What Would You Do? Tips for Managing Your Self-Storage Mulah
|Copyright 2014 by Virgo Publishing.|
|Posted on: 03/05/2013|
The following is part of an exciting 2013 content series entitled "What Would You Do?" ISS asked managers and owners how they would react in difficult situations that can arise at any facility. We then asked experts to advise on their recommended course of action. To see all articles and slideshows in the series, enter code WWYD13 in the search box at insideselfstorage.com. The complete sequence will roll out over several weeks and be available in full by March 10, 2013.
How a self-storage operator manages his money has a huge impact on the success of his business. Rental rates, discounts, collections and expenses are all key components of the equation, but they're not always simple to control. You've got to consider your competition, your long-term goals and, of course, the needs and wants of your customer base.
When delicate money-related issues arise, do you know what to do? Is what you would do the same as what you should do?
Inside Self-Storage got the inside scoop from professionals in the field to learn how they would proceed in specific but common situations to preserve income and generate even more revenue. They were asked "What Would You Do If ...?"
The answers were provided by members of Self-Storage Talk, the industry's largest online community. We then asked professionals from self-storage management companies to tell us what operators should do in each case. Our well-known experts are Linnea Appleby, president of Lime Tree Management in Sarasota, Fla.; Anne Ballard, president of training, marketing and developmental services for Universal Storage Group in Smyrna, Ga.; and Kevin Bledsoe, district manager for Storage Asset Management in York, Pa.
What would you do if a customer asked you for a discount?
Most respondents agree it depends on the situation and what—if any—discounts the facility may be offering at the time. “I offer a variety of discounts, some seasonal, some just as a courtesy,” says an anonymous manager in Oklahoma. For example, this might include a discount for military, a one-time student discount or "second month free" special during the slow season. “The more full I am, the easier it is to raise prices down the road,” he says.
Gina Six Kudo (Gina6k), an SST moderator and general manager for Cochrane Road Self Storage in Morgan Hill, Calif., agrees giving a discount depends on the circumstance. “If they are asking us to match prices, we do not. If it is for a senior or military-type discount, we'll take care of them on a case-by-case basis.”
SST member StrongTeam, on the other hand, sticks to a new-customer special. “We only have one new-customer special and that is all we can do. It is not an option to give a discount.”
What SHOULD you do?
Appleby: Politely explain why you are worth full price.
Bledsoe: Customers ask for discounts for many different reasons. Sometimes it’s because they’ve rented with us for a long period of time or they have multiple units and want a quantity discount. We try to work with every tenant to find out why they’re asking for the discount and we resolve each request differently. Our managers work closely with their district managers to manage rates and resolve discount requests on a case-by-case basis.
What would you do if you had to execute a rent increase?
Rent increases “are part of the business,” says the Oklahoma manager, who previously worked for a company that was afraid to regularly raise rates, but now works for one that handles them “sensibly” by basing them on occupancy trends for particular unit sizes. “As utilities rise, taxes raise, and other expenditures that we have to make go up. It's only fair that we ask for an extra $5 from a couple hundred people to help us keep up with the raising costs and continue to provide the customer with a superior storage product,” he adds.
The majority of respondents say rental increases are handled systematically, and they stick to some kind of annual calendar or other mile mark. “We raise rents on the yearly anniversary, like clockwork,” say Richard and Beverly Haessler (RichardandBeverly), SST members and resident managers at Park Inn Storage in Odessa, Texas.
Even though rental increases are a mandatory part of being a manager, Kudo reminds operators to keep them in check. “Once a year is sufficient if you do your homework prior to raising rates. There is nothing worse than raising rates, then three months later doing it again. But I am grateful for the competitors that do business this way; it means more dissatisfied customers for them, which equates to more happy customers for us!”
Above all, be honest with customers, cautions the Oklahoma manager. “Honesty with customers as well as showing how you are investing the customer's money goes a long way to making rent increases palatable.”
What SHOULD you do?
Appleby: Understand the requirements of the law and do it. Some states require 30 days notice and/or a method of delivering the notice. Train the staff on how to overcome and handle increase objections. Rent increases are a standard part of this business. When done properly, they not only increase income but create vacancy where needed. Giving managers some authority to reduce an increase if a tenant complains is a great way to get more money for the unit, retain the customer and create goodwill.
Bledsoe: All tenants receive an annual increase, and at some properties, we may have more aggressive rate-increase plans depending on occupancy. Rent increases are a part of our business plan to optimize revenue for the investors we work with on a monthly basis.
What would you do if a tenant told you he couldn’t pay rent because of some hardship?
Listening is key when to comes to dealing with a tenant who can’t pay. “Listen carefully to what the tenant is saying, read body their language, watch their face while they are talking, and make a judgment on what their story is,” says Bob Taylor (astro), an SST moderator and facility manager of Blue Ridge Self Storage in Cashiers, N.C. “If you believe them, make every effort to help them out—free month's rent, discount, whatever.”
The next step is finding a payment solution that will help the tenant but still get the bill paid in the long run, says Robert Madsen (Madman), an SST moderator and president of U-Lock Mini Storage in Surrey, British Columbia, Canada. “Sometimes it's a payment plan, downsizing or disposal of some of the goods.”
