Multiple Storefronts

Cary F. McGovern Comments
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Because of its appeal to businesses, self-storage attracts potential records-management customers. That being the case, having multiple storefronts in a single community has distinct advantages to those self-storage operators who offer records-storage services. Though having two or more facilities brings the greatest value, it is possible to generate multiple storefronts within a single facility through creative marketing, i.e., appealing to residential and corporate clients or different types of businesses.

Business Potential

Let’s look at a self-storage business with five facilities in a 25-mile radius. Each has 500 units, for a total of 2,500. The average turn rate (the period of time it takes for a unit to “turn over”) varies, but we’ll assume an average of nine months. We’ll also assume business clients represent 30 percent of the customer base. Using these numbers, the business has 3,125 sales opportunities annually, at least 938 of which are with businesses—good prospects for records storage.

A single account of only 50 to 250 boxes can be worth a great deal in storage revenue. Remember, records-storage revenue is considered “permanent,” and rental by the cubic foot has a much higher yield than square footage. Consider these factors:

1. Assuming a 30 percent close rate, our example produces nearly 300 new records-storage accounts each year. At an average of just 50 boxes each (a low estimate), that means 15,000 new boxes.

2. Commercial records centers in a self-storage environment tend to claim higher prices than traditional operations: an average of 35 cents per cubic foot. Based on a typical box size of 1.2 cubic feet, those 15,000 boxes produce $75,600 in annual storage revenue.

3. Using a model that incorporates records storage “lite” and small-business packages (for more information on these topics, refer to my last four columns, which can be read in the online article archive at www.insideselfstorage.com), the yield per cubic foot could be 50 cents or more, depending on several factors. If our assumptions are correct, the gross yield would be $115,600 after the first year.

4. In the nontraditional records-storage model often used for self-storage, expenses are limited by intelligent service offerings with little or no additional overhead, which also results in higher storage revenue.

Now let’s consider other factors that add to your revenue over time. While the above example looks at only one year of sales, let’s take a look at what can happen over five years of operation. First, let’s assume you and your staff get better at selling records-storage services over time and, after year one, your closing rate increases to 33 percent. That means the number of new accounts grows to 330 per year. Using the numbers cited above, these accounts yield annual gross revenue of $169,873. Add this to income from existing accounts and, after five years, the annual gross yield is $436,816 (see the accompanying chart). This does not even include the 7 percent average growth of existing accounts, referred to as “creep.”

Assumptions:

  1. There are five storefronts in a single market.
  2. There are 500 units per storefront for a total of 2,500 units.
  3. There is a nine-month turn rate.
  4. Business clients make up 30 percent of the business.
  5. Average box size is 1.2 cubic feet.
  6. Average price per cubic foot is 35 cents per month.
  7. Average yield is 50 cents per cubic foot.
  8. The creep rate is 7 percent, compounded annually.

At the end of five years, our example results in 1,620 storage accounts, with an anticipated volume of 104,004 cubic feet. Gross yield on these accounts after creep is $624,024. Can a self-storage operation with only one storefront still use this model? Absolutely. However, the results will depend on the operation’s number of units, turn rate, operating model, selling strategy, training and incentive for employees, and other issues.

You can model the example to fit your specific set of circumstances. It is not magic. The numbers work because of the records storage “lite” strategy and a business plan that optimizes revenue.

Regular columnist Cary McGovern is the principal of FileMan Records Management, which offers full-service assistance for commercial records-storage startups and sales training in commercial records-management operations. For help with feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail: fileman@fileman.com;

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