By Chuck Gordon
As a self-storage operator, there’s no question you should be marketing your facilities online. If you aren’t, you should start soon because your competitors most certainly are. There are many components to a successful online marketing campaign including your website, search-engine optimization (SEO), pay-per-click advertising, display advertising and third-party reservation services. Each of these elements is critical, but this article will focus on third-party reservation services.
You’ve probably heard companies in this category called a few different things: self-storage search engines, self-storage directory websites, self-storage aggregators. All of these names refer to a category of companies that provide third-party reservation services. What these companies essentially do is generate new tenants for you through their own websites and marketing efforts. The method and model for each vendor is unique, but at a high level, the purpose of these companies is to rent your vacant units.
There are a few vendors offering this service including SpareFoot, SelfStorage.com, Self Storage Finders, USstoragesearch and StorageFront. Every storage operator should sign up for as many third-party websites as they can find, so long as each one delivers a positive return on investment (ROI).
Calculate Tenant Value
Before we look at specific models, let’s determine how to calculate the dollar amount you should spend per rental. This number will help you decide which third-party websites are delivering a positive ROI. The figure will be unique for every storage facility, so I’m going to give you a formula.
First, you’ll need to find the average length of stay for tenants at your property and the average monthly rent across all your units. You’ll likely find this information in your management software. Once you have these numbers, multiply them to determine the average lifetime value of each tenant. For example, if your average monthly rent is $100 and your average length of stay is 10 months, each tenant who signs a lease at your facility is worth an average of $1,000. Of course, there are some customers who stay two months, but there are also some who stay five years, which is why you should work off the average.
Once you’ve calculated your average lifetime value, you can determine how much you’re willing to pay for each new rental based on the assumption that the customer will be worth that much. Since tenants sourced from third parties are incremental business you wouldn’t otherwise have, some would argue you could pay as much as 50 percent of the lifetime value, since you’ll still be profitable on that tenant. But let’s be conservative and say you’re willing to pay 10 percent. In the example above, this means you should be willing to pay a vendor $100 for each new tenant it sources.