Due to increased competition, the housing slowdown and the current state of our overall economy, we’re experiencing a more significant impact on our operational performance than in past economic slowdowns. The “recession” has impacted our industry in various ways. As I travel throughout the country, I’ve noticed lower unit occupancy levels, higher delinquencies, increased promotions and incentives and, most important, lower economic occupancies. With stagnating revenues and increasing expenses, net operating incomes have dropped for many storage operations.
Many of the new locations that have opened within the past year have experienced difficulties in achieving their pro forma forecasts and have “eaten through” their working capital (set aside to carry them to break-even levels) quicker than expected.
My observations are not intended to scare you but to make you realize the importance of proper training and management. In hard economic times, our natural reaction is to start cutting expenses and not spend the necessary money to improve the economic performance of a self-storage operation.
I encourage you to look at ways of properly training your operational team to improve the financial performance of your business. Sometimes this takes spending some money, but the payback will be exponentially higher. If you pay to bring a sales or marketing consultant in to provide new ideas and train your staff, how will this impact your profitability?
Let’s say your average rental is worth $720 ($80 average monthly rental multiplied by a nine-month average stay) and you achieve five additional rentals per month because of these new ideas and training. This nets a $3,600 in incremental value, which will easily have a compounding effect every month. Moreover, it’s far less than what a consultant would charge you, and is a great example of how to become more proactive versus reactive. In addition to profitability, it also improves your real estate value.