A third-party management company has experience in property management, including finding, hiring, training and placement of onsite management staff and accounting and maintenance services. It will set up and handle all day-to-day operations and interaction with onsite personnel, marketing programs, facility inspections and audits, deciphering of facility software reports and reporting to the owners on a weekly or monthly basis. Sound like the help you need?
For services provided by a management company, a self-storage owner will be charged a fee, which will vary depending upon the quantity of services needed. Some offer full-service management only; others provide management, customized training of owners and staff, and consulting. Let's dig a little deeper, weighing out all the findings to decide if a management company is right for your self-storage business.
First Time for Everyone
If this is your first facility, some lending institutions may require that you utilize a third-party management company because, while lending you millions of dollars, the lender wants to make sure the investment is secure. A third-party management company has the expertise and a support foundation to manage a new project and the lenders know this! It gives a lender peace of mind.
It may also give you an advantage when it comes to securing a loan if you already have a management company consulting with you during development. You might even get a lower interest rate if youve already lined up a third-party company for the first two years of operations.
You may say, Well, I have opened and operated my own business before, how hard can a self-storage facility be? To that, self-storage veterans would reply, If it was only that simple!
If you have a small operation, less than 200 units, you didnt need to borrow a lot of money to build your facility, and you have a bookkeeper already doing your accounting and payroll, then perhaps you dont need a third-party management company. You may elect to consult with one just to establish management systems, and to train you and your staff in operations, facility inspections and interpreting management software reports. Some companies offer short-term services such as this and this may be all that you need.
However, if you have a partnership, then I highly recommend hiring a management company, particularly because a third party is neutral and will have all of the owners best interests in mind. The management company will report to all owners and handle all accounting, unless an outside accountant is hired to do the bookkeeping. Some management companies offer full-service accounting; others offer operations management only while utilizing an outside payroll service and accounting service.
If you have an existing facility not experiencing the potential income you assumed you would, then perhaps a management company is the answer for you. Many times a management company will receive calls from a distressed owner who has managed the facility by himself or left his manager to manage the facility with little or no direction due to the lack of expertise. Perhaps the owner had a management company but did not receive the quality of service necessary to make the facility profitable. This is when the owner begins looking at different management companies to come bail him out of a bad situation.
Dont expect miracles from the management company; it took you a while to get the facility into the mess it is in now, so give a company time to fix the problems. If you do choose this route, make sure your site management knows there is a new sheriff in town. Your managers should no longer call you with their questions or problems, but communicate through the management company.
You may have to remind your managers of this more than once. But dont interfere. It only causes staff confusion and delineates from progress. Let the management company do the job you hired it to do.
Finding a Fit
Are you opening a new facility? Do you need to turn around a distressed facility? Has your lender required a management company be onboard? Do you have partners and would it be advantageous if a management company was hired? Once you have determined your needs, then its time to investigate management companies, but how do you find a good one?
Begin by getting involved: ask questions, get referrals, call the Self Storage Association, attend tradeshows, ask venders and inquire with other self-storage owners. Using these suggestions, make appointments to meet with representatives from the different management companies. Come prepared to this meeting with a list of questions to help you make an informed decision:
- Expertise: Have they opened a new facility. What is their track record of turning around distressed properties? What would their game plan be to help you and your situation?
- Current status: How many facilities do they manage now? Is there enough personnel to cover existing management contracts in addition to your property?
- Communication: How often do they conduct site visits, inspections and audits? Do they communicate daily with the site personnel to answer questions and solve problems? What types of reports do they prepare and how often will they send them to you?
- Marketing: Do they set up all marketing programs and materials?
- Documents: Will they provide all facility forms such as leases and daily management forms?
- Personnel: Do they provide employees or work with your staff?
- Pricing: Besides the monthly management fees, are there any other costs? Are fees flat or based on a percentage of the gross?
- Services: Can you pick and choose various parts of their management program: short-term solutions, training, audits, inspections and the like?
- Length of service: How long is the agreement and can you cancel it anytime, or is there a fee for early termination?
- Comfort level: Do you feel comfortable communicating with the company and letting it take over operations?
- References: Ask for current and previous owners references, and then be sure to call them.
The fee for the full-service management company ranges between 4 percent and 6.5 percent of the monthly gross, perhaps slightly higher in the Eastern states. A minimum monthly fee, which is probably higher than the percentage of the gross, may be charged for a new facility startup or for turning around a distressed property. At some point the percentage fee will be higher than the minimum monthly fee.
Most companies will ask for at least a two-year management contract, which is a reasonable allotment of time to start up or turn around a property. As an owner, you should think of the management fee as an investment in your business, not as an unnecessary yet required cost by a lender.
Management companies can be very successful if self-storage owners step back and give them the authority to manage. One of the biggest problems is an owners unwillingness to let go and let someone else manage his facility.
If youve conceived and delivered a brand-new storage facility, you must let go and turn your baby over to the professional daycare provider to help this child grow into the profitable adult it can become. It is not always easy for a parent to let go, but to achieve the desired goal of profitability, you must let the professional management company take over.
Remember, before you decide to use the expertise of a management company, you must have a realistic idea of what your goals are for choosing a management company in the first place. Do your research into various management companies qualifications and the services they offer. Weigh the pros and cons of each, and then settle on the best fit for you. Only then can you sit back, relax, and let them do your work for you.
Pamela Alton is the owner of Mini-Management Services, which offers feasibility studies, facility management, consulting, training, seminars and management placement nationwide. She can be contacted at 858.926.9039.