7 Steps to Creating a Realistic 2013 Budget for Your Self-Storage Facility
Its time for self-storage operators to start thinking about their operational budgets for 2013. Here are seven critical steps to creating a realistic financial plan.
August 3, 2012
Schools back in session, summers over, Halloweens around the corner Its time to start thinking about your self-storage facility's operational budget for 2013! Already!?!? you ask. To budget well, we need to prepare, research and take our time. Budgets are usually completed for the following year by Dec. 1. The process can take about a month, so you should begin by mid-October.
Why is budgeting important? For starters, many investors and bankers require it. Even if its not required, a budget helps predict cash flow, sets goals for revenue growth, and creates a framework from which operators can manage their expenses. Without a budget, it can be easy to spend more money than youre bringing in. Here are seven critical steps to creating a realistic 2013 budget for your self-storage operation.
Step 1: Gather Tools and Data
Before you begin assembling your budget, spend some time gathering important data. If you have a bookkeeper or property accountant, ask him for copies of the propertys profit-and-loss statements for the last two years, and year to date for the current year. Also, find out when paychecks will be cut next year. If payday is every two weeks for your manager, which two months will have three payroll periods instead of two during 2013? Review any existing contracts that will continue into 2013. This may include Yellow Pages ad commitments, preventive maintenance or Internet-marketing contracts.
You should also generate a couple of critical reports from your self-storage management software, including the most recent monthly summary report. It will give you starting points for gross potential, occupancy and total actual rent. It would also be really helpful to have a historical report that shows move-ins, move-outs, occupied units, total rent collected and discounts given for the last 36 months.
Step 2: Review the Competition
Budgeting season is also a great time to visit your local competitors. How does your facility compare in terms of quality, service and value? Are there any changes you could make in 2013 that would significantly improve your occupancy or revenue? This might include adding climate-controlled units, sealcoating your parking lot, purchasing new banners to improve signage, instituting a new move-in special, or hiring a more sales-oriented staff.
Step 3: Audit for Maintenance and Capital Project Needs
After youve visited your competitors, do a thorough walk-through of your property, trying to see it from a customers perspective. Make sure all the lights are working, and review the condition of the signage, gutters and roof. Are all keypads, gates and cameras working? Are there any signs of asphalt damage or wear and tear? Are there any doors that need spring adjustments or replacement? Create a list of capital improvements and maintenance projects youd like to complete next year, and then gather estimates.
Step 4: Ask Experts for Help
Who knows your property better than you? Your property manager! Include your manager in the budgeting process. Ask what he would do differently if he owned the property. Managers often have great ideas for improving the property and bottom line but are hesitant to say something to owners because theyre afraid of insulting them. Your manager should also be able to provide you with his expectations for growth in occupancy and rental rates for next year.
If you know other self-storage owners in your area, give them a call. In this industry, people are generally friendly and eager to help one another. Share your thoughts on the market and expectations, and then ask for their opinions. Maybe theyve heard rumors of a potential new competitor you didnt know about. Other storage investors can be a great source for information on the industry and your market.
Step 5: Analyze Trends
Analyzing trends in key areas at your property over the last couple of years can help you make a more accurate prediction for the next 15 months. If you have some experience with Microsoft Excel, Word or PowerPoint, creating quick line charts is a piece of cake. If you havent done it before, you can use the help tool within the program itself or search online for tutorials.
I recommend plotting these six line items on individual charts by month for the last two to three years:
Total revenue
Total discounts given
Total expense
Move-ins
Move-outs
Square-foot occupancy
Look for seasonal and long- and short-term trends. Does occupancy usually peak in August? Do move-ins spike in May due to local college students leaving for summer break? Do you have to give more discounts in the summer months or in the winter? Knowing this information can help you plan accordingly.