Dispelling Old Myths

Dispelling Old Myths

By Cary F. McGovern

Recently, I overheard several long-time self-storage owner/operators and prominent self-storage consultants discussing records management. According to their conversation, records management in a self-storage facility is difficult to operate and make into a profitable venture.

Let the naysayers beware: It is a new era in records management. Today, it is actually quite simple to increase revenue and maximize profitability in your existing facility without new cost. But first, you must understand the business.

Differing Points of View

Of course, there are differing points of view on every subject. We all have our own and it is usually based on who we are, how we were raised and influenced by our parents, where we grew up and what our collective set of experiences are.

There is no question that records management is quite a different business from self-storage, in more than a few ways. However, some of the basic components are identical, and the "launching pad" is already in place.

Traditional Records Management--The Super Market

The three biggest records-management companies worldwide are Iron Mountain, Pierce-Lehey and Recall (formerly Brambles). In addition to these players, major cities throughout the world have several hundred full-service commercial record centers, usually with their facilities based within a downtown area.

The recent industry consolidation at the high end of the business has had an interestingly negative effect on these supermarkets and a positive one for new start-ups. The following are several of the key issues:

  • A growing resentment of the supermarkets as the "out-of-towners."
  • Anger regarding the permanent retrieval charge (known in the industry as the "hostage fee").
  • Inevitable price escalation and reduction in service levels.

Neo-Records Management: The Convenience Store

Hundreds of small commercial records-storage and retrieval centers have popped up around the world within existing facilities using non-traditional methods that optimize profits within existing related businesses, such as self-storage, moving and storage, courier services, and shredding or document-destruction industries.

Several important factors have allowed the local players to be more attractive to both local and regional companies, including:

  • Boutique storage firms can offer unique services designed to fit the exact customer requirements.
  • Vertical marketing enables tightly honed, industry-specific market attraction.
  • Local decision making allows for flexibility in pricing and service levels.
  • Relationship selling and customer-service strategies are enabled because of the principals' familiarity and involvement in the local business community.
  • Third-tier (see side bar) geographical business growth (40 to 75 miles from the city centers) has promoted faster service for the community records-storage center over the distant supermarkets.

The Myth

Commercial record centers require substantial capital investment and long-term payback.

Although this has always been considered true based on the traditional approach of building a records-storage business in a city center utilizing high-rise racking with the typical storage-density requirement, this is no longer the only way to build a records-storage business.

A New and Different Notion or Point of View

It is possible--and likely--that you can optimize storage revenue in existing selected self-storage units by an average increase of 2.5 to 3.3 times the industry average unit revenue.

So, what's wrong with the idea of increasing existing unit revenue, one unit at a time?

In order to do this, the following are several important issues that should be considered:

1. Racking that insures optimum density.

If you are going to use existing units for records storage, you are probably dealing with 8- or 9-foot ceiling heights. It is imperative that the right shelving be used. We have designed optimum configurations and have partnered with manufacturers to keep shelving-unit cost below industry averages as they relate to cubic footage in storage.

2. Software without a front-end investment.

The notion of buying software for records management may be a thing of the past. You can now lease software by the transaction and access it through the Internet. All you need is a computer, a modem, and a Net browser such as Microsoft Internet Explorer or Netscape Navigator. This method allows you avoid $20,000 to $25,000 up-front software and hardware cost.

3. Business process management to insure control.

Simple systems ensure control. Your operating systems must be simple and easy to use. Forms, transmittals, work orders, labels, bar codes and reports must be absolutely user friendly to both your staff and customers. FileMan operating processes ensure connectivity with the Web-based transaction software for ease of use. Many of the activities are triggered directly by your customer without any of your staff being involved with the transaction.

4. Appropriate utilization of personnel.

Many self-storage operators are concerned about the use of existing personnel for additional records-management chores. Your personnel time can be minimal while easily outsourcing some of the activities.

5. Courier relationships that work.

Selecting and negotiating an agreement with a courier is an essential component of this method. There are important aspects of the courier business that need to be understood to ensure your revenue potential. My column in next month's Inside Self-Storage will discuss selecting and negotiating courier services for your records-storage operation.

6. Leasing can help you to leverage costs against storage revenue.

Developing a strategic leasing plan for shelving, equipment and boxes can spread the cost of converting one unit at a time, as you bring in new business.

7. Marketing plan and materials can ensure immediate profitability within the first 90 days.

This marketing plan and approach allows the self-storage operator to become profitable unit by unit within 90 days of bringing his first box into storage. The plan is both simple and inexpensive to implement.

Our experience shows that self-storage facilities are well-positioned to be either boutique record-storage resources or vertical marketers within the city centers, and are particularly well-positioned for records storage in the third tier or in smaller communities.

Remember, this concept did not even exist two years ago. It has become an alternative because of changes in the market, focus of industry leaders and inexpensive technology becoming universally accessible. You can participate with little risk and very little cost.

Old myths and points of view constantly change. This one has changed for the better.

Records-Management Growth in the 'Third Tier'

Many cities have grown into what sociologists call the "third tier." What was the traditional city center many years ago has now grown to encompass the suburbs (the second tier). It is expanding into an area 40 to 75 miles away from the center-city. This phenomena brings businesses into office parks and settings that are closer to where people want to live.

Because of this movement, records storage has also shifted into the third tier. Additionally, service industries, such as healthcare, have also greatly expanded into these areas that formerly were considered rural. Medical-records management in smaller communities now has the same problems that its big sisters in the city once had.

The move to the third tier opens up great potential for the self-storage entrepreneur since the distance is too great for the traditional center-city operators to easily deal with. I have observed the largest growth in records-storage opportunities in the third tier.
--Cary McGovern

Regular columnist Cary F. McGovern is a certified records manager and owner of File Managers Inc., a records-management consulting firm that also provides outsourcing services, file-room management and litigation support services for the legal industry. For more information about records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, Abita Springs, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected] or Web: www.fileman.com.

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