Managing facility expenses from the perspective of a self-storage owner or investor is a different experience from managing them at the facility level. Site managers are concerned with the 10,000-foot view of the property, focusing on items such as office supplies, maintenance equipment and vendor quality. As an owner, you’re concerned with the 50,000-foot view, with the ability to dive to the 10,000-foot level as needed. You’re focused on net operating income (NOI), real estate taxes, capitalization (cap) rates, interest rates, property insurance, exit strategies and debt service, to name a few items on your list.

Unfortunately, you can’t control most of these. A few jesters in your municipality will set the property-tax rates. The Federal Reserve will take care of interest rates, which will then impact cap rates and debt service. Mother Nature will be more than happy to conjure up a natural disaster, at just the right time, to help with your insurance costs.

The goal moving forward is not necessarily to cut expenses but to allocate them in the right categories and look for opportunities to increase revenue. Self-storage owners who understand where their market is going and capitalize on that knowledge will be the victor in the next economic downturn. The time to plan for that event is now, and it starts with a smart expense strategy.

Protect Your NOI

Facility NOI is one of the most critical—if not the most important—metrics of self-storage ownership. Every decision the owner makes will affect NOI in one way or another. Hire that manager with poor people and organizational skills? Well, just go ahead and light a pile of cash on fire. Invest in manager salaries, training and education? Then maybe you can fill out an exceptional deposit slip in the future. Provide a quality customer experience, and you’ll have happy customers. Provide a horrible experience, and you can figure out the next “highest and best use” for your property.

To keep the self-storage engine running smoothly, you need to treat your expenses as investments and expect a return. First, invest in your operational team. Your management company, head of operation and office manager need to be compensated appropriately. If you’re planning on cutting expenses, look elsewhere.

Consistency and stability are the traits of successful organizations, so strive for those qualities when hiring staff. A solid management team will install processes that create constancy and gauge the correct performance metrics. There’s a reason the best coaches, attorneys, accountants, doctors, marketers and managers are compensated on a different level than the average person. These individuals bring a game plan to keep your business safe and profitable while increasing customer satisfaction.

Review Sales and Marketing

As a self-storage owner, you should be aware of the sales-training and marketing plans that have been implemented at your facility. You need to know what’s happening and why, but not necessarily all the technical details.

Are you tracking the number of leads being produced by a specific marketing campaign? Of those leads, how many are being converted to paying customers? What’s the lifetime value of each customer? Are your managers offering up the farm to get a rental, or are they holding steady on unit rates?

There must be a marketing plan that gets the phone to ring, a process to get a customer from the phone to the facility, and a continuation to not only rent that customer a unit but at the highest price per square foot. Don’t forget to sell him ancillary items such as packing supplies and tenant insurance! As a self-storage owner, how you invest in the sales and marketing process will dictate a large part of your facility’s revenue stream.

Cultivate Curb Appeal

Finally, make sure your team is keeping your self-storage facility clean and providing the best possible curb appeal. The exterior of your site should be fresh and welcoming. The driveways, doors, hallways, units, gates, cameras, fire extinguishers, lawn, signage, etc., should be clean and in good working order. The office should be warm, inviting and organized. It should also smell nice and offer a number of retail items customers can purchase at a high markup.

Also make sure your management team has a solid set of vendors to assist with any maintenance issues. Again, this is not necessarily something you need to do yourself, but be aware of how your asset is managed.

Invest for Success

The thing about self-storage expenses is you can’t typically “cut” your way to profitability. You must invest in your business. Today’s economy is based on value. If customers and employees feel there’s value in your facility, then it will be successful. If they don’t perceive the value, your asset will be treated as such.

If your facility is operating with a solid plan and providing great service, then revenue, expenses and NOI will be on target. This will allow you, the owner, to address your short- and long-term investment goals.

The owner of an NFL team is not coaching the team, selling tickets or managing concessions, but he knows exactly how each of those divisions is performing. It’s the same for a self-storage owner. You may not be renting units or cleaning the facility, but you should be aware of how those functions are performing.

Matthew Van Horn is vice president of Cutting Edge Self-Storage Management, which specializes in facility management, feasibility studies, consulting and joint ventures. He’s also president of 3-Mile Domination, a full-service self-storage marketing and strategy company. For more information, visit www.cuttingedgeselfstorage.com and www.3miledomination.com, where you can download a free e-book.