By Cary F. McGovern
All markets, regardless of size, are good records-management markets in our paper-intensive environment. The only difference between markets is volume. The single best market opportunity for new start-ups in records management services is the 100,000 to 250,000-market range in North America and Europe. There are several factors that make this possible.
The Expanding Records-Management Market
Over the last 40 to 50 years, commercial records management has centered itself around the major world market cities. The need arose shortly after World War II as business expanded like never before in history. North America led the way as Europe and Asia rebuilt their plant and facility capabilities. During this time, government--particularly in the United States--began to impose regulations on businesses. It has since become complex and difficult to find our way through the maze of regulation.
If you are a multinational company, you will find the maze even more frightening. Heaped upon that, the United States and other Western countries have become increasingly litigious. Lawsuits abound. Although it took several decades for the rest of the world to catch up with the complexity of records management in the United States, it is true to say that everyone suffers from the same problems of data management throughout the free world.
I wrote this article upon returning from Europe, where I presented a paper on records management to the PRISM International (the association of commercial records centers) European group. Commercial records centers throughout the world discuss the same problems and opportunities we address in North America. One of the prime issues is growth. I ate lunch one day at a table with several operators from Budapest, Copenhagen and New Castle, U.K. We shared the same discussion about unparalled growth in our marketplace.
Companies Worldwide Share Experience
It seems that regardless of the size of the operation, problems abound in records management. Paper growth in the industry--even during a period experiencing more and more digital documentation--consistently outpaces the previous year's volume. Cities large and small have traditional paper records-storage growth doubling each four to five years on average.
The issue of records management is not simply a technological issue, but a sociological one as well. Research across North America, Europe and the Pacific Rim shows no real difference in records growth from city to city, except for pure volume based on population size. The one obvious component is that the smaller the market, the less competition there is.
The Ideal Population Market: 100,000 to 250,000
Business growth throughout the world has been moving out of the major city markets into the smaller, suburban markets. This was observed early on in the United States as major urban centers built broad traffic rings around their cities. Business and office parks followed. More and more people have become aware of the quality-of-life issues outside the hectic city centers.
As these markets have shifted, so have the service industries they require to operate. Commercial records centers in smaller markets have several advantages over the big center city operations. A recent survey of pricing reveals that the smaller the competition, the higher the average pricing usually is. It is also true to say that smaller community expenses are somewhat lower than large center city operations. The result is higher net margins on storage and retrieval services.
Advantages of Records Centers in Smaller Markets
Higher yield in storage revenue--Prices are higher since accounts with lower volumes are generally priced higher than large accounts, and "under-the-minimum" accounts are more common. These amount to net higher storage revenue margins per carton in storage.
Very little or no competition--Many markets of this size offer no records-management services. Those that do are very unsophisticated and easy to compete against.
Service levels can be dictated--Since you are the only player in town, you can set the service levels for your community. Whatever you set will become the benchmark for any future competition.
Some Issues to Consider
Customer education--Since your customers are not familiar with the benefits of records-management services, you become responsible for their education. Although this is not difficult, it is something that should be planned as part of an overall marketing strategy. In larger markets, the existing level of understanding records-management makes the sale more complex. Customer education can be a value-added service provided by your center to your customers.
More limited outsourcing options--In the smallest communities, you may find it more difficult to find resource partners to whom to outsource some of the activities. However, commercial records centers in many smaller communities can actually assist in the development of these outsourced service providers.
Smaller overall volume--Generally, there is less volume in smaller markets than in the large markets. Large market centers usually have to compete for the business and smaller markets simply have to justify their service. Even in smaller markets, there are large numbers of boxes that must be maintained as business records.
Marketing is Still the Name of the Game
Regardless of whether you are in a large or small market, marketing is still the most important ingredient in developing a commercial records-management facility. The business does not just roll in. You must market your offering. Remember that financially the model this best fits is an annuity. You should aspire to a volume of 100,000 cubic feet of storage in your market. If you do generate that volume over your first four to five years, the growth factor will double your business in the following five years. For example:
Computing Gross Storage Revenue for 100,000 Cubic Square Feet
- Start with 100,000 cubic feet of storage.
- Multiply by an average of $.25 per month.
- You end up with monthly storage revenue of $25,000.
- Multiply by a service revenue factor of .65 for each dollar of storage (1.65).
- You end up with monthly storage and base revenue of $41,250.
- Multiply by 12 months and you end up with gross operating revenue of $495,000.
Regular columnist Cary F. McGovern is a certified records manager and the principal of File Managers Inc., a records-management consulting firm specializing in implementation assistance and training for new, commercial records-center start-ups, as well as marketing support for existing records centers. For more information, visit www.fileman.com.
FileMan Records Management is developing a model for selling records-management services on the Internet. The company will soon be piloting several versions of its method. If you are interested in becoming a FileMan Pilot participant, e-mail firstname.lastname@example.org or call toll-free (877) FILE-MAN.