As we look ahead to 2015, self-storage operators should be reviewing their 2014 profit-and-loss statements. That’s right … It’s budget time! Time to start planning for next year’s success. That includes income and expenses.
There’s no rest for the weary. Facility owners are under constant pressure from vendors to pay out a higher percentage of their income. Whether it’s for utilities, marketing, insurance, repairs or office supplies, vendors want as much of a facility’s revenue as possible.
As a self-storage manager, you’re the first line of defense in the protection of your facility’s net operating income (NOI). You might say, “Well, I don’t make decisions about spending.” That may be true in regard to final decisions on certain items, but as the person who manages the day-to-day operation, you’re mistaken if you think your opinion and actions don’t matter.
Every self-storage manager is a gate-keeper. You know which of your vendors do a good job and which don’t show up on time. You know which have great customer service and those that act like you barely exist. You know the vendors that inflate their invoices and the ones that treat you fairly. The point is you’re the one who knows, and that should be very important to the final decision-maker.
3 Ways to Help
So what can you do to help? First, know your numbers. Remember, “In God we trust; everyone else must bring numbers.” With a vendor relationship, one of three things should be true: The vendor makes your life easier; loss of the vendor’s service would cause absolute havoc for your business (for example, utilities); or use of the service helps you increase your facility’s NOI.
Next, be willing to put your personal feelings aside when evaluating vendors. You might like some of them, but you have to judge them based on the service they provide.
Finally, take the initiative to research and re-bid all of the services used at your facility. You’ll often be surprised at the savings you can find by just picking up the phone or sending an e-mail.
Now that you know what you can do to help, let’s pick a few expense categories to attack.
Marketing is one of those ambiguous types of expenses that can eat up a significant part of your budget. To address this expense, you need to understand what marketing is and the individual items to which you allocate money. To me, marketing is an overall plan that includes advertising, sales, customer service and curb appeal, with the end goal of driving customers to use your service.
A majority of the money operators allot to marketing goes toward facility advertising. Is the money you’re spending on advertising giving you an acceptable return on your investment? If you haven’t tracked the number of leads that come from an ad campaign and the percentage of those leads that converted to rentals, you really have no idea. This analysis should apply to your website, Web marketing, print marketing, Yellow Page ads, referral program or any other advertising plans. If something isn’t providing an adequate return, cut it out of your budget swiftly and mercilessly.
Most self-storage facilities have a number of service contracts. The more bells and whistles your property has, the more services you’re likely to use. Any contracts for landscaping, snow plowing, security monitoring or maintenance, computer service, HVAC maintenance, etc., should be regularly reviewed and put out to bid.
One word of advice: It’s notoriously hard to find a good service provider, so don’t make changes lightly. There are usually only a few good options in any given market. When considering a change, you have to weigh the value of your current provider against the possibility that the next one will give you an ulcer. Sometimes the best approach is to talk to your current provider and try to negotiate a lower price or better terms.
Office supplies are another area where self-storage managers tend to have a lot influence, so you have to be careful. It’s extremely easy to be afflicted with “shiny-toy syndrome” when in an office-supply store or shopping on Amazon. Of course you need the newest printer, scanner, software, office chair or that Bluetooth-enabled paper-clip dispenser! Most of the time, you don’t need any of this stuff. You also don’t need 4,000 multi-colored Post-It notes, 55 types of pens, 3 million thumb tacks, 85 highlighters, or a Staples “easy” button. These items add up quickly and increase costs needlessly.
Expense management is an exercise in diligence. As you and your facility owners go through the budgeting process this year, take into account your intimate knowledge of the property. You may find you’re over budgeting in one area while another is suffering. Just a few minor changes can have a huge effect on your operation in 2015.
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.