By Cary McGovern
Perhaps the most difficult thing to do when starting up a records-storage business is determining how to price your services. This article focuses on the best ways to do that, based on competition and other important characteristics.
Rule Number One: There Is No Standard Price List
The first thing that you should remember is that there should never be a published price list. Prices vary across the board in all commercial records-center operations based on volume of cubic feet in storage and the mix of services. The cost of storage should always be related to the cubic foot, so the price per cube is the most important ingredient in creating a price list.
Rule Number Two: Competitors' Pricing Should Act Only as a Guideline
Of course, you should "shop" your competition. But if they are smart, they will not give you much information without committing to a survey. I recommend that prices never be given out to anyone without a survey first. Surveys reveal so many hidden agendas that it is virtually impossible to understand the customers' requirements and all the variables without them.
You do need to understand how your competition charges so you can effectively compete with them. However, most customers are looking for "value-added" benefits these days. By becoming unique, you can package services and avoid head-to-head competitive pricing except in the very largest accounts.
Remember that the cubic foot should always be the basis or lowest common denominator for setting storage rates. The first decision that you should make is how much to charge for the standard size boxes. The most common standards are listed below.
Letter/Legal Box--This box holds letter-size file folders in one direction or legal-size files in the opposite direction. Generally, this box measures at approximately 1.1 cubic feet when empty and 1.2 cubic feet when full. Some commercial records centers charge for one cube and others charge for 1.2 cubes. I always recommend that you charge 1.2 for this one. Let's say that your charge for this customer is 25 cents per cubic foot--the cost of storage for this box is then 30 cents per month.
Letter-Size, 24-Inch Transfer Box--This box is quite common. It measures approximately 1.6 to 1.7 cubic feet. Although some records centers charge the actual cubic footage on this one, many will round the charge up to 2 cubic feet. I always recommend that you round up on this size.
Legal-Size, 24-Inch Transfer Box--This box has been popular for many years because office-supply dealers pushed it since it carried a higher profit margin. It is by far the worst box to use for records storage. It is heavy and unwieldy. It breaks easily because of the weight and size, and it takes up an odd amount of shelf space. You will find a significant amount of these in existence. I recommend that you round this up to 3 cubic feet even though it measures in at 2.4 to 2.5 cubic feet.
I always recommend that you attempt to get your customers to switch over to the standard letter- or legal-size box. Typically, this box is less expensive and lasts much longer because it is more portable and weighs in at a maximum of 35 pounds when completely full.
Pricing Retrieval Services
After you have brought in your initial load of boxes from a customer, retrieval of boxes or files is always on demand. It is typical that normal retrieval service is considered to be either same-day or next-day. Retrieval in most cases will mean that a request is made and a return will follow at some point. After retrieval has been made, that box is logged out of your inventory, but you continue to charge rent on that box. The industry uses the term "permanent out" to describe a box that will not return. So, most boxes make a roundtrip and you should charge for both retrieval and re-file.
I have recently seen a tendency to lower these charges to $1 or $1.50 per unit (box or file) in larger cities. I recommend that the price be about $2.50 each way. Remember: This service requires labor to pull the box and log it out. In most cases, $2.50 is a fair and appropriate charge.
Permanent-out charges vary greatly from records center to records center. It is used primarily as a penalty for early retrieval or a disincentive to change vendors. I recommend the permanent-out fee be a minimum of $2 plus the regular retrieval fee.
Pricing Delivery Services
Delivery services are the easiest of all your services to price. Every community has existing courier rates. Courier services are eager to give out their price lists and should be willing to share information with you. Couriers sometimes use zones or ranges based on the distance from one place to another. It is very common that a customer might request several boxes or files at one time, so courier costs generally have a base rate to deliver and a surcharge for each additional box or file.
You may remember from an earlier article that you can use courier services for your deliveries rather than do it yourself. I recommend that you read that article for details. You can find additional information about courier deliveries on my web site at www.fileman.com. My best advice to you on deliveries is to be consistent with courier rates in your community. And remember that courier companies typically use a 60/40 split--the courier gets 60 percent and the dispatcher 40 percent of the delivery fee. You can act as the dispatcher and get 40 percent without any overhead.
Pricing Other Services
Services in commercial records range from indexing to retention scheduling on the traditional side, and from imaging to document-management strategy on the electronic-records side. Next month's article will discuss the ways to add value for your customers and profit to your bottom line. Pricing these services should yield margins of about 50 percent.
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]; www.fileman.com.