While self-storage owners tend to focus their efforts on increasing facility occupancy and, subsequently, income stream, they often forget to work on minimizing overall expenses. This can be a challenge, as our business costs go up annually, and our facilities are getting older and need more repairs. We must also strive to keep our properties furnished with up-to-date technology, so we have to invest in better equipment from time to time.
With all of these escalating expenses, it seems nearly impossible to find places to cut costs. Let’s examine how we might save a few dollars on common expenditures such as taxes, payroll, insurance, utilities and property maintenance.
Next to their mortgage, most self-storage owners would likely point to property taxes as their largest expense. In some states, it can take a minimum of three months of income just to pay them. Think about that—a full quarter of revenue. Can we control this expenditure? Sometimes.
If you have an appeals process in your state, hire a professional to appeal your property taxes. In some states, it may even be possible to do this on your own. Often, however, companies that specialize in this practice have better connections and know more loopholes than the average person. If you do hire someone to investigate this for you, you’ll generally pay him a percentage of the savings, so be sure it’s worth the effort.
Generally speaking, the next largest expense for most self-storage owners is payroll. Of course, you want to adequately compensate your managers, but you should take a hard look at the number of hours you’re paying someone to operate your facility. This is a tough one, but reducing or eliminating staff hours during times when you’re property isn’t busy can save money.
In many cases, even if you’re paying minimum wage (hopefully, you’re paying your managers better), you could save as much as $3,600 a year if you close your facility one day a week. Remember, you’re not just paying the hourly wage but also the 11 percent for Social Security, state unemployment, etc.
Another consideration is to launch an incentive program in which you reward managers for increasing facility occupancy or retail sales, or reaching another sales-related goal. I’m not suggesting you simply cut wages and still expect peak performance; I just want to emphasize how important labor costs are. You need to be aware of any potential savings.
Insuring your business is another high, but necessary, expense. Have you asked your agent to shop around to ensure you’re getting the best deal? While your business should be adequately insured, some operators are overly covered. You’d be surprised how much you can save by making a few tweaks to your insurance policy. Sometimes increasing your deductibles can save you a significant amount.
Property-insurance companies are competitive, so why not look for the best agreement? If your facility is managed by a third-party company, ask if it can put a master policy in place with you and its other clients. These savings can be as much as 40 percent of your current bill.
Your costs for utilities such as electricity, gas and water continue to increase annually. However, there are ways to trim these expenses. Take your energy consumption. Have your electric and gas companies visit your property to do an energy-efficiency study. You might be surprised how much cooling or heating you’re losing from improper duct sealing, poorly caulked windows and doors, and a lack of window screening to minimize the sunlight and heat entering your facility. These are just a few things that require minor investments but can significantly reduce your monthly electrical and gas bill.
If you’re lucky enough to be in a state that has sunshine for most of the day, look into alternative power such as solar panels. There are many tax incentives available, and you’ll be surprised at how affordable these systems are nowadays. Sunlight is free! You can count on your electric bill going up every year, so the longer you wait to explore these ideas and implement changes, the more money you’re throwing away.
Maintenance costs are always on the rise. This includes everything from the paper towels you stock in the bathroom to roof damage that requires repair. However, there are simple strategies to minimize these costs or, at the very least, help you prepare for them.
First, be proactive about your site maintenance. Include all facility components in your assessment, such as your air-conditioning and heating unit, landscaping, office equipment, pest control, parking-lot surfacing, roofs, unit doors, and everything else that requires year-round upkeep. Preventive maintenance usually costs less than replacing something or dealing with a major repair. You might not have any issues now, but the older your property gets, the more likely something will break.
One way to reduce expenses is to review your service contracts and make sure you’re getting the best deal. Check around and see if you can get a better pricing with another company. If you have a service contract in place for any of your building’s components, use it! Have a professional check your AC unit every spring each quarter. Get someone to lubricate the bearings on your roll-up doors and check the belts for proper tension. This can significantly improve the life these components.
When was the last time you examined your trash-removal bill? Are you still paying those hidden fees such as “fuel” allowances? In most states, fuel has dropped by as much as a $1 per gallon, so if you’re still paying a fuel surcharge, it’s time to renegotiate.
Paper products and cleaning supplies can be costly. Going to the local hardware or grocery store is convenient, but the savings come when you buy supplies in bulk. Plus, it saves gas and time to avoid making multiple trips each month. Think about how many rolls of paper towels or toilet paper you’ll need for a few months, or whether you should stock up on weed killer or cleaning products, then buy it all in one outing.
There may come a time when your property requires an expensive repair, such as seal-coating the parking lot or replacing the roof. Be diligent about putting away money each month to fund these high-ticket expenses. Usually, the longer you wait to take care of these repairs, the more costly they’ll be.
These are just a few simple steps you can take to minimize expenses for your self-storage business. If you can reduce your costs by $100 per month, it can have a significant impact on your bottom line as well as your property value. Take the time to annually review your overall expenses and do your best to minimize them. In some cases, you may even be able to reduce these expenditures significantly.
Mel Holsinger is president of Professional Self Storage Management LLC, which oversees the operation of more than 40 facilities in Arizona, Colorado and Texas. Mr. Holsinger has been in the self-storage industry for more than 25 years. To reach him, call 520.319.2164; e-mail [email protected]; visit www.proselfstorage.com.