Do You Really Need a Management Company?

By Pamela Alton

Self-storage is a wonderful business. Of course, we all know it's easy to operate: Justopen the doors and tenants will flock to your site. You will be full in a month or so andthe money will come rolling in, it will be a piece of cake. You have been in otherbusinesses over the years and certainly this one can't possibly be that hard. You think,"Why should I pay a management company to run the place when I can just hire Joe, theretired guy from my lodge, to run the store for me?"

If you are a new owner or contemplating buying or building your first facility, thenyou probably have attended at least one of the national trade shows. After you attendedthese conventions, I am sure your head was spinning. Which doors are best? What buildingcompany should you use? What alarm and software company should you go with? Where do youbegin?

Perhaps you have been in the self-storage business a while and are getting tired of thehustle and bustle and would like to relax and retire or maybe move on to that new projectyou've been thinking about. For whatever reason, the time has come for you to considerhiring a management company.

Why Have a Management Company?

If you are an inexperienced new owner and have business partners or a financial lenderinvolved with your facility, they may request that you employ a management company for thefirst year of the project. After all, if you have no experience in self-storage, withoutprofessional management guidance, you may find yourself paying a higher interest ratebecause of your lack of management experience and, hence, you are a higher risk. A goodmanagement company will help you start off on the right foot and achieve the neededresults to begin paying that mortgage. A management company can help guide and direct youso that you don't make costly mistakes and help save you money.

If you are looking to retire or move on to other projects, a management company couldbe the answer for you. They can provide you with the freedom to pursue other interests,handle the day-to-day operations of the facility and give you full financial reports on amonthly basis.

Just like when you started in the business, once again you are faced with severalquestions: What services does a professional management company provide and what are thecosts involved? Where do you find them? How do you choose the right one for you, and doyou really need a professional management company?

Various Levels of Management

A professional management company should offer various levels of management, fromfull-service property management to "operations only" to management placement,consulting, training, audits and inspections. Within these levels, they should give youthe option to choose only those services you need. For full-service management, mostcompanies will charge a monthly fee based on the gross income of the facility. The averagefee for this is 6 percent or a minimum monthly fee of around $1,500 to $2,000. Having saidthat, I have heard of 7 percent or 8 percent in some areas of the United States. For thisfee you should get the total management package, which includes staffing your site,training the management and handling financial obligations, conducting regular audit andinspections, providing you with monthly profit-and-loss statements, be available todiscuss any situation with you and be willing to meet with you on a quarterly basis. Whenchoosing a management company, ask what services you will get for the fee you will bepaying.

With an operations-only program, the management company should offer a reduced fee forfewer services. This means they will staff, train, conduct audits and inspections, bewilling to meet with you, etc., except they do not handle any of your accountingfunctions.

Many owners are leery of turning over the checkbook to what amounts to total strangers,so the operations-only concept is perfect for those owners. The average fee for this typeof service is usually 4 percent to 5 percent with a minimum monthly fee of about $1,350 to$1,500. If the company insists on controlling the checkbook and resists offering some typeof operations-only program, I would be very cautious about employing that company andgiving them access to my bank accounts. I have actually had management companies say tome, "But if I don't have the checkbook, I can't hide things."

Consulting, start-up training and audits and inspections is another alternative forowners that want the expertise of a professional management company but don't want to beobligated to them for a 12-month contract or longer. With these services, an owner can paya flat fee for what they need. Perhaps you only want a management company to conductaudits and inspections every six months at your site or come in and train your staff howto do their own audits and inspections. If you are just getting started, now is the timeto use consulting services before you make any costly mistakes. Once you are ready toopen, new start-up training is well worth the initial investment. A professionalmanagement company can train you how to find, hire and train your onsite management staffhow to sell, market and manage your facility before the doors are ever opened. The feesfor these services will vary, depending on the company you hire.

Choosing the Right Management Company for You

Finding management companies is as easy as opening this magazine and looking at theads. When choosing a management company, the following areas should be considered:

Location. You should choose a company in your general geographic area, or onethat is not further away than a two-hour plane ride, unless the company is one of thelarger national management companies with an extensive management support system in place.It's unlikely a management company in say, the Southeast, can manage a property in thePacific Northwest and do it effectively.

Track Record. If you are new to the industry, you need someone that has actuallyput in "apron time" behind the counter of a facility and opened new sites. Thesame theory should apply to a distressed facility. Choose a management company that hasturned around facilities and made them profitable. Ask questions when interviewing amanagement company, just like you would ask questions when interviewing an onsite managerto oversee your facility: "What is your track record of reducing delinquencies? Whatmarketing programs have you successfully instituted? Have you ever actually managed afacility, or just managed from behind a desk? How many facilities do you currently manage?How many did you manage in the past, but don't anymore, and why? What are your managementresources for placing a manager at my site? What training programs do you have? Can I havea list of current and past owners you have worked with?"

References. When hiring a company to manage your investment, don't only ask forreferences, but actually call them. Go look at facilities they manage in your area and askothers in the industry about the management company's reputation.

Checks and Balances. You should also have your own checks and balances in place.If you choose a full-management program, you may want to be more thorough in your checksand balances. Just because the budget says it includes $300 for medical insurance, youneed to find out the actual cost. You should only be charged the actual cost, not thebudgeted cost. Some management companies have been known to charge an owner a few dollarshere and few more there, and before you know it, you could be paying thousands of dollarsa month more to the management company than its monthly 6 percent.

Philosophy. Lastly, do you like the people you will be working with? Ifyou feel comfortable with them, their management style and their philosophy, and believethat it is the right company for you, sign the agreement and let them get to work makingyou the money you deserve.

Pamela Alton is the owner of Mini-Management, the largest nationwidemanager-placement service. Mini-Management also offers facility management in the WesternUnited States, policy and procedures manuals, sales and marketing training manuals,inspections, audits consulting, new start-up training and training seminars. For moreinformation on the various services offered by Mini-Management, call (800) 646-4648.