Easy Money: Add-On Sales Strategies Can Really Add Up for Self-Storage Operators
Copyright 2014 by Virgo Publishing.
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Posted on: 11/03/2013



 

By Rob Kaminski

A customer sitting across from me at dinner one night leaned over the white tablecloth and whispered, “Rob, the reason I’m buying you dinner this time is simple: For years you showed me how to make more money. A lot more money. And after all, isn’t that what this self-storage business is all about?”

For more than 25 years, I’ve crisscrossed the country supplying self-storage facilities with retail products—you know, the locks, boxes, tape, packaging materials and so on that many operators refer to as “ancillary sales.” This particular customer has been in business even longer, so when he gave me a whole new perspective on our industry, I listened and learned. I’d like to pass on some of his wisdom.

Expanding the Core Business

No one disputes that unit rentals are the heart of self-storage and should be an owner’s primary concern. But too often, getting locked in on the “core business” wards off consideration of other revenue streams. Some of you might think, “We can’t let small change distract us from our primary money-maker.” OK, but even for some old-school operations, ancillary sales still account for about 5 percent of revenue. Further, that 5 percent is often made with barely any effort! Facility managers can passively sell a few locks and maybe some tenant insurance and generate an additional 5 percent! Not shabby for mere add-on sales. If those same managers boosted rental profit 5 percent, they’d probably be made employee of the year.

If you owned a gas station, what would be your core business? Gasoline? Sure. But would it surprise you to learn that, on average, gas stations make most of their profit on non-fuel sales? The bottom line is making money is every business owner's primary concern. So focus on your core, but keep your eye out for other money-making opportunities.

Increase Traffic to Increase Occupancy

The theory goes that if more people drive by your site, you’ll get noticed and business will go up. Yet it’s a manager’s cliché that a first-time customer will say, “I must have passed this place every day, but it never registered. How long have you been here?” Frustrating, isn’t it?

You can’t necessarily increase the traffic driving past your facility, but you can increase the amount of traffic that stops at your business with strategies that will get you noticed and remembered. The key is to engage in retail sales unrelated to conventional self-storage. Here are a few examples:

  • Packaging: Even non-storage customers need professional packaging from time to time. List your business under “moving” and “moving boxes,” “cartons” and “packaging.” Use big outdoor signage. Offer quantity discounts. Become the neighborhood packaging center.
  • Pack and ship: Sell your materials and packing expertise. Arrange to be a pickup point with UPS, FedEx and/or DHL. These companies offer commercial rates to local businesses.
  • Truck rentals: Work with a company like Penske or Budget to be one of their rental outlets. You can rent trucks, dollies and mats, and sell more boxes.
  • Propane-tank rentals: If you have an easily accessible location, you can develop a lot of loyal customers looking to refill their barbecue tanks. Best of all, investment, labor and space requirements are minimal.
  • Records storage: In a commercial or corporate campus area, this can be a major revenue stream. Plus, every employee of your records-storage clients is a prospective tenant for you.
  • Wine storage: This requires climate control and some redecorating, but it can bring you commercial, as well as wine-lover, accounts. Offering wine storage sets you apart from your competitors, and it seems upscale to customers.
  • Shelving rentals and sales: This can be an add-on sale for individuals and businesses. Stick with serious warehouse-grade shelving because it lasts longer and is hard to find in consumer stores.

What these few ideas have in common is they don't require customers to need self-storage to visit your facility. Consider this type of sales strategy as advertising that pays you rather than the other way around. Best of all, every one of these sales can help increase consumer awareness of you in your local marketplace.

Does it work? I know of a self-storage facility in the Gulfport, Miss., area that offered truck rentals, pack and ship, packaging, moving supplies, propane, postal boxes, and even notary services. It had two counter employees who were busy all day. Its retail sales accounted for four to five times the average, and occupancy was always at maximum.

When I asked my aforementioned dinner companion if ancillary sales were really that important to a business as large as his, he laughed and said, “Let me put it this way: When I put pencil to paper, my retail revenues were the dollar equivalent to adding several more rental units without the construction costs. Moreover, with your help, I can grow my retail business and, in a manner of speaking, ‘grow’ additional rental units of income.”

Pump Up the Value

During dessert, my friend shared his investor’s outlook. “Rob,” he said, “every good self-storage pro is always re-estimating the value of his property and business. And when the day comes that someone shows interest in this facility, the annual retail-sales income I’ve enjoyed over the years will be multiplied by the agreed upon cap rate and added to the value of the property. Not bad for just ancillary sales, right?”

It was a great dinner. My customer picked up the check and left me with four retail truths worth remembering.

  • Retail-sales income is as important as rental income.
  • Retail sales can increase occupancy rates.
  • Retail sales offer growth when you can’t make your facility larger.
  • Retail sales have real value at re-sale.

The insight you can glean from your customers can be eye-opening, and the positive impact ancillary sales can make to your bottom line may prove invaluable to your business.

Rob Kaminski is vice president of Supply Side USA, a national distributor of packaging, moving and storage supplies for more than 50 years. He has helped self-storage owners improve their retail sales for more than 25 years. He has written numerous articles on the topic and speaks at industry tradeshows. For more information, call 800.305.6110; e-mail sales@supplysideusa.com; visit www.supplysideusa.com .