How can the portable-storage industry cope with the challenges posed by the recent economic upheaval? In analyzing any business situation, you should weigh different approaches before choosing the one that works best for you. Let's examine three different strategies portable-storage operators can use to stay competitive even during tough times.
1. Mini-Min. Taking this position would mean minimizing operating expenditures, reducing staff, offering promotions and, perhaps, subletting some warehouse space, trucks or lifts. Selling assets, to a “friendly competitor” in a distant market won't affect your own business, but will generate cash or eliminate the monthly expense of idle assets. In addition, terminating slow-paying and complicated customers reduces time and effort spent on generating marginal income.
The benefit is you collect the current monthly rentals at basically no variable operating costs. The drawback is customers get minimal service, and your market presence is heavily reduced. The business has little or no exposure to the market and new customers may choose a competitor doing more promotions.
2. Mini-Max. This strategy is more of “let’s go with the flow,” in which you don’t invest in new containers, trucks, lift or warehouses. Still, you should maintain customer service and promotions at current levels while being thrifty. By offering incentives for longer rentals, you can support the use and stability of the business. Offering free delivery/pickup is a common incentive, but can backfire. It is a direct expense and, with current high fuel costs, it means cash out but no cash in. Offering free months is not an additional cash layout, and is a preferred form of discount over free delivery.
A sales-oriented portable-storage operator doesn’t want to reduce promotions, but must review advertising to ensure it is efficient and provides the best value for money spent. Reducing ad size may not affect the number of new customer calls, but saves money. Doing a geographic overlay of the customer base and the promotional efforts is a good way to measure the effectiveness of various advertising campaigns. The best example is to look at the local Yellow Pages’ areas and compare them to your customers’ geographical locations.
Be sure your company name and information is on your containers so potential customers can see them loaded/unloaded or transported in their neighborhoods. This can be a great marketing tool.
Having a concentrated customer base is another valuable strategy. By operating in a smaller geographical area, you may obtain better economics overall. Being closer to your customers makes it is easier to provide good service, which is the best form of promotion. Good service means referrals, and translates into more business at no additional cost.
3. Maxi-Max. In this scenario, a portable-storage operator takes advantage of a market’s weakness. During a soft economy, suppliers often rely on rebates to add oomph to sales. Look for deals in all the right places. Another marketing strategy is getting involved in your community, which can lead to local media exposure. For example, offer a free container for highly visible locations such as schools, sports arenas or municipal offices for a limited time. This gets your name seen in a charitable fashion.
Finally, the most aggressive position is to look to your competitors for opportunities. They may be interested in selling equipment, containers, trucks, lifts, or even the company. They may have customers who are difficult to service because of location or specific demands. It may be an opportunity for you to buy these containers with the attached rental agreements at a discounted price. Obviously, this strategy poses additional risks, so timing and prudence are important.
Beware, though, a prolonged downturn may mean your aggressive actions don’t pay off as quickly as projected, which may cause an unnecessary squeeze on cash flow. To take advantage of existing opportunities, you need available capital. Stay in touch with your funding sources—banks, finance companies and private investors—at all times.
The best approach to the changing environment differs between companies, but a skillful entrepreneur finds ways to adjust and adapt to new conditions. Change may even bring bigger opportunities.
Anders Norlin is the owner and managing member of Box Credit LLC. He has more than 15 years experience in the container-leasing and portable-storage industry. Box Credit specializes in financing portable-storage and self-storage businesses as well as providing financial consulting and brokerage services. For more information, call 415.381.8542; visit www.boxcredit.com.