Due to increased competition, the housing slowdown and the current state of our overall economy, we’re experiencing a more significant impact on our operational performance than in past economic slowdowns. The “recession” has impacted our industry in various ways. As I travel throughout the country, I’ve noticed lower unit occupancy levels, higher delinquencies, increased promotions and incentives and, most important, lower economic occupancies. With stagnating revenues and increasing expenses, net operating incomes have dropped for many storage operations.
Many of the new locations that have opened within the past year have experienced difficulties in achieving their pro forma forecasts and have “eaten through” their working capital (set aside to carry them to break-even levels) quicker than expected.
My observations are not intended to scare you but to make you realize the importance of proper training and management. In hard economic times, our natural reaction is to start cutting expenses and not spend the necessary money to improve the economic performance of a self-storage operation.
I encourage you to look at ways of properly training your operational team to improve the financial performance of your business. Sometimes this takes spending some money, but the payback will be exponentially higher. If you pay to bring a sales or marketing consultant in to provide new ideas and train your staff, how will this impact your profitability?
Let’s say your average rental is worth $720 ($80 average monthly rental multiplied by a nine-month average stay) and you achieve five additional rentals per month because of these new ideas and training. This nets a $3,600 in incremental value, which will easily have a compounding effect every month. Moreover, it’s far less than what a consultant would charge you, and is a great example of how to become more proactive versus reactive. In addition to profitability, it also improves your real estate value.
Bring in the Reinforcements
A training workshop is only as good as the reinforcement afterward. It is easy to get a group of owners and managers excited and “charged up” about new approaches and ideas of enhancing and improving the business. It is more difficult to get them to follow through.
Reinforcement of improvements helps break old habits and establish new ones that will help overall operations. A good consultant can make recommendations and provide ways of reinforcing the training to help with this process. Training must be more than an annual convention or quarterly meeting. It must be a comprehensive training program that provides measurable results. There must be a training philosophy established within the organization and carried through on a daily, weekly, monthly and yearly basis.
The results don’t lie. If you are tracking key performance indicators it becomes much easier to set goals in the critical areas of operation. Over time it will also help you to establish benchmarks for what poor, average, good and exceptional performance is. This relays to the manager how he is performing. For example, if monthly rentals are a key performance indicator, determine a storage-unit goal for each month throughout the year. This goal can change based on market conditions, unit availability, rate increases, competition, etc., but it should be set at the beginning of each month.
Goals let employees know what is expected and promote growth. If training, tools and resources are provided to employees to meet their goals. Tracking and measuring strengthens the team and holds everyone accountable.
In the current state of the self-storage industry, we must find creative ways to equip and train our employees. This will improve our economic occupancies and maximize profitability. It can also help set an expectation for excellence in all areas of the operation that will carry through to better long-term results.
The biggest asset we have is our employees. Invest in them and your business will grow.
Brad North is the founder of Advantage Business Consulting, which specializes in facility management, feasibility, onsite sales, marketing and operational training for the self-storage industry. He contributes articles to various self-storage publications and is a nationally recognized speaker and consultant within the industry. For information, call 513.229.0400; visit www.advantagebusinessconsulting.com.