Records Storage: No More Myths, Just the Basics

Cary F. McGovern Comments
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Records storage offered in a self-storage environment can be simple and require very little labor. If you’ve considered offering an ancillary service but have been frightened away by the thought of more work, it’s time you learned about records management.

When I started writing these columns more than 11 years ago, many people said records storage didn’t fit with self-storage. Not only has that old myth been busted, but many self-storage facilities have attracted hundreds of thousands of boxes without the help of an added salesperson.

The simplest records storage can function in any self-storage facility and yield great results, possibly becoming the highest value ancillary service with the lowest possible cost of implementation. To begin, you’ll need empty units, racking, boxes, software, packaging, a contract, pricing, profit, management, services and an exit strategy. Oops! I seem to have left out manpower … or maybe not. We’ll see. Let’s take a peek at each of the above and re-evaluate the situation.

Unit Selection

Regardless of the size or sophistication of your facility, you can provide records-management services. The first step is selecting which units to use. Refer to the accompanying chart to estimate billable box positions and revenue for any size storage unit, room or warehouse. The best choice is a 10-by- 10 or larger, but any size will work. Monthly records-storage revenue should be approximately three to five times that of the current unit price.

Racking

The first capital investment is racking to hold the boxes. You’ll get the greatest density of storage with the least amount of work by using racking by providers such as REB Storage Systems International. This company has pre-drawn specification sheets for each size storage unit and regularly exhibits at industry tradeshows. Racks are a depreciable item, but they’re also a permanent asset that never needs to be replaced.

Boxes

All clients need records-storage boxes. Maybe you already sell moving boxes to customers and it won’t take much to add this new product to your inventory. Selling high-quality containers designed specifically for records storage can yield margins as high as 200 percent.

Software

Software is another capital expense. A quality program will operate your inventory-control system to easily find clients’ boxes. Many operators have been frightened by the complexity of the software, but there are new alternatives. Software is the key to reduction in manpower.

Packaging

Rather than sell records storage or management a la carte, sell packages of services. Consider three pre-priced options: economy (up to 25 boxes), small business (up to 50 boxes) and professional (up to 100 boxes). Each should include set services and a fixed price, billed quarterly in advance with a credit card.

The Contract

Self-storage contracts are typically month-to-month, whereas records-storage contracts are usually annual with an “evergreen” clause, an automatic self-renewal at the end of each year. Growth of existing accounts ranges from 9 percent to 25 percent annually, making this more of an annuity than a margin business.

Pricing

The price per box will vary from 35 cents to 50 cents depending on the market. If you’re in California, Florida or New York, your price will be higher than in Louisiana, Idaho or Indiana. However, in any locale, you’ll bill for three types of boxes:

  • Type 1 is a standard letter/legal size and will be billed at one times the price.
  • Type 2 ranges from a standard letter/legal size up to 2 cubic feet and will be charged at two times the price.
  • Type 3 ranges from 2.1 cubic feet to 3 cubic feet and will be charged at three times the price. Boxes of more than 3 cubic feet aren’t acceptable—they must be repackaged because of the weight.

Using this formula, the yield on a 1.5-cubic-foot box is 50 percent greater than the standard price, so odd-size boxes yield higher revenue each month. Since your basic package includes “up to 25 boxes,” if a client stores 15, the yield is much higher than price.

Profit

Profit margins vary depending on price and real estate. Permanent storage profits can be huge. Once your building and racks are depreciated, overhead will be your only cost. Since boxes stay in storage an average of 10 years or longer, margins are very high.


Click here for full size chart.

Management

Without proper management techniques and practices, you’ll never achieve or exceed expectations. Measurement is the key to managing your business process. Some records-storage systems have exact measurements to define the quantity and quality of each activity, automatically. Research the right products up front, and you’ll save tons of time and money in the long run.

Manpower

Suffice it to say you can outsource every portion of your manpower with net-margin management. Every activity has a price and a margin. You never need someone like the Maytag repairman waiting behind the scenes for something to do.

Services

Services should include storage, retrieval and “will-call pickup” rather than delivery and re-filing. Indexing can be as simple as adding box numbers.

Exit Strategy

You’ll only be selling records-storage contracts, not real estate. The contract holds the value in records management and can be sold to numerous buyers. You’ll probably have a dozen or more buyers and local players interested in your “book of business.” Convinced that records management is the way to go? When thinking of ancillaries, don’t overlook the obvious.

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 recordsmanagement operations. For help with feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail fileman@fileman.com; visit www.fileman.com.

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