Most of you are familiar with Aesop’s fable about “The Goose With the Golden Eggs.” Those of you who are not, consider this your lucky day. You’re about to be transported back in time to when moral values were taught using delightful little tales of human foolishness and suffering:
One day a countryman going to the nest of his Goose found there an egg all yellow and glittering. When he took it up it was as heavy as lead and he was going to throw it away, because he thought a trick had been played upon him. But he took it home on second thoughts, and soon found to his delight that it was an egg of pure gold. Every morning the same thing occurred, and he soon became rich by selling his eggs. As he grew rich he grew greedy; and thinking to get at once all the gold the Goose could give, he killed it and opened it only to find—nothing.
The official moral of the story is “Greed oft o’er reaches itself.” But a wistful member of the 21st century might deduce other truisms like “Only a silly goose kills his goose,” “Don’t kill your goose before all your golden eggs are hatched,” or “Misuse your goose, and it’s cooked.” The bottom line is: Geese who lay golden eggs are good to have around. No doubt.
Now let’s say the “goose” is your self-storage business, and the “golden eggs” represent the cash flow it creates. Investors and owners always aim to maximize their return on investment. The big mystery is how to operate in the most efficient, lucrative manner. Which financing options do you choose? How do you maximize potentially limited opportunities such as low interest rates and tax benefits? How do you leverage equity, and when do you seek financial backing? Make the wrong decision, and it’s as good as wielding the axe.
As this month’s slate of writers will tell you, we live in unique economic times, and even the Fed is perplexed by rate behavior. Nobody knows how long the window of opportunity will remain open to take advantage of historically low interest rates. What we do know is 2005 is the last year to make the most of post-9/11 tax enticements, such as bonus depreciation and deductions on capital improvements. Though it is late in the year, it isn’t too late to take action and make some profitable business decisions.
If you’re a newcomer to the industry or current owner seeking to refinance, this issue will teach you about assembling a successful loan-request package and help you understand the difference between basic loan types and lending institutions. It will also delve into more advanced topics, such as interest-only financing, letters of credit, prepayment options and cost segregation. In addition, it touches upon tangential ways to streamline monetary processes, such as electronic banking and a program of regular rent increases.
Keeping your goose happy, healthy and producing those golden beauties is a very delicate balance of care and exploitation. It’s just as possible to do too much as too little. Trying to take advantage of every feasible finance alternative may not be the way to go. But knowing your choices is more than half the battle in profitable parenting. Investigate your investment opportunities and groom only the ones that seem well-suited to your business.
One day a storage operator going to his facility found there a chance to make more money with only reasonable effort and some careful planning. When he pursued financing, he found it laden with options of which he was previously unaware. He soon discovered to his delight that he could cut costs and create more cash flow with his current resources. He had come across his golden eggs and operated happily ever after.
Until next time,
Teri L. Lanza