By Rick Beal
The United States Navy SEALs are some of the toughest guys on the planet. Their training dropout rate is somewhere in the 75 percent to 80 percent range. About the closest thing you and I will ever get to that kind of environment is in a video game! That said, there are many lessons to be learned from the SEALs, some of which could even be applied to operating a self-storage business.
The SEALS are good at everything they do, which is what makes them such a deadly force. When you get great at a variety of tasks as opposed to just a few, your level of effectiveness is raised considerably. To be successful in the self-storage world, a facility owner must be good at many things: reading management reports, maintaining the property, overseeing the business finances and much more. Let’s look at how we can apply SEAL strategies to one of your most essential operational tasks: creating an annual budget.
Plan the Mission
I don’t think any SEAL would last long if he only knew the mission’s end and had to fill in the blanks as he went along. The same goes for a self-storage owner. What are your goals for the year? Sit down with a piece of paper and answer these three questions:
- How can I maintain my current level of revenue?
- How can I grow my revenue?
- How can I reduce my expenses?
Often, when budgets are written, they’re thrown together at the 11th hour to meet some arbitrary deadline. Your facility’s yearly budget is one of the most important documents you have in your competitive arsenal. I’ll state it simply and bluntly: If your budget isn’t up to par or you don’t have one, you’re losing money.
As with most things, creating and maintaining a budget is driven by a vision but grounded in reality. Make it an opportunity to meet with your partners and staff to promote an open dialog about expenses and revenue as well as your goals to move the business forward.
On May 2, 2011, the SEALs raided and killed Osama bin Laden in his compound in Pakistan. This wasn’t an operation that happened overnight. The intelligence (intel) that preceded the raid was unparalleled.
What intel do you need to grow revenue and reduce expenses next year? Projections are a mix of past financial data and future goals. They serve as an accurate tool to ensure your income is maximized and growing as it should. Many of the reports you need are simple ones that can be found in your management software. Print off the management summary, move-in and move-out data, and credits and discounts issued. Obtain your profit-and-loss statement from your accountant, and you’re ready to go.
These are the key questions you need to ask:
- What will be your new gross potential at the end of the year? For example, is it an increase of $4,000?
- What’s your actual revenue?
- What’s your vacancy cost?
- What’s your average monthly move-out percentage?
- How many rentals do you need each month to stay current or grow?
- What are your anniversary increases (average number of increases and the amount you send out each month)?
- What about miscellaneous revenue? Consider fees, tenant insurance, truck rentals, retail and other income that can be folded into your total revenue.
- What are your biggest expenses? How can you reduce them?
- How can you reduce or eliminate discounts and credits offered to tenants?
Similar to a SEAL going on a mission, you want to be as prepared as possible. I tend to over plan when it comes to budgeting because I feel more is better. The more information you can glean and predict, the better investors, bankers and other partners will feel about your ability to take control of the situation.
My personal preference is to combine the budget and the rental goals because they go hand-in-hand. Since your budget is broken down into months, this creates the opportunity to list your rental goals for each month for the rest of the year.
Brief the Plan and Delegate
From the commander to the junior member, everyone on the SEAL team knows the plan. They’re aware of every contingency and every phase of the operation. You should take this approach with your self-storage team as well.
Having a transparent budget is almost as important as the budget itself. Your managers and employees need access to the plan. It’s not a secret that you’re in the business of making money. Why wouldn’t you want to educate your staff on how the financial side works? They need to know that what they do every day turns important fiscal levers for your operation. They should also be aware that waiving fees or discounting adds up at the end of the year. Conversely, they should know the effect of how being slightly better on the phone or closing one more sale a month can make a tremendous difference over several months.
Check your ego at the door—it’s time for debriefing! After a mission, SEALs gather in a room for an operational review in which they scrutinize the assignment with a fine-tooth comb. What they say in that room is forthright and often difficult; however, it needs to be said.
How often does the year go by at your facility with no reflection on what went right and what went wrong? Did you meet your rental-income goal? Did you increase your rates to meet your gross potential? Did you hit any of your budget targets? You need to sit down with your team for an operational review and have a truthful discussion about the previous year’s performance against the budget that was created.
It’s up to you to make your facility budget what you want it to be. It can be something put together at the last minute and filed away, or it can be a useful tool to guide and grow your business throughout the year. If budgeting and numbers aren’t your first language, be smart and find someone who can help you make a plan. It’s worth it to set your financial goals while still understanding your financial realities.
Rick Beal is the district manager and part owner of Cubes Self Storage in Salt Lake City. He discovered his passion for the self-storage industry a number of years ago. Since then, his goal has been to help operators embrace new and innovative ideas. His approach to constant industry changes are based on a practical “rubber hits the road” application. His professional motto is “Storage is a business of inches not miles.” He can be reached at [email protected].