By Cary F. McGovern
Abstract: To be successful in any business you must have a plan. Records management is a "horse of a different color." The typical business concerns are a bit different in this business than in other enterprises. It has been said that the records-storage business is financially similar to an annuity. They grow annually from existing accounts at a rate of 15 percent to 20 percent or more. This requires a plan that looks at the need for capital and facilities on an ongoing basis.
This month, we will discuss only the paper records-management components of your business plan. In subsequent issues, we will deal with both microform and electronic records and their components. For paper records there are a number of primary components to consider: storage, retrieval, delivery, indexing services and future growth. Each of these has both financial and operational implications.
Storage and Retrieval
Rule # 1: You must maximize your storage space and access capabilities in order to maximize profitability.
1. Ceiling Height. When considering real-estate properties or drawing up the blueprints for a new business, remember that you are always better off with high ceilings for a records-storage business.
The name of the game is to maximize the number of cubic feet per square foot. For example, if you have 10,000 square feet of warehouse space with eight-foot ceilings, you have 80,000 cubic feet within your walls. But with 20-foot ceilings, you will have 160,000 cubic feet. Using the rule of thumb for actual "usable" storage space within a warehouse, multiply the number of cubic feet by 65 percent. The result of this comparison in the first example generates 52,000 cubic space of storage while the second higher-ceiling example generates 104,000 cubic feet of revenue generating space. This represents almost three times the rentable storage space in the same amount of square footage.
2. Selection of Racking. High-rise pallet racking is always the best choice for ceiling height above 15 feet. Used pallet racking is widely available throughout the world. I have concluded that the best configuration for storage on pallet racks is two cartons high and three boxes deep for standard letter/legal 1-cubic-foot cartons. In my experience, this configuration provides the best access and space utilization, while maintaining optimum retrieval efficiency.
3. Ladders vs. Catwalks. In the beginning stages of business, the number of retrievals are relatively low. As storage volume increases, so does the number of daily retrievals. The use of ladders in an active retrieval warehouse greatly hinders the retrieval productivity. It is always best to prepare for the eventual use of catwalks in your warehouse.
Rule # 2: Your business plan must prepare for the inevitable growth and its accompanying financial dilemma.
Would you believe that growth could cause the biggest problem for your new start-up, commercial records-storage operation? Believe it. You can estimate that with an aggressive sales effort during the first year you can bring in a significant number of cartons. What you may not expect is the annual growth from existing accounts as you move into year two and three of operation. It is not uncommon to anticipate 15 percent to 20 percent new growth from existing accounts on an annual basis. This rate of increase may require new facilities, additional racking and more employees. Regardless, be prepared for the fact that your revenue may not grow as fast as your capital expenses during the first few years.
Services Can Offset Costs
Rule # 3: Selecting the right revenue-generating services can help offset some of the early demands on capital.
Indexing services can provide high profit to your new records-management business with relatively low cost. Indexing is also the most needed service you can provide to your customers and the one customers will want most. Indexing is also one of the easiest services to sell. It allows the customer to know exactly what is within each box. You can provide indexing services for a relatively low operating cost. In order to provide the service efficiently, though, you will require software (a database), one or more PCs and an indexing room.
The best way to provide indexing services is with a self-contained, portable indexing hut. These huts typically can be constructed with two or three indexing workstations. They can be moved to different areas of the facility as expansion occurs, which allows you to keep them close to the receiving area for new cartons coming into storage. A hut can be constructed to include conveyors for moving cartons easily and allowing access to indexing clerks. Staffing your indexing service can utilize flexible manpower by working with a temporary clerical service that provides personnel on demand as the work levels fluctuate.
Location, Location, Location
Rule # 4: Choosing the right location is the most important part of your business plan.
Those who are already in the self-storage business understand the need to be in a location that has access to the community. This need changes for those in the commercial-records business. Although access remains important, it is no longer as important for the customer as it is for you. The customer rarely comes into the commercial records center. If they do come in, it's typically because of an audit or litigation. Instead, they will call or fax orders for retrievals and delivery. So, closeness to the primary business of your customers' operations and access to major highways can improve profitability.
Rule # 5: Find the right balance between delivery vehicles and commercial couriers.
You will need to plan ahead to offer retrieval and delivery services from the very first day of operating your records-storage center. The vehicle and driver will be responsible for delivery of requested files and for picking up new accounts, which sometimes can add up to thousands of boxes. There are a number of possible solutions to this problem.
I recommend that you begin with a medium-size step van. This will allow you to maneuver through the downtown streets easily and have enough space for small pickups and moderate deliveries. You can rent vans from commercial sources for large pickups. Arrange a regular rate from Hertz, Ryder, U-Haul or other providers. Local couriers can also accommodate deliveries. You should have two or more local courier services on call for emergency or overflow deliveries or pickups.
A Final Note
Planning your business will allow you to discover cost alternatives that can save you a great deal of anguish in the future. Take time to plan wisely and your businesses will bless you with profits.
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; email firstname.lastname@example.org ; Web site http://www.fileman.com.