As we close out the third quarter of 2012, it’s time to start thinking about your self-storage facility’s goals and projections for 2013. How close were you in 2012? Were you above or below your projections for income, expenses and net operating income (NOI)? Were your move-ins, move-outs and net units at an acceptable level? Do you believe your facility provides the best customer service and amenities in the area? Are your managers fully trained?
All of these items can have a dramatic effect on the financial success of your business. In our never-ending quest to increase NOI, we must consistently review our facility expenses. Here are six expense areas you should review on a regular basis.
This is one of the largest expenses in any self-storage operation. Between a manager’s salary, bonuses, insurance benefits, payroll burden, payroll services, allowances and workman’s comp, the costs can add up very quickly.
Are your managers compensated correctly and at the market rate? Have you reviewed multiple vendors for your insurance and benefit costs? Is your facility’s bonus program based on real and measurable metrics such as an actual increase in NOI? Are the allowances you pay, such as a cellular phone or mileage, at an acceptable rate? Have you reviewed multiple vendors for your payroll services? Does your insurance company have your employees coded correctly for workman’s comp?
While reviewing these costs, keep one thing in mind: The success of a self-storage facility depends greatly on the manager in the office. If you have a great manager, consider that variable when you review your payroll costs. Talented managers are hard to find, even in this economy.
Marketing is an intriguing expense for the self-storage industry as a whole. Facility operators usually fall into one of two camps: They budget extensively for marketing or they budget nothing at all.
If your facility doesn't have a marketing budget, this section may not apply to you. But if you're not doing any active marketing, I guarantee the lack is affecting your facility revenue. Remember, having a marketing plan is not the same as advertising. A marketing plan is a consistent and well-thought-out course of action that takes into account available marketing campaigns, the timing of these campaigns, related expenses and return on investment (ROI).
The best way to measure the success of your facility’s marketing plan is to calculate the ROI of each individual campaign. For example, take a look at the costs associated with your website.
Let’s assume the monthly expenses are $500, and your facility averages five online rentals per month. The facility has an average unit price of $100 per month, and customers stay an average of 10 months. In this scenario, the cost to acquire each customer is $100 (total monthly Web expenses divided by the number of online rentals). The profit on these customers should be about $900 each (average unit price per month times the average length of stay minus the cost of customer acquisition).
This is a very easy way to calculate the ROI on an individual campaign. There are other variables that could affect these numbers, but overall it will be pretty close. Review this scenario on each marketing campaign to decide which your facility needs to keep and which you should discontinue.