Records storage is an option for any self-storage facility wishing to diversify and add high value to its service base. Is one of these four proven models right for your facility?
A generally accepted principle of management concludes, “If you can’t measure it, you can’t manage it.” Measurement is a requirement of any business. But how you size up the success of a storage facility depends on individual standards. Let’s examine four diverse types of self-storage facilities successfully offering records storage. Each case study representative of one of my clients. See which model standards of success might suit your own goals and expectations.
Limited Space, High-Yield
The first case study may seem odd to some, but several clients have followed this model with varying degrees of success. Joe Smith runs a single facility with a full-time manager and part-time handyman in a small city of about 300,000 people. The design is mundane by Southwest-market standards, but it’s properly managed.
Smith decided several years ago he would dedicate a section of his facility to records storage. The area, which runs along the back of the property, has typical 8-foot ceilings and holds 26,250 box positions on appropriate racking.
His records-storage model is minimal services with no deliveries; marketing focuses on small-business accounts of fewer than 100 boxes each. The facility declines medical accounts because of their unique service requirements. Smith’s services are limited to retrieval, re-file and box-number indexing only. He provides next-day, will-call service with no delivery option, meaning clients must come to the site to pick up items.
Smith markets in two ways: over-the-counter, small-business sales of pre-designed packages; and telemarketing to business prospects within a 2-mile radius of the facility. It took four years to fill the dedicated space. Let’s look at the results.
Case Study 1
26,250 Boxes in storage after four years
278 Small-business clients (average 95 boxes each client)
$.50 Price per box
$.82 Yield per box
6,500 Square feet dedicated to records storage, with 8-foot ceilings
$41.19 Yield per square foot annually
Each year, Smith’s client-growth rate of 9 percent forces him to “fire” one or more of his worst records-storage tenants. Since the facility is full, he’s opted not to sell the service anymore. Actual yield is enhanced by three factors:
1. Each year the account base is purged of worst payers to allow room for better clients.
2. The service-requirement ratio decreases, reducing labor costs.
3. Prices increase annually, based on the regional CPI published by the U.S. Department of Labor. Smith’s measure of success is based on annuity revenue that continues each year because of the permanency of records-storage contracts.
Lite Records Storage
Our second case study has been implemented in more than 100 companies in the United States as well as some in the United Kingdom. Clients who’ve followed this model are successful by their own measure. But see what you think.
Mary and Fred Jones own a single facility in a Northeastern suburban town of about 125,000 people. The facility is upscale but not climate controlled. Mary manages the self-storage and Fred runs the records side.
The facility has a small non-climate-control metal warehouse with 5,500 square feet and 18-foot ceilings, which accommodates 44,550 box positions. The higher ceiling allows the Joneses to employ a single-catwalk racking system. They leased 50 percent of the racking initially and purchased the other half later with existing cash flow.
The facility offers 17 services, including Internet-based “shopping cart” technology available at a reasonable cost from a software provider. There are no full-time or part-time employees; instead, Fred chose “just-in-time” labor and outsourced courier services for all pickups and deliveries. His services provide high margins averaging 50 percent to 80 percent; monthly revenue equals or exceeds storage revenue because of his aggressive approach.
The sales and marketing program includes Fred’s part-time efforts, two agent salesmen, and over-the-counter sales and telemarketing. He has successfully filled his site and developed a new building adjacent to the first. Let’s look at the results after 2.5 years.
Case Study 2
44,550 Boxes in storage after 2.5 years
158 Business clients (average 282 boxes each client)
$.35 Price per box
$.52 Yield per box
5,000 Square feet dedicated to records storage with 18-foot ceilings
$43.37 Yield per square foot annually
Fred and Mary had to decide if they’d invest in a second building after three years in the business. Their growth rate from existing storage and outside sales has been somewhat successful. Over-the-counter sales have been surprisingly strong, yielding many valuable under-the-minimum accounts. Fred’s strategy is to employ a full-time salesman next year and fill his second building in the next two years.
Business is aimed at growing annuity revenue with a goal of 100,000 box positions. Fred wisely developed an exit strategy from the get go: to sell the business after six years or 100,000 box positions. Today’s market has numerous buyers with ready cash. Fred will have to select one of two ways to sell—based on a multiple of earnings before interest, taxes, depreciation, and amortization (EBITDA); or gross sales and the building sold in a separate real estate transaction.
Nontraditional Records Management
The third case study has been implemented successfully in about a dozen self-storage companies in North America and Europe. Brothers Dave and Ken Johnson are real estate developers and entrepreneurs in the South. Their family owns one large self-storage facility and other businesses— mostly driven by real estate—in a major market. Ten years ago they started a records-management business within their self-storage facility. It’s a world-class, modern operation with many amenities. They market it aggressively.
With little expertise in records management, the Johnsons accumulated more than 300,000 boxes. They soon realized they could increase profitability by building a separate warehouse designed for commercial-records management. They hired a consultant and added a full-time operations manager and a salesperson. The new building holds up to 500,000 box positions. The Johnsons have transitioned to traditional records management successfully and now have a full-service facility.
Case Study 3
300,000 Boxes in Storage after 10 years
458 Business clients (average 655 boxes each client)
$.32 Price per box
$.45 Yield per box
20,000 Square feet dedicated to records storage, with 30-foot ceilings
$95.04 Yield per square foot annually
$1,900,800 Gross storage and service revenue (service is based on 65 percent of storage revenue from records storage)
In a decade, the Johnsons evolved from a simple to a sophisticated approach—somewhat unintentionally. They offered services and provided quality to clients, but until two years ago had no real goals. Now they are poised to become a market leader and grow to a million boxes, or sell their business for a big profit. Remember, they can sell their records business without selling their self-storage because real estate is a separate transaction in records management. The Johnsons’ success can now be measured as a traditional records center with long-term annuity revenue.
Our fourth case study follows a new concept implemented only a handful of times exclusively in North America. Clients who have followed this model have the potential to be extraordinary earners. A management group in a large U.S. city has 12 self-storage storefronts—each with 500-plus units—in a single metropolitan market. Two sites have large warehouses. Their company’s portfolio is funded by wealthy individual investors. The management group also owns the records-management company.
The plan is to have enough storage space for a million boxes in two or three locations across the city. The first building has 15,000 square feet with 40-foot ceilings, enough to house 270,000 boxes. The second and third will be slightly larger to meet the 1 million-box goal.
These entrepreneurs plan a combination of seven selling methods to reach large- and small-business accounts. The multiple storefronts may attract more than 100 new small-business accounts per year, for a total of 1,200 to 1,500 annually. Front-office sales will be grounded in a commission-based incentive program. Three to five full-time salesmen will sell directly to large regional and local clients. High-yield, small-business accounts will become the most profitable segment of the market.
The results of this model are not shown because they vary greatly between individual centers. However, the return on investment can be high over a relatively short period. The real estate investment group has little problem raising capital. Goals are to maximize investor return while developing a perpetual annuity revenue stream.
As you can see, records-storage centers are a mixed bunch—from simple to elaborate. I’ve provided case studies to generate ideas for others to emulate. Measure the successes of others, follow in their footsteps and see how you size up.
Finally, if you’re unfamiliar with terminology in this article, I suggest you check out the Inside Self-Storage articles on demand at www.insideselfstorage.com. The database has numerous articles to assist you in understanding the records-storage concept.
Cary F. 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 email@example.com; visit www.fileman.com.