Records storage can be the No. 1 revenue-producing ancillary service in self-storage. It’s up in a down economy and up in an up economy. During hard times, businesses shrink their footprint and store records off site. In an up economy, growth spurs more business records.
Growth in commercial records management is now up by more than 10 percent worldwide. In fact, last yearthere were more commercial records-center startups than ever in the 60-year history of the industry. It has become a great ancillary service for about 5 percent of self-storage operators in Canada, Europe, Mexico and the United States.
Up in a Down Economy
Often, the most reliable self-storage customers are commercial tenants, typically small businesses. They stay longer and are most likely to add additional space. It’s estimated there are more than 100 million records-storage boxes in passive storage in North America. As a matter of fact, self-storage is the largest point of origin for most new commercial-records clients. You may already have dozens of clients with hundreds or even thousands of boxes in passive self-storage today.
Businesses worldwide are in a recessionary downturn, minimizing their expenses and onsite space. Records-storage boxes are the first non-essential items to go offsite. Self-storage is the most logical place to store them “temporarily.” Many traditional commercial records centers have hit all-time highs of growth during this slump.
Multiples of Revenue for the Same Space
Like self-storage revenue, records-storage revenue is computed by the cubic foot. Additionally, it is considered annuity revenue. The industry has developed an unusual and almost magic characteristic: Records grow like mushrooms in the dark. The average growth of an existing records-storage account can be as high as 25 percent in the first year of storage, or a minimum of about 10 percent on average. This factor is called “creep.” It’s defined as growth net of destruction from existing accounts.
Records-storage clients sign a one- to five-year contract rather than a month-to-month agreement. The contract has several key components:
- Automatic renewal for the existing term unless canceled 60 days before the end of the term
- Automatic price increases written into the verbiage
- Penalties for withdrawal, retrieval fees, permanent retrieval fees and transportation fees
Price vs. Yield
Traditional records centers focus on larger accounts because of the cost of sales. Non-traditional records centers focus on small-business accounts that can be packaged to include a group of services for a fixed price. For example, typical packaging could include:
- Economy package: less than 50 boxes
- Small-business package: more than 50, but less than 100 boxes
- Professional package: more than 100, but less than 200 boxes
These packages are priced based on a formula that allows the revenue yield to be 60 to 80 cents per box per month rather than the traditional average of about 35 cents per box. The account is signed to a tiered contract that automatically moves from one package to the next, and then finally to a standard agreement when it reaches 201 boxes at a fixed price. No new agreement ever needs to be signed. Billing for accounts can be done in advance by credit card on a quarterly basis to avoid hassle.
In records storage, all labor can be outsourced except management. The smallest business clients will have only few transactions, such as retrievals and re-files. You can avoid offering delivery by opting to provide only will-call service. However, the most successful providers offer seven to 17 services, which create the most value for the customer and revenue for the operator.
The best approach is to employ “just-in-time labor,” a concept that combines strategic partnering with part-time employees:
- A small independent mover to bring in new accounts
- A local independent courier to make regular and emergency deliveries
- Agent sales representatives to sell your services on their own schedule
- Part-time employees to do data entry, boxing, retrieving and re-filing
All of these resources must be carefully selected to represent your business. They should wear your uniform and must undergo training. They should also be required to sign a confidentiality agreement and a strategic-partnering agreement.
A self-storage operator can grow his records-storage business at his own pace. There are three primary models for commercial records management:
- Traditional, which is usually a standalone business and building
- Non-traditional, which exists within the walls of another business such as self-storage
- Transition, which moves from non-traditional to traditional over time
Some operators choose to remain small and offer only few services. Some make a leap to traditional when they reach 30,000 boxes. Others go directly into a traditional model by building a specialized building with a high ceiling height to accommodate records storage. Whatever you choose, it can be a valuable addition to your property’s revenue stream.
In addition, you can sell your book of business at any time during your business lifecycle. In other words, if you don’t like the records business, you can sell your contracts to a local or national provider. Records storage is an add-on service with little risk to you, but it can offer great rewards for you and your tenants.
Cary F. McGovernhas been in the commercial records-management industry for 32 years. He has assisted more than 500 companies in 23 countries enter and excel in this unique business. He is a member of ARMA International and PRISM International, and is a speaker at numerous industry tradeshows and conferences. To reach him, e-mail [email protected]; visit www.fileman.com.