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A Self-Storage Operator's Guide to Negotiating Third-Party Service Contracts

Negotiating with an outside contractor can be a challenging process for a self-storage operator. The key to getting quality service at a fair price is to be prepared before entering negotiations and having clear goals in mind.

By Molly Bilker

When he first started operating a self-storage business, Robert Clark of Oregon-based South Eugene Storage hired an outside contractor to handle the facility landscaping. The landscaper was the self-storage owner's friend, so Clark thought hed get a great deal. When the bill came in at $1,100, he knew he'd made a mistake. "It turned out, not that good of a friend," says Clark, who's also a member of the Self-Storage Talk online community.

Clark admits he wasn't sure how to negotiate a contract and failed to get all the information he needed to get the best value. Now he swears hell never let that happen again.

Negotiating with a third-party service provider can be a challenging process. While every self-storage operator wants to receive quality service at a fair price, it doesn't always occur. Contract negotiations are about finding a happy, harmonious niche where both parties agree. To make this happen, operators should be prepared and have clear goals in mind.

Know Your Stuff: Contract Types and Terms

There are a variety of service contracts storage operators might consider including pest control, gate repair, office renovation, security monitoring, and telephone and Internet services. Elevator service, search engine marketing, Web design and cable are a few other types they may negotiate, says David Dixon, chief operating officer of Georgia-based Universal Storage Group, which owns seven facilities and manages 44 across the Southeast. "There are a lot of product and service contracts to be dealt with. They vary by time, scope of work, and products/services offered," he says.

Operators need to familiarize themselves with the terms often found in contracts. Some can be filled with unfamiliar words and phrases, which can easily throw a person who's inexperienced with legalese. Don't let yourself get caught in some of the traps that come with the language, says Scott Zucker, founder and partner of law firm Weissman, Zucker, Euster, Morochnik P.C., which advises self-storage operators on legal concerns.

Contracts should contain three elements: the specific product or scope of the work, the price, and the time of delivery, Zucker says. "These are the main points of a contract. Do not sign a contract that is missing important terms or is ambiguous.

The contract should also include precise terms so no one misunderstands it, says Jamey Fawcett, president of Accent Building Restoration (ABR), a self-storage maintenance company based in Salem, Ore. "Many problems arise out of general terms that don't call out the specific terms and services being provided," he says. "I have found the more specific you are, the fewer problems you have, as each side is able to easily understand what is included in the terms and services of the project."

Operators should also read the contract thoroughly. Dale Payne, sales manager for Sovran Self Storage Inc., which manages Uncle Bob's Self Storage facilities, says he makes notes and highlights problem areas, then lists items in the order they appear on the contract for reference. "You will also find by doing this you take control of the negotiation by being prepared," he says. "The other side will respect the time you took to understand the contract."

Don't be afraid to ask questions, adds Zucker. "If you don't understand the contract, it will really be difficult for a judge or jury to interpret it later," Zucker says.

If all else fails, you can always go back to numbers, Payne says. Dates, percentages and dollar amounts should match what you agreed on. Even if the legal language is a nightmare, concrete numbers will always help to indicate whether both parties are on the same page.

Understanding the terms of the contract is key to negotiations, Dixon says. "If there is any misunderstanding in the end product/service, then you will fail at the final negotiations." 

Look for Resources

If you're inexperienced with contracts, you don't have to figure them out on your own, as there are a number of resources to help you define contract terms and zero in on problem areas:

  • Attorneys: Most operators likely retain an attorney now and again to handle any legal questions. "When it comes to the language of a contract, it was probably written by an attorney, and you would be wise to have a lawyer who represents your interests review the contract and approve or make changes," Payne says.
  • Co-workers: You can also find someone in your company who negotiates contracts regularly. "Usually an experienced negotiator can quickly find items in the contract that may need clarification or an overhaul," says Payne.
  • Other operators: Look for peers who have gone through the negotiations, Dixon says. "They can sometimes get you a shortcut to the proper person in the organization or point you to the best product/service to suit your needs."
  • State associations: You can also contact your state association to help decipher a confusing contract. Many associations retain legal council for their members, have board members who frequently deal with contracts, or can refer you to another source.

Get What You Need: Negotiate Honestly

Honesty is central to the contract process. Be fair and let vendors know you're getting quotes from others, Dixon says. "The result is typically the best price for what you are looking to purchase, because they will know others are looking to provide a service to you as well."

Naturally, any dishonesty will destroy a negotiation. Dishonesty or fear of discussing something is the most common problem in contract negotiations, Fawcett says.

"It may be a red flag that the relationship will not work out," adds Payne. "Trust must be built throughout the process and maintained to properly carry out the terms of any contract."

Smoothing the Process

There are several ways you can make negotiations easier and more pleasant for you and your vendor. First, start your negotiation as soon as you know what you want. You'll have more time to discuss what you need and a better chance of getting it, Dixon says.

Second, get at least three bids for any contract. Give the vendors specific information about the scope of work or product model or type. After his early contracting experience, Clark says he no longer does any work without getting at least three bids so he can compare prices and services to find the best value.

A third and enormously important part of contract negotiation is the you-get-what-you-pay-for rule. Quality of service after the sale depends on whether youre willing to pay for it, Dixon says. The service provider needs to make a profit just as much as you do, adds Fawcett. "Negotiate terms that are beneficial to both sides, and typically both sides will be pleased with the outcome."

One way to create harmonious negotiations is by starting out positive and conceding to a request from your vendor at the beginning of the conversation, Payne says. "You want to break down the wall between each participant, and giving in to something that is beneficial to the other side extends that olive branch and creates a better atmosphere to cooperate."

Finally, never be afraid to back out before you've signed the contract. Don't make payments or approve work until the contract is signed, Zucker warns. Also, don't accept terms youre not comfortable with or that make you or your company vulnerable, Payne adds. Self-storage operators should never feel the pressure to sign a contract at any given time. If youre not happy, you can always walk away.

Agreement is the key to a successful negotiation, so keep that in mind going in. "Look to bring the two sides together in harmony to make it a win-win situation, Payne advises.

Molly Bilker is a sophomore journalism major at Arizona State University in Phoenix. She is part of ASU's Barrett Honors College and completing a minor in Spanish. She comes from an arts-focused high school with a creative-writing background. She actively participates in the arts, including creative writing, guitar and vocal music, theater, photography, ballroom dance, drawing, and film. To reach her, e-mail [email protected]

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