million boxes in self-storage. That number accounts for between 75 million and 100 million billable cubic feet of storage sitting idly.

There are two key advantages to converting clients from passive self-storage to records management. First, you convert your existing billable space from the square foot to the cubic foot. In effect, you now can rent the air space in your units. Second, you convert a very tenuous 30-day lease to a permanent one.

Nontraditional records management is aptly described by its name. It is simply a different way to build a recordsmanagement business. It is not at all like traditional records management. This strategy uses technology and unique operating methods that have been developed over the years in similar industries but have rarely been applied to a traditional records-management model. The nontraditional model uses a vastly different selling method as well. Let’s look at the components of the nontraditional method and discuss why it is so unique:

  1. FACILITY—If you currently own a facility, leverage your existing assets. One of the first questions most operators ask is, “How much space do I need?” The answer is, as long as you have existing space or the ability to add more, use whatever you have. Yes, there is an optimum facility size, but it doesn’t seem to matter at the beginning. Using what you have gets you by the start-up process with very little new cost.
  2. SHELVING—Buy only what you need when you need it. Of course, there are cost breaks and freight factors to consider in the decision, but the main ingredient is shelf design. Use only the proper shelving that will maximize storage your current space.
  3. SOFTWARE—All three of the major recordsmanagement software companies have a small-business edition that includes one PDT (portable data terminal) barcode scanner, training and support for the first year.
  4. TRAINING AND SUPPORT—This is available from consultants in the records-management industry. It is important your training be repeatable and simple. Your work processes must be limited to only a handful.
  5. COURIER SERVICES—Outsourced courier services reduce the need for vehicles, personnel and all the associated fuel and maintenance items. A model already exists to control and manage outsourced resources.
  6. LABOR—There are 16 roles and responsibilities in a records-center operation. Of those 16, 14 can be outsourced. The secret to outsourcing any administrative function is to manage the outsourcer to the contract terms. It should act as you would and be invisible to your client as an outsourced resource. There are four ways to staff any business: full time, part time, temporary or outsourced. Outsourcing activities can give you more control and cost management than the others. It is essential to have specific measurable terms to the outsourcing agreement.
  7. SALES—Selling in a nontraditional facility must be done in incremental steps. You and only you will draw the line at the level of sales you will use. Suffice it to say, the more levels of selling you entertain, the more sales you make.

Having a full-time sales person delineates the difference between nontraditional and traditional records-management sales. Let’s look at the nontraditional selling model:

LEVEL 1—EXISTING RECORDS-STORAGE CLIENTS

Every self-storage company stores business records in passive storage units. It is likely, depending on the location of your facility, between 5 percent and 10 percent of your existing clients have business records stored in your facility. You probably already know who they are. If you do not know, this is always the place to begin.

LEVEL 2—ALL OTHER EXISTING BUSINESS CLIENTS

All businesses have records. Therefore, your current business clients are your first target for sales. They have business records somewhere that are probably problematic for them. Records take the lowest level of importance in a business—until they take the highest level. There is an old saying in the industry, “Records go from the basement to the boardroom overnight.”

LEVEL 3—OVER-THE-COUNTER SALES

You have a captive audience as soon as contact is made at your service counter—you simply need a strategy. Years ago, in the banking industry, management began to understand that, nine out of 10 times, the teller was the primary contact for each customer. What a marvelous sales opportunity! But tellers are transaction-oriented people, not salespeople.

The banks then devised methods to assist their tellers in using simple repeatable selling methods. The CIF (customer-information file) was born. When the teller encountered the customer, his computer terminal looked at the transaction, determined “the best sell,” and flashed a message on the teller’s screen, such as “Give the customer a consumer- loan brochure.” It took the thought process away from a transaction-oriented person. The same can be true at your sales counter.

You must have a selling strategy, a way of identifying prospects, a script, a cost benefit and a closing process right there at the counter in a simple, repeatable method. The counter employee must be trained, and the method must become second nature to him. It has to be simple and take little effort. It should be repeatable, because you certainly will have others who will be trained to use the method over years.

LEVEL 4—OTHER LOCAL SELF-STORAGE CLIENTS

Perhaps the biggest trick of all is attracting accounts from existing self-storage competition. This level takes thought and strategy. It is fertile ground. Many clients’ records volume grows in self-storage until it becomes too large to control. Then it becomes fodder for the local commercial records-center operation or your self-storage competition— they will try to take it away from you. And it is easy for them to do so because of your simple 30-day lease, during which you have had little or no interaction with the client.