Operators should also make a record of the transaction. “We formalize any new payment plan in writing, always lining it up with the lease in mind. If the tenant doesn't meet his agreement or lies, it doesn't make us want to reward the behavior,” Madsen says.
Lying about the hardship is a deal-breaker for most operators. “Once I feel taken advantage of, lied to, etc., I won’t go out of the way to help that customer anymore,” says SST member rich-pms. Conversely, tenants will remember the manager’s actions. “I've worked with several customers that got themselves out of the hole they were in and still thanked me months later!"
What SHOULD you do?
Appleby: Storage operators are in business for the money, but sometimes it’s hard to not get caught up in the drama of a tenant’s life. The solution depends on the situation, but the goal is always the same: to get the unit back and re-rent it to a paying customer.
Understanding the nature of the hardship will set the course. Is it short- or long-term? Are they expecting a tax refund or insurance settlement? If they can provide a date as to when they will pay, create a payment plan so you both have a firm expectation of when the payment will come. If there seems to be no long-term solution, make a deal for part of the balance due with the understanding that they move out within 24 hours.
Ballard: Sometimes you have to counsel the customer in getting rid of their storage unit, since they obviously won't be able to afford it. I recently overheard one manager working with a customer to get him into a smaller unit since the customer indicated he did not have a full unit. The manager was also helping him get current on his bill so we could assist him in transferring to a smaller unit. The manager was very artful in dealing with the customer and making sure he got the account current, then helping reduce the payment and unit size for the customer going forward.
If a manager has seen the customer cannot handle the payments, he can suggest a myriad of things to get him current and help him reduce the obligation going forward—anything to avoid selling the unit at auction. Sometimes when we see a customer chronically late, we ask if there’s anyone he knows who will let him store for free, or someone at his church or work who would help him so he doesn’t need to rent storage and pile up debt. Some of our teams are super at collecting all accounts prior to auction each month, as they’re passionate about not letting customers get to auction.
Bledsoe: We would review the tenant’s account to see if there’s a history of being late or if he’s offered this same type of reason for not paying rent in the past. If it’s the first time this issue has come up, or if he’s had issues in the past and brought his account current, we would offer several resolutions. First, we may ask the tenant to pay a portion of the past-due rent and vacate to avoid this type of issue in the future. Second, we may identify a payment plan to bring the account current within 60 days, and the plan would be identified in writing. If the first two attempts fail to resolve the problem, we would move forward with the auction process per the state's required guidelines.
What would you do if you found money in a storage unit?
While your first response may be, “Jackpot!,” finding money in a unit is usually not something operators hope for. Much like finding a wallet on the floor at a grocery store, moral people will find they have an obligation to do right by the poor guy or gal who lost the greenbacks. “Try to contact the last tenant for that space. If unsuccessful in this attempt, declare a special bonus for the employees of the facility. Personally, trying to split $.58 among employees is tricky,” Taylor jokes.
All kidding aside, SST member Satyra From PhoneSmart says it really depends on the amount. “Petty cash could be taken care of with a follow-up call to the owner of the unit. A large sum of money definitely needs to be forwarded to the authorities, and if it does rightfully belong to the owner of the unit, then they'll have proof of where they got it from.”
When it’s a unit scheduled to go to auction, storage experts agree, the money stays in the unit and the auction buyer is the lucky one. List T., an SST senior member, said she found a 5-gallon water jug brimming with change in a unit scheduled for auction. The amount was even enough to pay the storage debt. “Unfortunately, we couldn't get the tenant to answer his phone, return a phone call, respond to an e-mail, etc., to get permission to pay his past due rent with the change, which I was willing to roll up and take to the bank to help him out. So the jug got auctioned off with the rest of the unit when the time came.”
What SHOULD you do?
Appleby: The only way an operator would find money is if it was lying around in the unit when the lock was cut for auction, which only happens on TV. Money in the unit will belong to the owner of the unit or the bidder who purchases the unit. Occasionally, it is the police that arrives with a search warrant when large sums of money are suspected to be in a unit. This is drug or counterfeit money. The authorities will determine what happens to that money.
Ballard: This would depend on when and how the discovery was made as to which actions are necessary. If after the customer moved out and left money, I would be shocked and have never heard of this happening. However, if discovered while auctioning a unit, I personally sell the entire contents as one. This is great for the new owner, but I have not had this happen either, with the exception of a coin collection and the bidder was very happy.
If we feel the money is counterfeit or possibly involved in some sort of illegal activity, we first call our attorney for explicit instructions. If the manager finds change on the floor at move-out, he’s certainly welcome to it as the customer was responsible for taking everything out and left it there.
Bledsoe: If the unit was recently vacated, the tenant would be contacted to see if the money belongs to him. The manager would contact the district manager to notify him of the money that was found. The property manager would be required to make a “special deposit” in the property bank account with only these funds on the deposit slip. The additional funds would be identified by our accounting department in the event that someone may attempt to claim them in the future.
To read more great content in the ISS "What Would You Do?" business-challenges series, type code WWYD13 in the search box at insideselfstorage.com.