Records Management in Smaller Markets

A real opportunity for self-storage

By Cary F. McGovern

Allmarkets, regardless of size, are good records-management markets in ourpaper-intensive environment. The only difference between markets is volume. Thesingle best market opportunity for new start-ups in records management servicesis the 100,000 to 250,000-market range in North America and Europe. There areseveral factors that make this possible.

The Expanding Records-Management Market

Over the last 40 to 50 years, commercial records management has centereditself around the major world market cities. The need arose shortly after WorldWar II as business expanded like never before in history. North America led theway as Europe and Asia rebuilt their plant and facility capabilities. Duringthis time, government--particularly in the United States--began to imposeregulations on businesses. It has since become complex and difficult to find ourway through the maze of regulation.

If you are a multinational company, you will find the maze even morefrightening. Heaped upon that, the United States and other Western countrieshave become increasingly litigious. Lawsuits abound. Although it took severaldecades for the rest of the world to catch up with the complexity of recordsmanagement in the United States, it is true to say that everyone suffers fromthe same problems of data management throughout the free world.

I wrote this article upon returning from Europe, where I presented a paper onrecords management to the PRISM International (the association of commercialrecords centers) European group. Commercial records centers throughout the worlddiscuss the same problems and opportunities we address in North America. One ofthe prime issues is growth. I ate lunch one day at a table with severaloperators from Budapest, Copenhagen and New Castle, U.K. We shared the samediscussion about unparalled growth in our marketplace.

Companies Worldwide Share Experience

It seems that regardless of the size of the operation, problems abound inrecords management. Paper growth in the industry--even during a periodexperiencing more and more digital documentation--consistently outpaces theprevious year's volume. Cities large and small have traditional paperrecords-storage growth doubling each four to five years on average.

The issue of records management is not simply a technological issue, but asociological one as well. Research across North America, Europe and the PacificRim shows no real difference in records growth from city to city, except forpure volume based on population size. The one obvious component is that thesmaller 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 citymarkets into the smaller, suburban markets. This was observed early on in theUnited States as major urban centers built broad traffic rings around theircities. Business and office parks followed. More and more people have becomeaware of the quality-of-life issues outside the hectic city centers.

As these markets have shifted, so have the service industries they require tooperate. Commercial records centers in smaller markets have several advantagesover the big center city operations. A recent survey of pricing reveals that thesmaller the competition, the higher the average pricing usually is. It is alsotrue to say that smaller community expenses are somewhat lower than large centercity operations. The result is higher net margins on storage and retrievalservices.

Advantages of Records Centers in Smaller Markets

Higher yield in storage revenue--Prices are higher since accounts with lowervolumes are generally priced higher than large accounts, and"under-the-minimum" accounts are more common. These amount to nethigher storage revenue margins per carton in storage.

Very little or no competition--Many markets of this size offer norecords-management services. Those that do are very unsophisticated and easy tocompete 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 becomethe benchmark for any future competition.

Some Issues to Consider

Customer education--Since your customers are not familiar with thebenefits of records-management services, you become responsible for theireducation. Although this is not difficult, it is something that should beplanned as part of an overall marketing strategy. In larger markets, theexisting level of understanding records-management makes the sale more complex.Customer education can be a value-added service provided by your center to yourcustomers.

More limited outsourcing options--In the smallest communities, you mayfind it more difficult to find resource partners to whom to outsource some ofthe activities. However, commercial records centers in many smaller communitiescan actually assist in the development of these outsourced service providers.

Smaller overall volume--Generally, there is less volume in smallermarkets than in the large markets. Large market centers usually have to competefor the business and smaller markets simply have to justify their service. Evenin smaller markets, there are large numbers of boxes that must be maintained asbusiness records.

Marketing is Still the Name of the Game

Regardless of whether you are in a large or small market, marketing is stillthe most important ingredient in developing a commercial records-managementfacility. The business does not just roll in. You must market your offering.Remember that financially the model this best fits is an annuity. You shouldaspire to a volume of 100,000 cubic feet of storage in your market. If you dogenerate that volume over your first four to five years, the growth factor willdouble your business in the following five years. For example:

Computing Gross Storage Revenue for 100,000 Cubic Square Feet

Regular columnist Cary F. McGovern is a certified records manager and theprincipal of File Managers Inc., a records-management consulting firmspecializing in implementation assistance and training for new, commercialrecords-center start-ups, as well as marketing support for existing recordscenters. For more information, visit www.fileman.com.

FileMan Records Management is developing a model for sellingrecords-management services on the Internet. The company will soon be pilotingseveral versions of its method. If you are interested in becoming a FileManPilot participant, e-mail [email protected]or call toll-free (877) FILE-MAN.