This past spring, during a seminar I presented at the Inside Self-Storage World Expo in Las Vegas, I asked a large group of facility owners how many of them planned to do any gambling while they were there. A few hands went up, but the majority sat still. In fact, there were a few comments such as, “I don’t like to risk my money!” That’s understandable. Most people who gamble in Las Vegas will lose, and that’s kind of the point of the economy there. It’d be difficult to keep all that neon burning if people actually won.
I then asked the same owners how many of them regularly audit their self-storage facilities. A few hands went up, and there were a few comments such as, “I don’t need to” and “It’s a waste of time.” Some even mentioned that since their manager has been with them for years, there’s really no need. That’s not understandable and is just as much a gamble as playing one of the many games in Las Vegas.
Why would otherwise smart, self-made entrepreneurs be so foolish as to never or rarely audit one of the most valuable assets they own? Why would anyone put as much effort, time, money, sweat, anxiety, credit-worthiness and sleepless nights into such a huge endeavor as developing or buying one or more self-storage facilities, and then never bother to ensure everything is operating as well as it should or could? Why risk everything to chance?
I’ve come to the conclusion that most self-storage owners have a gambling addiction. They’re taking a gamble that:
- Nothing can ever go wrong
- Their manager would never steal from or mismanage the facility
- The facility’s income is as high as it can ever be
- There are no problems with the unit mix, waived fees or discounts
- They’re in no danger of ever getting sued for doing something painfully wrong
- Their ego and personality will be enough to keep it all together
- This is such an easy business that they can’t mess it up
These owners are also addicted to danger and that hands-off management style that’s so alluring in this business. But as with any addiction, things can go wrong—from bad to worse to terrible to disastrous. The question is not if something will go wrong but when. Your turn may be just one roll of the dice away.
The good news is many disasters can be avoided by conducting regular facility audits. Let’s take a look at some things that could go wrong and how an audit can reduce these risks.
While the majority of self-storage managers don’t steal and would never even consider doing so, there’ll always be a few bad apples. The discovery can be heartbreaking for an owner. I’ve never caught a manager stealing and then heard the owner say, “Yeah, I thought so.” It’s always a shock, and usually someone he never would have suspected.
Unfortunately, in many ways, the nature of the business lends itself to the occasional theft. Managers often work alone, customers sometimes pay in cash, fees are “waived” with no verification, move-in specials are widely used, and payments are deleted with no follow-up. In almost every of theft case I’ve seen, the guilty manager acknowledged that it was easy because no one was paying attention. Your manager is most likely not stealing, but do you know for sure?
Failure to Follow the Law
Many a self-storage unit is sold at auction without someone making sure every “I” gets dotted and every “T” is crossed. Maybe the address of record was incorrect, or the manager took a partial payment, or no one documented the collection efforts, or the locks were cut too soon. Maybe the problem is even in how you charge your tenants.