Interest in the development of new, commercial records businesses has never been higher. Entrepreneurs desiring an unusually high return on investment are drawn to this industry. New startups are at an all-time peak. There has never been a better time to enter the commercial records-management business. Curiosity in commercial records management has climbed steadily over the past few years, and attendees at this year's Inside Self-Storage Expo in Las Vegas demonstrated an astonishing interest. There were at least six exhibitors that serve the consulting, software and equipment needs of the commercial records industry. My educational seminar was delivered to an audience of nearly 400, and the roundtable discussion regarding records management was packed. For an industry that has been virtually unknown by most developers, this truly represents amazing growth.
Commercial records management has been an obscure but highly profitable business opportunity during its 50-year history. The industry is mature, with unusual returns and compound revenue-growth potential. It has been growing steadily for decades with no end in sight, but it is an enigma to most business-planning sensibilities. Why would an industry that stores boxes be such a good investment? The answer to this question lies in these unusual industry attributes.
Yes, permanent revenue. The storage agreement is structured to keep clients in your storage facility. If you follow the rules for maintaining satisfied client relationships, your revenue base will grow each and every month. Iron Mountain, the worldwide market leader in commercial records storage, is a publicly traded company and discusses storage revenue in its press releases on a regular basis. (For more information or to access releases, visit www.ironmountain.com.)
Compound Growth Rate
Although the compound growth rate of storage decreases over time as each individual client matures, the industry averages a more than 13 percent growth rate from existing clients. Records storage reflects storage-volume growth from a low of 7.5 percent from very mature clients to as high as 25 percent from newly outsourced businesses.
Customers for Life
The storage agreement is self-renewing, with a retrieval charge and other fees associated with termination. The cost of moving boxes to another facility is generally not cost beneficial to your clients. Of course, as in any business, you must maintain high levels of service in order to keep satisfied customers.
Myth of the Paperless Office
I remember reading an article in 1967 about the "paperless office" becoming a reality by 1980. It hasn't happened yet and won't for a very long time. The issues around the movement to digital records include sociological issues, migration costs, strategic planning and many other complex subjects. Suffice it to say, it will be 20 to 30 years before the migration is complete. In the meantime, paper is the clear choice.
Renting Cubes vs. Squares
As you convert your storage units from passive storage to active records management, you will change the basis of rental from the square foot to the cubic foot. You will maximize your storage revenue by an average of three to five times depending on the area of the country in which your facility is located.
Compatibility With Self-Storage
Self-storage operators and developers are very well positioned to transition to records- management services. Many of the same components are required. It does take a perspective shift, though, since it changes the nature of your storage facility from passive to active management.
Various Operating Models
It is true to say there is no longer only one way to provide records-management services. Traditionalists believe self-storage and records management are strange bedfellows. However, over the last few years, there have been some important changes that enable several different operating models to work very well. Four pricipal methods have developed:
Each of these operating models requires a different set of capital and labor components. They vary from very little cost to a substantial investment. The return on initial investment can be unusually high, and the time to profitability can be as little as 90 days depending on the operating model you choose. As I assist entrepreneurs and developers in the implementation of new commercial records businesses, I emphasize four fundamental principals of operation:
- Effective use of technology
- Strategic outsourcing
- Best industry practices
- Labor abatement
Each of these principals delivers increased profitability and improved operations and requires diligence in the development and management process. Commercial records management is not for everyone, but for those willing to venture into these waters, it can be an extremely valuable addition to your business portfolio.
Regular columnist Cary McGovern, CRM, is the principal of FileMan and FIRMS (FileMan Internet Records Management Services), which offer full-service records-management assistance for commercial records-storage start-ups in self-storage operations. For assistance in feasibility determination, operational implementation or marketing support, or for questions on the FIRMS Sales Manager, call 877.FILEMAN, e-mail [email protected]; www.fileman.com.