Virtual Records Management

By Cary McGovern

Records-managementservices can be outsourced in a self-storage facility to a great extent. I consider avirtual records-management facility as one where all the parts are outsourced with aresidual profit. This article discusses this concept.

Virtual Records Management

The concept of the "virtual business" has been around for a long time, withseveral books written on the subject. Frankly, the concept has always intrigued me. Idefine a virtual business as one where all of the components are outsourced--including themarketing--with a residual profit.

What exactly does this mean? That any business can be broken down into its parts. Eachof the parts has specific focus and work processes directly related to it. I will attemptto describe how the virtual concept can relate to a records-management business in aself-storage environment. If you own or operate a self-storage business, you probably arealready in the records-storage business. The switch to records management is comparativelyeasy 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 considerfor records management in the self-storage environment. The first is one you operateyourself and the second is one in which you provide the components for another individualor company to operate out of your facility. Let's describe each and then look at thecomponents 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 toyour self-storage business. You will determine all of the components and how each will beoutsourced.

Option 2: Operated by Another Individual or Company in Your Facility

In the second option, you will sell the business concept to another individual orcompany who will operate the business out of your facility. You will assist thetenant-operator in the development of the company and selection of vendors to outsourceeach component. In this model the operator may choose to perform some of the componentprocesses himself or may outsource all parts.

Where This Concept Developed

Early in 1999, at one of the Inside Self-Storage Expos, a prospective client approachedme 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 ofoperation. Initially, I thought that this was a particularly unusual idea. After somethought, I concluded this is just one more way the business can be operated. There aresome obvious benefits to this method I never considered before. First, the cost ofoverhead is very limited. The operator only rents units when they are needed, keeping hisspace requirement limited to only what he sells. After the operator has developed hisbusiness volume, he could consider a larger space or larger units.

Virtual Components

The components of records management are always the same, whether it is a traditionalcommercial record center, a records-management business operated within a self-storagebusiness or a virtual records-management business.

Facility

The primary component, of course, is the space in which you operate. The traditionalmodel 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 maximizesexisting storage units and can generate from three to five times the storage revenue perunit. In the virtual model you only use units that are needed when new sales are made oras growth occurs. The cost of your facility overhead is limited to space that generatesrevenue. If you are an operator running a records-management operation in someone else'sfacility, you may negotiate your rates.

Racking

Racking is definitely a requirement. In order to maximize density, you must design andpurchase 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.

Hardware

The hardware requirements are few indeed. You need a relatively fast PC with a modemand printer, direct-connect bar-code reader, and a portable bar-code reader with itsattachments 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.

Software

Although software in the records-management business can be pricey if you buy it, anInternet-based software product is available that you lease by transaction. You only paywhen your customer pays. The alternative is to purchase software from either O'Neil orAndrews (the only products I recommend) and add this to your lease. You can findadditional information about this software in past columns or by contacting me.

Business Processes

Business processes are all related to inventory control. We have assisted more than 150companies in the development of their operating processes for records management. Nevervary 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 andto clearly state your prices in your contract. Prism International (www.prismintl.org) hasfor more than 25 years been the professional resource for the commercial records-storageindustry. As part of its membership package, Prism International provides an industrystandard contract that is used by most of the industry leaders.

Courier Services

Courier services are required for three separate activities. The first is regular dailydelivery; the second is weekly or periodic pick-up; and the third is for first-timepick-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 nocharge. All courier services can be outsourced based on a 60/40 split. You can earn 40percent 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 systemsinclude a comprehensive billing module. The FileMan Internet based system (FIRMS) providesthe 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 ofyour business. Sales can be outsourced to other related businesses as a "valueadd" to their sales force. For example, if you offer the local office-supply businessowner to sell your services for a commission, it adds another product to his portfolio andadditional revenue for his salespeople.

Virtual businesses are growing worldwide. Outsourcing services have grown into leadofferings by major companies. A little creative thought can bring you additional revenuewith little or no new cost and very little trouble.

Regularcolumnist 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-roommanagement and litigation support services for the legal industry. For more informationabout records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, AbitaSprings, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected]; www.fileman.com.