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Outsourcing Self-Storage Management: Finding Your Comfort Level for Optimal Success

By Matthew Van Horn Comments
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It all started when you found some land in a great location and thought, “Why not self-storage?” You were still new to the industry and, at times, unsure of yourself, but you kept going. You had to work with the municipal leaders to get your facility approved, and then with contractors to get it built. Finally, the doors opened.

Now, fast forward a couple of years, and you couldn’t be more proud. Your facility has done well. It’s met occupancy and revenue targets, employs several highly talented people and is a solid business in your community. Even with all this success, though, you’re starting to feel something—getting that itch. You’d like to see your kids more or take your significant other on that trip you’ve been talking about. One day, you sit up in your chair, look at the clock, walk over to the coffee-maker, and it hits you: “I want to do something else.”

You’re not alone. Every year, many self-storage owners and investors go through a similar experience.

Maybe you acquired your property, or maybe inherited it or just decided to invest in a friend’s project. Maybe this is just a passive investment and the thought of managing the day-to-day operation of a storage facility isn’t that appealing. Maybe your facility isn’t even built yet.

The question is: What do you want to do with the business? You could sell it, but what would you do with the return? Perhaps you like the property, and it could possibly be a great business for your kids. No matter the situation, there’s a solution: You need to find someone to take care of your investment. It’s time to hire a management company. But where do you start?

Two Models

First, consider how you want your facility to be operated. There are basically two options for self-storage management: Hire a real estate investment trust (REIT), or hire a private company.

The first benefit of REIT management is your facility can be integrated into large network of facilities very quickly. The operating systems, marketing campaigns, sales programs and performance reporting come pre-installed. No mess—it’s just like flipping a switch. Also, since REIT branding is national, there’s the potential a prospective customer will recognize your business over a local “no name” facility. In addition, working with a REIT may provide you with an exit strategy should you ever want to sell.

The flip side is that you’ll most likely have to change your facility’s name and identity. If that’s an idea you’re fully against, this model may not work for you.

Alternatively, you can hire a private management company to operate your investment. The main benefits of choosing this model are that you’ll rarely have to rebrand, you won’t be just one of 1,000 properties in the management portfolio, and the cost could be more palatable. Like REITs, private companies provide operating systems, marketing campaigns, sales programs and facility reporting. Some will be stronger in certain areas, but they’ll typically streamline your operation and integrate the pieces you already have available.

At the end of the day, it all comes down to team-building and finding the system that works best for you. With whom do you feel comfortable and what are your goals? How much control are you willing to give up?

The Basics

When hiring a company to manage your self-storage investment, specifics matter. The cost is usually straightforward. The firm will normally charge a set monthly fee or a percentage of gross revenue. Generally, this isn’t the deciding factor because there are intangibles each owner seeks. The choice is going to come down to something more than money.

Overall, you want to know how the company defines the word “management.” Let’s start with some basic questions to ask your candidates:

  • Where’s the company located, and what’s its level of industry experience?
  • Who is your company contact, and how will you communicate?
  • How often will the company conduct site visits, and what happens during the appointment?
  • Does the company institute policies and procedures?
  • What is the structure for its human resources department?
  • Does the company have a manager-hiring system, and how is training conducted?
  • Are your managers employees of the facility or of the management company?
  • How does the company communicate with site managers?
  • Are you required to change your self-storage management software?
  • Who’s responsible for payroll and tax reporting?
  • Who handles the accounting and does it include paying invoices? If so, what’s the dollar limit for management-company approval?
  • How is accounting handled, on an accrual or cash basis?
  • What financial reports will you receive and how often?
  • Does the company install a preventive maintenance schedule, and how are vendors chosen?

Marketing

Once you move through the general questions, it’s time to get more specific. As competition heats up in our industry, you need to know how your new management company plans to take on this challenge. Ask the following:

  • Does it have a marketing plan? If so, what does it entail and how much will it cost?
  • Does it include offline and online marketing?
  • Does the online component include the facility’s website, overseeing its social media channels or pay-per-click advertising?
  • Will the company market to local businesses such as apartment complexes, realtors, moving companies, etc.?
  • Will it install a referral program?
  • What kind of rental specials are offered during marketing campaigns?
  • Is there a call to action in the marketing materials? Can you review examples?
  • How often does local marketing take place and how is it tracked?
  • What’s the return on investment for each campaign?
  • What kind of marketing reporting will you receive?

Most self-storage managers aren’t natural marketers, so training in this discipline is extremely important. The answers to the above questions will give you a good idea of the kind of exposure your investment will receive in your local market.

Sales

A quality sales program is equally important to the daily success of your self-storage operation. Well-designed marketing campaigns will increase traffic to your facility, but managers must be able to close these leads to make a difference. When speaking with management companies, ask:

  • What kind of sales training will be provided?
  • Who conducts it and through what medium?
  • Are managers provided with sales scripts?
  • What specials or discounts will the facility offer?
  • How much latitude do managers have in regard to pricing?
  • How are potential customers tracked?
  • Is some type of customer-relationship-management software used?
  • How often should managers follow up with potential customers?
  • Is there a bonus program for managers?
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