There’s only one good reason for competing stores to be 30 percent or 40 percent different on rates: one operator is that much better. If you don’t manage your rates regularly, you’re probably not making what you could. Manage for profit, not occupancy.
Moving the income bubble just a little bit can make a big difference in the value of your property or portfolio. If you improve the net operating income of your store by $10,000 annually, it will increase the value of your property, using an 8.5 percent cap rate, by around $100,000. For a store with 400 tenants, that is $2 per tenant, per month. Pay attention and build value into your business.
I am not encouraging greed. I am encouraging focused stewardship of the assets with which you create wealth for your family—a noble cause. Will you sell your property? Will it pass to your children? You owe it to yourself and your family to get as much out of your assets as possible. If you’ve worked hard to build your assets and streams of income, make sure you are fine-tuning your business for today and the future.
Challenge No. 4: Everyone else is losing occupancy. We’re already competitive. It’s just that the market is so tight.
Be sure your “sense” of the market is accurate. If you don’t regularly track your competitors, you should. Your manager should, too. It’s imperative that you know when the store across town raises prices or offers concessions. Know if it is offering a move-in special on certain sizes.
You cannot compete if you don’t keep track of the market. A trend in your bank statements—up or down—doesn’t necessarily represent a market trend. Be sure you know the difference between internal and external influences on your income. Would you be surprised if you saw a detailed competitive market study in your area?
Challenge No. 5: My site is older, and the investment in remodeling is too high. I’d just rather keep my rates low and keep going like I am.
The asset you’ve built, the business for which you sacrificed and the time you spent away from your family will lose value if you are complacent. The value of your self-storage asset is not in past performance but reliable future income. If your site is dated, the capital improvements you need are probably not that expensive when you measure expected return. And when you provide better service to your customers, you’ll be able to charge stronger rents and generate more income in the long run. If you simply let your business die, be assured, it will.
We’re all in business for pretty much the same reason: We want to provide for our families. We want our kids to have more than we have. We want our grandchildren to be secure. We want to retire and have an income we can depend on. We want to travel, make other investments, build new things, live a certain lifestyle. As self-storage owners, we owe it to ourselves, our families, and our legacies to do business the right way—not waste our opportunities.
Someday, your facility will be sold, either by you or by your heirs. Now is the time to invest in your managers and facility and improve the value of your business. If the benefit is not fully realized by you, it will certainly become part of your legacy to the next generation.
Whether yours is a young business or an established one, set your standards of management and competitiveness high to perpetuate the value you have created for your family.
Ben Burkhart is owner of BKB Properties and StorageStudy.com. Located in central Virginia, he assists self-storage owners, developers and managers in analyzing site and market feasibility, measuring and improving sales and enhancing profitability. To reach him, call 804.598.8742; e-mail firstname.lastname@example.org.