By Cary McGovern
Records-management services can be outsourced in a self-storage facility to a great extent. I consider a virtual records-management facility as one where all the parts are outsourced with a residual profit. This article discusses this concept.
Virtual Records Management
The concept of the "virtual business" has been around for a long time, with several books written on the subject. Frankly, the concept has always intrigued me. I define a virtual business as one where all of the components are outsourced--including the marketing--with a residual profit.
What exactly does this mean? That any business can be broken down into its parts. Each of the parts has specific focus and work processes directly related to it. I will attempt to describe how the virtual concept can relate to a records-management business in a self-storage environment. If you own or operate a self-storage business, you probably are already in the records-storage business. The switch to records management is comparatively easy and can be developed as a virtual business.
Two Virtual Concepts to Consider
There are at least two somewhat different virtual concepts you might want to consider for records management in the self-storage environment. The first is one you operate yourself and the second is one in which you provide the components for another individual or company to operate out of your facility. Let's describe each and then look at the components and their ability to be considered virtual.
Option 1: Operated by Your Management Team in Your Facility
In this option you own and operate the records-management business as an adjunct to your self-storage business. You will determine all of the components and how each will be outsourced.
Option 2: Operated by Another Individual or Company in Your Facility
In the second option, you will sell the business concept to another individual or company who will operate the business out of your facility. You will assist the tenant-operator in the development of the company and selection of vendors to outsource each component. In this model the operator may choose to perform some of the component processes himself or may outsource all parts.
Where This Concept Developed
Early in 1999, at one of the Inside Self-Storage Expos, a prospective client approached me with an interesting idea. He told me he did not own or operate a self-storage facility, but would like to provide records-management services using rented units as his locus of operation. Initially, I thought that this was a particularly unusual idea. After some thought, I concluded this is just one more way the business can be operated. There are some obvious benefits to this method I never considered before. First, the cost of overhead is very limited. The operator only rents units when they are needed, keeping his space requirement limited to only what he sells. After the operator has developed his business volume, he could consider a larger space or larger units.
The components of records management are always the same, whether it is a traditional commercial record center, a records-management business operated within a self-storage business or a virtual records-management business.
The primary component, of course, is the space in which you operate. The traditional model utilizes warehouse space with high ceilings to maximize the number of cubic footage (the basis of monthly storage charges) per square foot. The self-storage model maximizes existing storage units and can generate from three to five times the storage revenue per unit. In the virtual model you only use units that are needed when new sales are made or as growth occurs. The cost of your facility overhead is limited to space that generates revenue. If you are an operator running a records-management operation in someone else's facility, you may negotiate your rates.
Racking is definitely a requirement. In order to maximize density, you must design and purchase racking intelligently. You may want to refer to last month's column titled "The Shelving Paradox." Shelving can be leased one unit at a time.
The hardware requirements are few indeed. You need a relatively fast PC with a modem and printer, direct-connect bar-code reader, and a portable bar-code reader with its attachments to download data into the PC. Total cost of all hardware is usually less than $5,000. This can also be added into the lease package.
Although software in the records-management business can be pricey if you buy it, an Internet-based software product is available that you lease by transaction. You only pay when your customer pays. The alternative is to purchase software from either O'Neil or Andrews (the only products I recommend) and add this to your lease. You can find additional information about this software in past columns or by contacting me.
Business processes are all related to inventory control. We have assisted more than 150 companies in the development of their operating processes for records management. Never vary from your adopted business processes that insure internal control.
Limitation of Liability and Storage Agreements
The most important first step is to limit your liability in your storage agreement and to clearly state your prices in your contract. Prism International (www.prismintl.org) has for more than 25 years been the professional resource for the commercial records-storage industry. As part of its membership package, Prism International provides an industry standard contract that is used by most of the industry leaders.
Courier services are required for three separate activities. The first is regular daily delivery; the second is weekly or periodic pick-up; and the third is for first-time pick-up of records from a new customer. This was discussed in detail in an earlier column. Past columns are available from either www.insideselfstorage.com or www.fileman.com at no charge. All courier services can be outsourced based on a 60/40 split. You can earn 40 percent of the gross revenue with no courier overhead.
Monthly Billing and Accounting
Billing requires some time at the end of each month. Both Andrews and O'Neil systems include a comprehensive billing module. The FileMan Internet based system (FIRMS) provides the billing automatically for its clients.
Sales and Marketing
Both marketing and sales can be done on a casual or highly professional basis. Obviously, the results of your marketing strategy are directly related to the growth of your business. Sales can be outsourced to other related businesses as a "value add" to their sales force. For example, if you offer the local office-supply business owner to sell your services for a commission, it adds another product to his portfolio and additional revenue for his salespeople.
Virtual businesses are growing worldwide. Outsourcing services have grown into lead offerings by major companies. A little creative thought can bring you additional revenue with little or no new cost and very little trouble.
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.