By Rick Beal
The United States Navy SEALs are some of the toughest guys on the planet. Their training dropout rate is somewhere in the 75 percent to 80 percent range. About the closest thing you and I will ever get to that kind of environment is in a video game! That said, there are many lessons to be learned from the SEALs, some of which could even be applied to operating a self-storage business.
The SEALS are good at everything they do, which is what makes them such a deadly force. When you get great at a variety of tasks as opposed to just a few, your level of effectiveness is raised considerably. To be successful in the self-storage world, a facility owner must be good at many things: reading management reports, maintaining the property, overseeing the business finances and much more. Let’s look at how we can apply SEAL strategies to one of your most essential operational tasks: creating an annual budget.
Plan the Mission
I don’t think any SEAL would last long if he only knew the mission’s end and had to fill in the blanks as he went along. The same goes for a self-storage owner. What are your goals for the year? Sit down with a piece of paper and answer these three questions:
- How can I maintain my current level of revenue?
- How can I grow my revenue?
- How can I reduce my expenses?
Often, when budgets are written, they’re thrown together at the 11th hour to meet some arbitrary deadline. Your facility’s yearly budget is one of the most important documents you have in your competitive arsenal. I’ll state it simply and bluntly: If your budget isn’t up to par or you don’t have one, you’re losing money.
As with most things, creating and maintaining a budget is driven by a vision but grounded in reality. Make it an opportunity to meet with your partners and staff to promote an open dialog about expenses and revenue as well as your goals to move the business forward.
On May 2, 2011, the SEALs raided and killed Osama bin Laden in his compound in Pakistan. This wasn’t an operation that happened overnight. The intelligence (intel) that preceded the raid was unparalleled.
What intel do you need to grow revenue and reduce expenses next year? Projections are a mix of past financial data and future goals. They serve as an accurate tool to ensure your income is maximized and growing as it should. Many of the reports you need are simple ones that can be found in your management software. Print off the management summary, move-in and move-out data, and credits and discounts issued. Obtain your profit-and-loss statement from your accountant, and you’re ready to go.
These are the key questions you need to ask:
- What will be your new gross potential at the end of the year? For example, is it an increase of $4,000?
- What’s your actual revenue?
- What’s your vacancy cost?
- What’s your average monthly move-out percentage?
- How many rentals do you need each month to stay current or grow?
- What are your anniversary increases (average number of increases and the amount you send out each month)?
- What about miscellaneous revenue? Consider fees, tenant insurance, truck rentals, retail and other income that can be folded into your total revenue.
- What are your biggest expenses? How can you reduce them?
- How can you reduce or eliminate discounts and credits offered to tenants?