On each of his two most recent projects, he’s bleeding $25,000 to $30,000 per month. Both have loans coming due, and he lies awake at night in a cold sweat wondering how the bank is going to react to his extremely low occupancy and income.
OA could have easily solved his problem with by allotting $10,000 per month for marketing in the first 12 months to 18 months of operation, and then $3,500 per month thereafter to maintain income and occupancy. That may sound like a lot, but compared to what he’s losing and what his NOI could be with a cap rate applied, it would have been the best $10,000 per month he could spend. But he didn’t budget it, and that’s the way he operates. Sad story.
OB is new to the industry and came from a retail background where acquiring and keeping customers was the most important function of his business. When he financed his facility, he made certain to over budget for marketing just in case things were tougher than anticipated. He allotted $2 per rentable square foot, per year for the first two years, which allowed him to crush his competitors and stabilize in just 14 months in a competitive market.
OB has money to spare and is far ahead of his projections. He now spends a small amount to maintain his occupancy and enjoys a great income from his investment. Getting new financing when the time arrives will not be an issue, and he sleeps like a baby at night.
Marketing is no longer something eccentric or crazy operators do.
It’s every bit as important as your land and building materials. Make sure you budget for it when planning your financing and execute an aggressive plan after you open. Learn from the stories of OA and OB, and your life will be much more easy, fun and lucrative.
Derek M. Naylor is the president of Storage Marketing Solutions, a full-service, results-oriented marketing and advertising agency dedicated to the self-storage industry. For a free subscription to his e-newsletter, call 800.941.4805; e-mail firstname.lastname@example.org; visit www.storagemarketingsolutions.com.
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