Quick, a show of hands: Who here owns a car? Good. Now, who owns a self-storage property? OK, good. Now, whose self-storage facility is worth more than their car? Everyone, just as I suspected.
Here's the conundrum: Most of you perform regular maintenance on your car, for example, getting a tune-up, changing the oil, rotating the tires. And yet many of you fail to see any value or importance in having your self-storage facility regularly checked via a thorough operational audit. Are you more interested in maintaining the value of your car than your self-storage property? That doesnt make any sense.
If you own a self-storage facility, doesnt it seem reasonable and responsible to ensure it's running as effectively and efficiently as possible? Dont you believe its important to make sure that what is likely one of your most valuable assets is properly managed? Why are you so willing to take a chance with such a valuable venture?
Conducting a regular and thorough operational audit of assets is one of the most important responsibilities of a self-storage owner. To leave the operation of those facilities to chance and trust everything is OK without a regular review is a risky proposition. At the very least, it could lead to missed opportunities and lost asset value. At the very worst, it could lead to a complete disaster. So why do so many operators take that risk?
Lack of Concern and Knowledge
Simply put, some self-storage operators just dont see the need for an audit or dont care. Some really dont want to know and are satisfied with the status quo. They accept there are likely some problematic issues or even some minor theft, but they dont want to make any changes that could mean more work for themselves.
An audit might turn up a theft issue that could lead to manager turnover, and that prospect scares them. Or it could reveal operational deficiencies that are better left alone and not shared with the rest of the investors.
Some owners just dont know how to conduct an operational audit and have decided not to take advantage of the plethora of training resources available in the industry. Resources range from books and DVDs to webinars and association workshops, yet many are either too lazy to take the time or too cheap to spend the money to learn.
For those of you who do see the need for conducting an operational audit and review of your self-storage facility, here are some basic guidelines:
- Audits should be conducted at least annually, but twice a year is ideal.
- Audits should be conducted whenever theres manager turnover. This ensures the new manager doesnt unfairly inherit operational or theft issues.
- Audits should be conducted at random and without any advance notice.
- Audits can be conducted internally by ownership or upper management or by outside vendors. Most sophisticated operators use both resources to ensure compliance and consistency.
If you employ a third-party management company, you can expect regular audits of your facility several times a year. At least one of these should be completed by an outside vendor. Theres nothing wrong with expecting or insisting your management company has someone audit its work from time to time. Ask your management company for copies of every audit, including the one thats outsourced.
A full operational audit should take from half to a full day, depending on the facility size. Every review should include:
- A reconciliation of the cash and petty-cash drawers
- A complete space audit
- A list of deferred maintenance issues
- A review of payment and deposit records
- A review of lease and vacate files
- A review of all discounts and rent credits
- A review any deleted payments
- A review any waived fees
- A review of the non-standard rates report
- A reconciliation of moving and packing supply totals
- An inspection of onsite managers apartment
- An inspection of any rental trucks
- A review of the facility's curb appeal and property condition
In addition, a third-party vendor might include commentary regarding the onsite managers, their demeanor and customer-service attitudes, a mystery-phone shop and property photos. It also may include commentary on various operational reports and an executive summary with conclusions, along with marketing and operational recommendations. The vendor's job is to provide an unbiased picture of the state of your self-storage asset, including reporting any suspected or proven theft issues.
Applying the Findings
Its important to understand the value of an operational audit and learn to use the information provided to improve the operation of your facility. The audit should also be used as a training tool for onsite managers. Expectations and accountability should be clearly explained within the parameters of the audit process.
Theres little value in an operational audit if the information is not used to make improvements, track performance or hold management responsible for their part in creating asset value.
If you're a facility owner and conducting regular operational audits isnt part of your routine, its time you started. If you dont see the importance of auditing, youre fooling yourself and likely missing out on revenue and value-increase opportunities.
If you dont know how to audit your storage facility, learn. There are far too many good resources in the industry, so theres no excuse to not learn how to better protect your most valuable asset. If you dont want to learn, hire a third-party company. Its unbiased and professional review will be one of the best investments youll ever make in your facility. If you believe hiring out for an audit is too expensive, to what are you comparing that? Loss of value? Loss of operational efficiency? Exposure to theft? Potential for important details to fall through the cracks? Keep in mind an independent third party is going to notice things you no longer do.
Whether you conduct a self-audit or have a professional perform one for you, failing to audit your self-storage facility is irresponsible and should be unacceptable. Get going!
Bob Copper is partner in charge at Self Storage 101, an industry consulting firm that assists facility owner/operators and managers in developing more effective and profitable operational systems. It also aids in conducting performance reviews and providing the necessary tools to perform at higher levels in a competitive industry. To reach Bob, call 866.269.1311; e-mail [email protected].