As we wind down another calendar year, self-storage owners are working on next years budgets. After we get past the optimistic income projections, we need to analyze our operating expenses and see if we can manage our facilities more efficiently and lower our costs. With price increases occurring in most every facet of life (gas, food, insurance, taxes, etc.), planning for business expenses is complex in many ways.
The goal is to effectively manage costs and minimize increases. Approach each line item with an open mind and look outside the box. Here are some tips to keep your facilitys expenses in check.
Consider Your Vendors
An important consideration when looking at your overall expenses is your vendor relationships. First, look at your business and tenant-insurance policies. Have signed on with the same property-insurance company year after year simply out of habit? You could be saving money simply by switching providers. Get at least three different companies to look at your policy and offer you a bid.
There may also be some new discounts available to you. For example, if youve added mandatory tenant insurance in the past year, look to see if theres a discount based on your facility's average penetration. Have you upgraded your security system, improved safety conditions or made other major capital improvements that have increased the value of your property? If so, go over these improvements with your insurance agent to see if any of them can help you save.
Have you really looked at your invoices and statements from your other vendors, such as your landscaper, maintenance company, etc.? Again, get some other companies to give you bids for the same services.
When gas prices sky rocketed a few years ago, many vendors added a fuel surcharge. Are you still paying for this and, if so, why? Ask your vendor if you can reduce or eliminate it all together. Fuel is costly, but after this many years of relatively stable prices, perhaps this is something you should not have to pay.
Are you spending money on services that could be purchased for less or even eliminated? For example, compare the cost of an outside service, such as pest control, to doing it yourself or having your manager do it as part of his duties. In many cases, youre paying hundreds of dollars for something that may not be as necessary as it was in the past, or that could be done in-house by simply buying the materials.
Im not saying you should make your manager do more than is necessary but, in many cases, you could offer your manager a raise of half of what you save by not outsourcing the service. This way, you both win. Your manager gets a few more dollars in his pocket, and you shell out a few less. Look at each item you outsource and evaluate it from every conceivable angle.
Are you still writing checks to pay your bills? These days, most companies offer auto-billing or online bill pay. Think about the cost savings if you eliminate the cost of postage, checks, printer cartridges, etc. You may be losing money by not paying your bills online.
Are your managers still sending invoices and late notices via snail mail? Again, if you can get this to a paperless process, youll save hundreds if not thousands of dollars each year. These minor items can add up fast.
Examine Your Retail Inventory
We all recognize the value of selling retail and ancillary supplies, but how many of us honestly know what we sell? Do you really need to have the amount of inventory on hand that you do?
Many of us want to have as much as possible to sell to customers, but do we really sell everything we display? What length of time should we allow for product movement? If it takes us six months to sell an item, is there really a reason to re-order it once it's gone? Is this the most effective use of our money? These are hard questions to answer, but some stores have thousands of dollars tied up in retail inventory for an extended period of time, sometimes unnecessarily.
Audit Your Energy Costs
Have you recently completed an energy audit of your facility? You might be surprised, but next to taxes, payroll, marketing and insurance, utility costs are usually the next highest expense. Can you adjust the temperature in the climate-controlled building by 2 degrees? How much would it save you in the long term? Can you turn the lights off after 1 a.m. without compromising your facilitys safety or security?
Again, these are questions we never seem to ask because were so focused on increasing income. However, imagine what your bottom line would look like if you could reduce these expenses by 10 percent? Things like leaky faucets, toilets or hose bibs are just allowing us to throw money out the window. These expenses are manageable and should be constantly maintained.
Pay Your Managers Well
Last but not least in the discussion self-storage operating expenses is your payroll. Are you over or under compensating your management team? Many owners think the lower wage they have to pay, the better off they are. This sounds good in theory. In reality, its probably the most wasteful spending youll ever do.
You get what you pay for. If you want to pay minimum wage to your manager, expect minimum results. If you compensate well, you should expect higher returns. Examine your operating hours and payroll obligations to see where you can make improvements. Create a team you can compensate based more on performance and give them an opportunity to increase their income by growing yours!
One alternative is to install a self-storage kiosk to reduce some of your employee work hours. It might not only save you money but allow your managers to make more by focusing on facility performance. The important thing is to weigh the cost against the benefits and have a clear objective.
Many owners wont even consider installing a kiosk because they fear how it will affect their managers, who often relate the automated machine with a drop in pay. Nothing is further from the truth. A strategically placed and used kiosk can actually increase their income by paying a bonus for every rental gained from the kiosk, for example. Kiosks also extend your renting hours, which can improve overall occupancy.
If you can offset the cost of a kiosk with increased rentals, the savings can be huge. Im not promoting kiosks for every facility, but we have to embrace the technology tools out there to help us improve our bottom line. In many cases, kiosks are a great alternative and an asset that should be examined closely.
Managing your self-storage facilitys expenses is hard work. However, the rewards of efficiently doing so can be exponential, making it well worth your time and effort.
Mel Holsinger is president of Professional Self Storage Management LLC, which oversees the operation of more than 40 facilities in Arizona, Colorado and Texas. Holsinger has been in the self-storage industry for more than 25 years. To reach him, call 520.319.2164; e-mail [email protected]; visit www.proselfstorage.com .