If you’re a self-storage owner considering a third-party management company, you should do your homework before handing over the keys to your valuable investment. When researching potential candidates:
- Compare multiple companies
- Understand how each management company works and makes its money
- Talk to current and past owners
- Get detailed information about what services are provided and all fees
- Weigh the pros and cons
There are many advantages to hiring a third-party management company. If you’re considering the switch, review the benefits these companies can offer.
Volume savings. One of the main advantages of using an experienced management company is your ability to leverage the company’s size. Because management companies allocate costs over multiple facilities, they help you reduce expenses. The cost-savings will vary depending on the size of the company and the number of facilities it manages. The more sites it has, the more savings that can be realized on items such as Yellow Pages ads, facility maintenance, advertising campaigns, Internet marketing and property insurance.
Branding. Most management companies will allow you to maintain your existing brand, so you don’t have to change signage and other branded items. However, you may also lose out on Internet opportunities, such as free listings on major search engines.
Shared amenities. Many larger management companies offer amenities that you, as an independent operator, could not provide, such as a call center.
Revenue management. Revenue management is much more complex than looking at your competitors’ prices and matching their rates and discounts. It’s imperative that you have a strategy to push rates higher while minimizing move-outs. While this can be a daunting task for an independent owner, a management company can help you manage and maximize revenue. Just be sure to understand the revenue-management philosophy of the companies you’re comparing, and review their quantitative results.
Human resources. The challenge of finding and keeping staff can be onerous and expensive. A management company will often take care of all hiring and firing, background checks and references, and training.
In-house legal counsel. Large management companies will also have experienced in-house legal counsel to review leases, keep up on industry law, and be available if a lawsuit occurs.
IT support. Small technical problems with computers, software, telephones or Internet service can cause huge headaches for most owners, wasting valuable time and opportunities. Third-party management companies frequently provide IT support services to all their properties at a significant cost-savings.
Although there are many advantages to hiring a third-party management company, there are also disadvantages all owners should take into consideration before signing a contract.
Limited experience. The owners of most management companies have worked in the storage industry for a notable amount of time, but their experience is may be limited to a particular market. Management companies with broad experience are more likely to generate success in any market.
Limited accessibility. Most management companies operate within a set geographical area. If your facility is outside this area or far from the company’s other managed facilities, it may get overlooked. Also, the additional costs related to travel may not be included in the management fee. Cost-savings (and competitive advantage) from shared local marketing may also be less if a property is in a remote location compared to other sites managed by the same company. Regardless of the size and location of the management company, visit the office and meet the staff before making a decision.
Required vendors. Some management companies get discounts from their vendors and will require owners use these vendors. This can present a conflict if the owner has established vendor relationships. Carefully evaluate all vendors and contract terms presented by the management company.
Communication. Lack of communication between the facility owner and management company can result in misunderstandings relating to costs, expectations and performance. These problems can be prevented through open communication and due diligence by the facility owner.
As the self-storage industry evolves, we will continue to see the formation of many third-party management companies. Although there are many pros and cons to consider in the decision-making process, an owner can often exceed his own expectations by hiring the right partner.
Noah Springer handles the management of all strategic partnerships for Extra Space Storage. In 2007, he helped create the Extra Space Storage Joint Venture Program, in which Extra Space joined forces with local developers to develop self-storage facilities across the United States. To reach him, call 801.365.4628; e-mail [email protected]; visit www.extraspace.com.