Top 10 Most Frequently Asked Questions for Commercial Records-Center Start-ups

By Cary McGovern

Over the past 22 years I have been asked many questions about how the records businessworks and what are the most important considerations. Like starting up any new businessenterprise, it requires diligent research of the marketplace to assist in the developmentof a business plan. Although it is impossible to list them all here, the following are themost frequently asked questions about starting your own records-storage business:

1. What is the most important factor for maximizing my revenue?

Answer: The ceiling height of the facility is always the most critical component forstorage revenue. The more cubes per square foot, the more storage revenue your operationwill have.

2. How do I charge for storage?

Answer: The basis for storage fees is the cubic foot. Since boxes are all differentsizes, the lowest common denominator is the cube. Usually there is a minimum box size ofone cube, while odd-size boxes are generally rounded up to the next cube size for billing.

3. Is there a standard storage box that I should recommend and supply to mycustomers?

Answer: Yes, the letter/legal box has become the most predominant box in therecords-storage industry. It allows for filing letter-size documents in one direction andlegal size in the other direction within the box. Try as you might, you cannot control thesize of boxes coming into your facility. It is common to get many different box sizes,including letter-size and legal-size (2-feet long) transfer cases into storage. These arevery heavy and break quite easily and should be discouraged. You can change the percentageof these cases coming into your center by providing and selling the standard letter/legalboxes to your customers. This also presents a marketing opportunity since each box can beprinted with your name and logo.

4. How can I measure my potential market size?

Answer: The rule of thumb for market analysis is as follows: Draw a circle depictingthe radius of your planned service area. Determine the number of people that live and workin that area. Multiply the population by five. This number approximates the number ofstorage boxes in existence in that area. Divide by two, since some of the boxes arealready stored and managed somewhere. The factor of two approximates the number of boxesthat are typically not in records storage. Remember that this is only a rule of thumb andcan vary greatly depending on your market, although it usually seems quite accurate basedupon my personal experience in more than 100 communities in North America.

5. How fast can I expect to grow?

Answer: The first two years will be directly related to the aggressive nature of yourinitial marketing plan. The more aggressive, the better. Although it is possible to bringin 100,000 cubic feet of records during your first 24 months, it is somewhat difficult.(This is discussed fully in our start-up manual.) For years three through five, you canexpect approximately 18 percent to 20 percent annual growth.

6. How do I determine the storage capacity for my planned facility?

Answer: This is an extremely complex question. The general rule for computing the floorspace in any building is the square footage multiplied by the average effective ceilingheight (below the fire- and building-code restrictions) multiplied by between 40 percentand 65 percent. This difference is rather wide since racking differences vary greatly, andthe mix of open-shelf filing to box storage can also vary based on your marketing plan.Additionally, the use of mezzanines within your shelving grid can guarantee much higherstorage density. The FileMan start-up manual discusses in detail the alternative methodsfor computing this essential part of your business plan.

7. Is it best to target vertical or horizontal markets?

Answer: The answer to this question depends greatly on your area's market demographicsand the extent of your existing competition. Many commercial records centers specialize invertical markets such as healthcare. Others offer services to a broad base of businesses.

8. What kind of vehicles do I need?

Answer: You may consider using a local courier service in the beginning. However, mostcommercial-records centers utilize at least one standard van for regular pick-up anddelivery service. Large initial customer pick ups are commonly done using rental trucksfrom Hertz, U-Haul, Ryder or another truck-rental service.

9. Can I start-up a commercial records center from an existing facility regardlessof the ceiling height?

Answer: Yes. If you have an existing facility such as a self-storage facility or awarehouse, you can start-up as is. If your ceiling height is low, you will not generate asmuch gross storage revenue, but it may be a good way to get your feet wet in therecords-storage business. (For more information, refer to my column in Inside SelfStorage, October 1998, entitled "Records Management and Storage With Little or NoStart-Up Cost.")

10. What about software?

Answer: The most predominant software products made specifically for operating acommercial records center are O'Neil's "Record Storage for Windows" and Andrew's"Corporate Keeper." Both of these packages require an initial investment forsoftware, hardware, set-up and training. It can easily exceed $20,000 to start. There isanother alternative through FileMan Records Management. "FileMan" is a Web-basedsoftware product that allows you to pay per transaction with no initial software start-upcost required other than Internet access and a Web browser.

The records-management and storage business offers new opportunities for theself-storage operator and entrepreneur today. Now is probably the best time to go into thebusiness within the last 20 years.

Regularcolumnist Cary F. McGovern is a certified records manager and owner of File Managers Inc.,a records-management consulting firm that also provides outsourcing services, file-roommanagement and litigation support services for the legal industry. For more informationabout records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, AbitaSprings, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected] or Web: www.fileman.com.