I dont have a lot of hard and fast rules about the self-storage business, but I do have a few rules of thumb that Ive found useful when it comes to successful facility operation. One of the most effective is for managers to have a higher sense of urgency about renting space.
Years ago I worked as a district manager for one of the real estate investment trusts and was assigned a territory of underperforming facilities. The locations were beautiful, multi-story sites with large retail offices and professional signage but lower-than-expected occupancy. After about three months of working with the managers, one of them said to me, "Youre the first person who has ever told us our main job is to rent space." My response was, "Really? What else do you do here?"
It turned out the managers in this territory had been given an ever-changing list of priorities communicated by their supervisor: Keep the facility clean! Sell more boxes! Increase your insurance percentages! Lower your past-dues! Rent more trucks! While all of these are important, none have anything to do with renting space.
To reverse course, we refocused their efforts on occupancy. I told them, You have to rent space or we dont need you to be here. We had to create a sense of urgency about the critical importance of renting units. Several months later, those facilities were experiencing healthy occupancy gains, and I received a bonus check for a billion or gazillion dollars, or maybe it was an Applebees gift card.
The point? If you want to increase occupancy, you have to rent more units. To rent more units, you have to create a sense of urgency about renting space. You have to develop a drop everything mentality as it relates to potential customers and realize that every lead matters. If managers get only one or two chances each day to rent a space, then how they handle those opportunities is critical.
Lost Opportunity Has a Price
You must also communicate to your managers the high cost of not renting space. I find very few have any idea about the expenses involved in creating rental leads and the revenue lost when they fail to convert those leads into rentals. Not renting space is expensive!
First, consider the costs of generating the leads. Have you ever calculated what each phone call, walk-in or Web lead costs in marketing expenses? Do you know which of your marketing efforts are the most effective? Which have the highest return on investment? If you havent, you should, and you need to share this information with your managers.
Self-storage staff should understand that when the phone rings, money was spent to make that happen. Marketing dollars are spent to generate walk-in traffic, and each month, money is invested in various forms to gather more Internet leads. Those things dont happen by accident! The money spent to generate storage leads is lost forever if a potential customer isnt converted to a paying tenant. And, by the way, if youre not investing in quality sales training for your managers, the cost of lost opportunity is even higher.
When a storage unit goes unrented, another substantial sum is lost foreverthe potential revenue generated by the paying tenant. Amazingly, most self-storage managers have no idea what the average rental is worth. How can marketing investments and other decisions be confidently made without first knowing the value of your product? Whether it's $750 or $2,500, understanding the average value of every rental helps to instill a higher sense of urgency when it comes to working every lead and renting more space. Failing to rent space is just too expensive because you lose out on the income.
Other Lost Income
Another revenue stream that's lost when a unit goes rented is ancillary income. A person who doesn't rent a storage space also will not buy tenant insurance or boxes, or pay late fees, and probably will not rent a truck. Most self-storage owners factor ancillary income into their budgets, but it won't materialize if units aren't rented. Again, failing to rent storage space is an expensive proposition because the lost income is lost forever.
A referral program is also a great source of rentals. Who better to generate more business than existing tenants? Of course, if you dont rent the space, then you probably wont get the referral.
Another expensive side effect that results from unrented units is the loss of asset value. Self-storage facility value is based on net income, and the loss of even $1 can be a costly mistake. Every dollar collected can equal approximately $12 in asset value, so empty space can represent a significant loss. A managers lack of urgency toward renting units will have long-term, negative consequences for the facility hes managing.
Since we all now clearly understand how expensive it is to not rent a storage unit, what can owners and managers do to increase their closing percentages on potential leads?
- Drop whatever youre doing and answer the phone, or stand up when a customer walks in the door. There really is nothing more important to do at a facility than rent space.
- Make every effort to gather names and contact numbers for every potential rental lead. Customers love to hear their name used a couple of times during the conversation, and professional salespeople know you cannot have an adult conversation without sharing names.
- Use the gathered contact information to follow up with customers who dont immediately rent a space. Why bother getting names and numbers if you never plan to use them? Potential customers are much more offended by salespeople who never check in with them than those who call too often.
- When talking to potential customers, take notes, including name, number, why they need storage, when theyll need it, what kind of unit, etc. Taking notes forces you to focus, and it gives you personal information you can use when the customer comes to the facility. So did your son get off to college, OK? You can ask that type of question if you made a note of it.
- Make sure the spaces listed on your vacant list are actually clean and rent-ready. Theres nothing more embarrassing than to show a unit that turns out to be dirty and unrentable.
- Close the sale! The customer contacted you about solving a need, so dont be shy about asking what it will take to get him to rent a space today. What have you got to lose?
Vacant storage space has no value to a self-storage operation. Keeping an empty facility spotlessly clean wont ever pay the bills. Fill the space, and youll be much more likely to be successful in this business.
Bob Copper is the 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 him, call 866.269.1311; e-mail [email protected]; visit www.selfstorage101.com .