The first sign you are losing an account is a truck coming to pick up the spoils of its sales. Self-storage has been considered helpless in the past because its 30-day lease has no penalties. Records-management contracts require a term of one or more years, an evergreen (self-renewable contract), a retrieval fee, plus a permanent retrieval fee to exit the facility. These are considered permanent leases because of how difficult it is to get out of them. You can attract the local self-storage records client base and keep it forever at three to five times the yield of square footage in self-storage.

LEVEL 5—AGENT SALES

As a businessperson and entrepreneur, you are likely connected to other peer business owners in your community. Operators of office-supply and equipment stores, filing-system products, imaging services, computer-support companies and many others are in the field working with business clients. You can give them an incentive to become an agent for you by paying them a commission for leads or closed agreements. This is a simple and workable method to root out small, under-the-minimum accounts that are generally not worth a full sales effort. The model for training and a commission structure already exists and is proven to work.

LEVEL 6—PART-TIME SALES

Owners, equity partners and managers can become valuable part-time sales agents for your company. Part-time selling requires a process just as full-time selling does. Some operators employ part-time sales representatives who are compensated on a commission basis and set their own work schedule. Outsourcing sales can be an inexpensive and valuable practice; but you must train the sales staff and manage the sales process for it to be effective.

LEVEL 7—FULL-TIME SALES

This is first of the two components that separate nontraditional from traditional records management.

Traditional Strategy

As I mentioned earlier, traditional commercial records management is “how it has always been done.” Easily 95 percent of the industry got started this way. It takes more capital and much more time, and it does not use the leverage of another business to launch. It requires a commitment of a facility, usually 10,000 to 20,000 square feet, a full-time operations manager and a full-time salesperson to start. It takes a minimum of two to three years to get to a breakeven point. Although this has proven to be a sound business model over the 50 years of this industry, it is certainly time for a fresh new look.

A nontraditional records-center operation can easily vault itself into a traditional one by “shoehorning” into a traditional model. As I mentioned earlier, there are two major differences between nontraditional and traditional records management:

Facility Size. Is there an optimum facility size with which to start? I have come to some conclusions on this question, and I admit they are arguable. I prefer a first building of 10,000 square feet with a 30-foot ceiling. I will use this size as the basis of an example calculation.

A nontraditional records-center operation can easily vault itself into a traditional one by “shoehorning” into a traditional model. Using an industry standard, 300,000 square feet of overall cubic feet is reduced by 45 percent. This will approximate the yield of billable box positions. Every warehouse varies, and the actual yield may be between 40 percent and 52 percent. This variable exists because of roof slant, internal columns, warehouse and office-space configuration. But for planning purposes, the 45 percent factor is a good rule of thumb.

This example yields 135,000 box positions. A box position is a standard 1.2 cubic foot letter/ legal records-storage container. Using industry averages of 25 cents per cube and 65 percent additional service revenue, the annual gross yield for this space when full is $801,900. Self-storage facilities can reap a much higher per-unit yield, and traditional records centers can move the service-to-storage ratio to 1:1 or greater.

Full-Time Sales Effort. A full-time sales effort is required because you need to fill your facility as quickly as possible to get to the break even point. Full-time sales efforts require three components to be part of the process:

  • Qualified and well-trained sales representatives.
  • A proven selling method.
  • A sales-management process that is measurable and manageable.

A realistic sales goal is 100,000 cubic feet of billable storage within 30 months, which is achievable—albeit difficult—if you employ the three components. Using these—along with a capital structure that can support them—you can develop a profitable traditional records-management business quicker than the industry average.

Back to the Original Premise

What makes this the right time to strike out your course in commercial records management? The factors abound, particularly if you have a self-storage facility or are considering one. You do have several choices to make right from the start:

  • Do I start with a nontraditional facility within the walls of my existing or planned facility?
  • Do I build a traditional facility within the walls of my existing or planned facility?
  • Do I begin with nontraditional and leverage my existing assets until I can shoehorn my records business into a traditional one?
  • Do I begin nontraditional and remain in it while, focusing on only a high-yield, low-volume, low-retrieval sector of the business?

You really do not have to make the decision yet. You can begin with the low-cost nontraditional model first and move step-by-step up the sophistication levels until you decide to stop. The industry is adding more new service providers every year. The market is expanding and doesn’t seem to be slowing.

The need for records management is greater now than ever, and you already have a facility and records to start your business. You can join the hundreds of self-storage operators who have made the commitment and followed proven paths to successful operations.

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 fileman@fileman.com; www.fileman.com