This article discusses the selection and use of facilities, units or alternative space for a records management operation within the walls of self-storage. There are common misconceptions and misunderstandings about the maximumization of space that prevents owners and operators from achieving the highest return on investment.
The most common question asked by self-storage operators seeking advice about a new records-storage operation is, How much space do I need? There is no single answer to this question. My usual response is quite simple: Start with what you already have. Now, that response requires a little further explanation.
Starting a records-storage and management facility with a self-storage operation can be done in several ways. Over the past few columns, I have discussed how nontraditional records management differs from traditional. I have explained how a self-storage facility can be profitable in 90 days or less. But that result requires one primary component: storage space. Lets look at the space issue from three perspectives: conversion of existing storage units, one at a time; conversion of a whole area or block of units; and conversion or construction of a separate building.
Conversion of Existing Units
It is always best to select the largest units possible for records storage. Never select units smaller than 10-by-10-by-8, and always choose those with the highest ceiling. Units smaller than this size do not effectively accommodate racking. A recent density study conducted by a provider of records-storage shelving showed the best standard unit sizes are:
Note: Yield per square foot is based on 35 cents per unit for storage and 65 cents per cubic foot of billable storage for service. In my recent column titled Price and Yield Differences (May 2003), I discussed the difference between price and yield per cubic foot of storage. It is common in nontraditional records management to yield one-and-a-half to two times the computed yields above. Now lets add a higher ceiling height of 12 feet to the mix and see what happens:
Do you see the difference here? The higher the ceiling, the more revenue you achieve per square foot.
Conversion of an Area
Choosing a contiguous area for records storage is always a good decision. I know one owner who chose 20 side-by-side 10-by- 10-by-8 units, took out the dividing walls, and achieved 10 percent more density. Aside from getting the additional 10 percent or so from maximizing storage space, your operation is simplified by grouping boxes in an area of your facility rather than scattering them around.
Conversion or Construction of a Separate Building
If you have a separate building with an area of 5,000 square feet or more, and if ceiling heights range above 16 feet, you may have a great starting scenario. Lets look at the make-up of such a structure and its attributes.
If we compute length times width times height of a 5,000- square-foot building with a 16-foot clear ceiling, we get a cubic area of 80,000 cubic feet. Using a density ratio of 50 percent, we find we have 40,000 billable cubic-foot units:
With 16 feet or higher ceilings, it is possible to introduce catwalks to your shelving system. This will allow you to have 30-inch aisles, which provide maximum density and reduce the need for access ladders. My experience indicates once you have achieved approximately 35,000 cubic feet of billable storage, you have the ability to use your cash flow to support the enlargement of your facility and move toward the more traditional model of records management.
Optimum Facility Size
Is there an optimum facility size? Throughout the world of traditional records-management facilities, there is a variety of sizes and shapes and ceiling heights, ranging from a 10-by-10-by-8 unit to a 20,000-square-foot area to a building more than 100 feet high (in cities such as Hong Kong and Singapore). The optimum building size I suggest is 10,000 square feet with a 30-foot ceiling height, or 300,000 cubic feet:
There are many in the industry who would argue this is not the optimum size with which to start. But lets see if I can make my case. First, using standard industry statistics, this size building grosses monthly revenue of $1.04 million over 12 months. But most commercial records centers are underachieving in revenue. It is my observation they typically leave more than half of every sale on the table. Based on potential revenue, records-storage operators could yield as much as twice this amount. Is it easy? No. But if it were, everyone would be doing it! It requires diligence, management and control, plus a formidable selling process.
The second reason this building size is optimal is its contribution to protecting your assets. Fire has caused problems in this industry in the past. But since you limit your contractual liability to only $2 per box and your facility is presumably insured, what, then, is really the problem? If there is a fire in a records center and it is not extinguished quickly, chances are the entire facility will burn to the ground. The problem is not the lost records or the lost buildingit is the lost revenue stream. Lost revenue on 125,000 boxes is a difficult pill to swallow, but by segmenting your records into several smaller buildings, you can limit your loss. I recommend putting 30 feet or more between buildings.
Finally, the industry has a common myth. I call it The Myth of the Six-Month Sales Cycle. My recommended selling method controls the sales cycle to 60 work days, or three calendar months on average. The process requires 25 predisposed prospects in the sales cycle at any one time and closes four to five accounts per month. The expectation for a single salesman is 100,000 cubic feet of records storage in the first 30 months. This size building would support the sales effort and provide a base for future expansion.
Perhaps I have convinced you about the optimum size, perhaps not. There is certainly room for argument. But dont believe the naysayersrecords management works in self-storage in many different ways!
Regular columnist Cary McGovern, CRM, is the principal of FileMan Records Management, which offers full-service records-management assistance for commercial records-storage startups, marketing assistance, and sales training in commercial records-management operations. For assistance in feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail [email protected]; www.fileman.com.