Many operators focus only on unit occupancies. As an owner, I know it’s an ego boost when occupancies are high. Maybe you’re hovering at 95 percent occupancy, have cut back marketing efforts and put the operation on cruise control. Why not? You have only a handful of units to rent.
Actually, plain logic should steer you from this kind of thinking. First, if you’re out of several unit sizes and only have a few other sizes to rent, you’re virtually out of business. You’ll end up turning away customers to someone else—a dangerous plan.
Proactive or Reactive?
It’s not uncommon to find self-storage operators running at 95 percent unit occupancy with an economic occupancy (total possible rental income) of only 80 percent. This can be devastating to ROI and must be evaluated continuously to maximize profitability. It happens most often when demand softens in a market (maybe due to increased competition) and operators immediately discount or run promotions to compensate. Instead of becoming proactive in sales efforts, we become reactive and tend to give away the store. How can we become more proactive in these circumstances?
Storage operators should compare their units, square footage and economic occupancies on a consistent basis. Most self-storage management software packages have programs to compare these numbers. It’s difficult to improve on any business aspects if you don’t know where you are. As you become more familiar with measuring and tracking performance, you’ll learn how to improve the situation.
It’s better to be 90 percent occupied with higher rates than to be at 95 percent and giving away a chunk of potential profits in promotions. You need to be confident you can build value and trust with customers through a more effective sales program. Educate customers to the unique advantages you offer relative to the competition.
Calling All Phone Skills
Successful self-storage sales begins on the phone. With accomplished phone skills you’ll be able to invite more callers to take a tour. Industry statistics show customers who visit a facility also rent a unit more than 90 percent of the time.
Those who acquire strategic phone skills are leaders in their markets. If you can set appointments with callers to visit the store, you can also learn to schedule appointments with tenants to pay rent. The better you become at this, the more economic occupancies improve, boosting the profitability of the store.
Unfortunately, most storage owners fail to make appointments with late-paying tenants. At most, they might send a letter and make a reminder call. But it takes a lot more than this to keep delinquencies down and profits moving up. It takes setting appointments and holding customers accountable. If they don’t show, it gives the self-storage manager reason to call and re-set the appointment. Keep putting tenants in the hot seat until they pay up. This helps minimize the gap between unit occupancy and economic occupancy, which is the true measure of any self-storage operation.
With nearly 50,000 self-storage locations throughout the United States, many markets have reached saturation and beyond. Some operators have become reactive in their fight to sustain or gain occupancy. Their economic occupancies have therefore suffered, resulting in lower profit at day’s end.
Self-storage leaders tend to take a more proactive approach to improving their economic occupancies. The goal is to improve sales by minimizing rental discounts and promotions. As a special bonus, improved sales efforts have many times helped to improve delinquencies. What more could you ask for?
Brad North is founder of Advantage Business Consulting, which specializes in on-site sales, marketing, feasibility and operational training for the self-storage industry. He has produced two live videos and a workbook titled “Maximizing Your Sales and Marketing Program,” designed to help managers improve their sales and marketing efforts. He most recently launched A TelePro, a mystery shopping service for educating, evaluating and improving the phone-sales performance of self-storage professionals. For more information, call 513.229.0400; visit www.advantagebusinessconsulting.com.