It’s often said that you should “measure what you manage” and “inspect what you expect,” but what if you’re not sure how to do that? Reviewing management-software reports can be overwhelming for self-storage operators due to the abundance of information available. With so many options, it’s difficult to know which data to seek and how to interpret it. Here’s some guidance on the process, including the information you can glean and how to apply it.
Know the Goal
The first step in reviewing management reports is to set your expectations. Evaluating information for the purpose of raising rates, checking for theft, understanding move-ins and move-outs, or determining occupancy requires unique reports and a different “lens” for looking at the numbers. Decide what you want accomplish before you dive in.
The second step is to verify the data. Reading a report with faulty figures is a waste of time at best. At worst, it’s misleading for major company decisions.
Understand Unit Rates vs. Tenant Rates
The facility unit rate (also known as the street rate) and the tenant rate (the amount paid by each individual customer) are separate numbers in most self-storage management programs. The system should allow you to set a rate for each tenant that’s different from the unit rate. For example, if the street rate on your 10-by-10 units is $100 per month, but Mrs. Jones only pays $90 per month, then the unit rate is $100 and the tenant rate is $90. The difference between the two is called a “variance.”
Operators often make two common mistakes regarding these rates:
1. Confusing the unit rate with the tenant rate. Let’s say you want to give a tenant a $5 per month discount. If you accidentally adjust the unit rate instead of the tenant rate in your software, you’ll not only eliminate the variance, you’ll change your gross potential revenue. What’s more, the next tenant to move into that unit size will pay the lower rate by default.
2. Failing to adjust all units when there’s a price change. Each unit of the same type and size should have the same price in your management software. This unit rate can change daily or hourly, but it should be consistent. If the unit rate on your 10-by-10s changed from $95 to $100, change it for all units of that size.
Understand Occupancy Rates
When unit rates are correct, your gross potential revenue and economic occupancy will also be correct. Some owners prefer to focus on unit (or physical) occupancy, but it’s more important to focus on economic occupancy. What’s the difference? The former is a measure of how many spaces are filled; the latter is a measure of money in bank.
For example, let’s say your self-storage facility has 10 units at a unit rate of $100 per month. If all 10 of them are rented at the full price, your unit and economic occupancy are both 100 percent. But what if you have four units rented at $100 per month and another four at only $50 per month? In that case, your unit occupancy is 80 percent, but your economic occupancy is only 60 percent.
- Four units rented at $100 per month = $400
- Four units rented at $50 = $200
- Eight units rented = 80 percent unit occupancy
- $600 income per month = 60 percent economic occupancy
You want to watch the gap between unit and economic occupancy. Some managers try to be slick and lower the unit rate to make economic occupancy look better. This is a mistake. Make sure unit rates are competitive. It doesn’t help to rent 10-by-10s for $100 when the rest of the market is charging $175. High tide raises all ships.
Reports to Review
Unit rate, tenant rate, variance, unit occupancy and economic occupancy are all key numbers to review for revenue management, audits and the health of your self-storage facility. To this end, there are several management reports you should periodically review. Here’s a breakdown of each and the helpful data you’ll find.
Exceptions. A great report to look for “odd” activity is the exceptions report. If the staff changes an address or unit price, deletes charges or payments, or does anything out of the ordinary, it’ll show here. Verify that any changes of address have written proof from the tenant, research deleted charges and payments, and review any unit changes or unusual events.
Credits issued. As a former manager, I know how hard it is to hear sad stories from tenants who can’t pay their bill, and how tempting it is to waive late fees. Create a policy around waiving fees or issuing credits, and then review the credits-issued report to ensure each staff member upholds it.
Discounts. Staff can be overly reliant on discounts to move in new tenants. Most management-software programs have a report to summarize all discounts given along with a detail of reductions by tenant. Review these to ensure they’re valid. If discounts are given to military personnel or students, check for a valid ID on file. If they were for a set period of time, make sure they’ve expired in the system.
Management summary. Someone other than the site manager should walk through the property at least quarterly, though monthly is better. Print a map or walk-through report and check that all rented units have a tenant lock, all empty units have a company lock or no lock, all late units have an overlock, and all unrentable units are marked as such. Smart owners make sure their inventory (units) is always accurate.
The management summary gives a snapshot of the company and can alert you to problem areas such as low deposits, high receivables, low move-ins or a lack of changing rates. Use the management-history report, if available, to dig deeper into the numbers and determine if they align with expectations.
What’s Your Story?
Learn to look at reports as the story of your business. They aren’t just numbers on a page. They’re telling the tale of what happened. They summarize the decisions and attitudes of you and your staff.
For example, reports show that an auction was held because bad debt and move-outs both increased. If move-ins increase and revenue collected stays the same, unit rates may have been lowered. If the staff is weak at collections, unpaid charges and credits issued will be high. When the staff doesn’t believe in selling tenant insurance, you’ll see a low number of customers buying it.
Set an expectation before looking at the reports, and then review the numbers to see if they tell the story you expect. Don’t just look at one number and move on. Look at multiple figures and make sure they’re all moving in the right direction. Each decision will affect an area of the business, and the reports and numbers are connected.
Magen Smith is a former self-storage manager turned certified public accountant (CPA). Her company, Magen Smith CPA LLC, helps storage operators understand the financial side of their business. Services include monthly financial management, bill-pay functions, revenue management and strategy. She also offers a curb-appeal checklist available for download and has created an online revenue-management course complete with checklists, cheat sheets and guides. For more information, e-mail [email protected]; visit www.selfstoragecpa.com.