As we close out the third quarter of 2012, its time to start thinking about your self-storage facilitys goals and projections for 2013. How close were you in 2012? Were you above or below your projections for income, expenses and net operating income (NOI)? Were your move-ins, move-outs and net units at an acceptable level? Do you believe your facility provides the best customer service and amenities in the area? Are your managers fully trained?

All of these items can have a dramatic effect on the financial success of your business. In our never-ending quest to increase NOI, we must consistently review our facility expenses. Here are six expense areas you should review on a regular basis.

Payroll

This is one of the largest expenses in any self-storage operation. Between a managers salary, bonuses, insurance benefits, payroll burden, payroll services, allowances and workmans comp, the costs can add up very quickly.

Are your managers compensated correctly and at the market rate? Have you reviewed multiple vendors for your insurance and benefit costs? Is your facilitys bonus program based on real and measurable metrics such as an actual increase in NOI? Are the allowances you pay, such as a cellular phone or mileage, at an acceptable rate? Have you reviewed multiple vendors for your payroll services? Does your insurance company have your employees coded correctly for workmans comp?

While reviewing these costs, keep one thing in mind: The success of a self-storage facility depends greatly on the manager in the office. If you have a great manager, consider that variable when you review your payroll costs. Talented managers are hard to find, even in this economy.

Marketing

Marketing is an intriguing expense for the self-storage industry as a whole. Facility operators usually fall into one of two camps: They budget extensively for marketing or they budget nothing at all.

If your facility doesn't have a marketing budget, this section may not apply to you. But if you're not doing any active marketing, I guarantee the lack is affecting your facility revenue. Remember, having a marketing plan is not the same as advertising. A marketing plan is a consistent and well-thought-out course of action that takes into account available marketing campaigns, the timing of these campaigns, related expenses and return on investment (ROI).

The best way to measure the success of your facilitys marketing plan is to calculate the ROI of each individual campaign. For example, take a look at the costs associated with your website.

Lets assume the monthly expenses are $500, and your facility averages five online rentals per month. The facility has an average unit price of $100 per month, and customers stay an average of 10 months. In this scenario, the cost to acquire each customer is $100 (total monthly Web expenses divided by the number of online rentals). The profit on these customers should be about $900 each (average unit price per month times the average length of stay minus the cost of customer acquisition).

This is a very easy way to calculate the ROI on an individual campaign. There are other variables that could affect these numbers, but overall it will be pretty close. Review this scenario on each marketing campaign to decide which your facility needs to keep and which you should discontinue.

Utilities

Every year the utility costs at your self-storage facility rise. Regularly review your electric bill. If it increases, check to see if the electric company has raised its rates. Put your indoor lights on automatic timers, and make sure customers close the doors to all air-conditioned and climate-controlled buildings. Make sure outdoor lights are turned off during the day.

Internet and phone service are two other services you should bid out on a regular basis. Often a bundle pack or a multi-year agreement can reduce your phone and Internet costs by 20 percent or more.

Professional Services

Regularly review all of your facility's professional services. Lawn care, pest control, security monitoring, snow plowing and maintenance contracts are all services that can be put out to bid.

Insurance

Its not uncommon for a self-storage property insurance policy to increase 20 percent over the previous year. Try to find a broker who has multiple carrier contacts to find the best deal. If you have multiple properties, consider leveraging those facilities into a single policy. Often, there are significant discounts for this type of multi-property policy.

Office Expenses

Office expenses are often hidden. They may seem tame compared to insurance or utilities, but they add up quickly.

Look around your office. Do you have seven colors of Post-It notes, 25 types of pens, eight colored highlighters, six types of candy on the counter, and a gum-ball machine you dont remember ordering? Set standards for office supplies. Consider setting up an account with an office retailer like Staples or Office Depot and limit the office supplies your staff can order. It may seem like a small expense, but you can often save hundreds of dollars per year.

The year 2013 is coming quickly. Even though the self-storage industry has been very successful over the last few years, facility operators must regularly monitor their expenses. This simple exercise can add thousands of dollars to your facility value.

Matthew Van Horn is vice president of Cutting Edge Self-Storage Management, a full-service management company specializing in management, feasibility studies, consulting and joint ventures within the self-storage industry. Van Horn is well-known for finding hidden profit centers in self-storage operations. For a complimentary copy of Hidden Profit Discovery Session, send an e-mail to [email protected]. For more information, call 866.970.EDGE or visit www.cuttingedgeselfstorage.com. Follow the company on Twitter at Cuttingedgemgt, and on Facebook at Cutting Edge Self-Storage Management.