As the self-storage industry attracts more and more investors, the pressure to increase revenue also grows. This will be become vital in 2023 as decreased rental rates and lower occupancy could become a reality for many facility operators.
Fortunately, the industry has multiple adjacent profit centers that can easily be tapped for additional income. These include retail product such as moving and packing supplies, tenant insurance, and specialty storage including vehicle, wine and records. Ahead, I’ll discuss the revenue potential of these offerings, proven sales techniques, a few of the more popular options, and other ways to boost success. If you haven’t yet unlocked the full potential of add-on products and services, the time is now!
The clearest reason to explore add-on profit centers is to generate more money for your self-storage business. In a best-case scenario in which a facility manager (or call center) is particularly great at selling, the owner can expect to see as much as a 10% increase in income. For example, the breakout might look something like this:
- Retail merchandise = 1.5%
- Truck rentals = 1.5% to 2%
- Tenant insurance = 5% to 6%
At a glance, those numbers don’t appear to be that significant, until you start looking at them over time. Let’s say we have a 300-unit facility with 70% occupancy and an average street rate of $135 a unit. If we can generate an additional 8% in sales through add-on products and services, we can gross upward of $27,000 a year.
- 300 units x .70 = 210 rented units
- 210 x $135 = $28,350 per month
- $28,350 x 12 months = $340,200
- $340,200 x .08 = $27,216 in add-on sales
How to Upsell
So, now we know that offering storage-related products and services through your self-storage store is just good sense. But you have to be able to sell them! One of the main rules of retail is to never let a customer leave your store to buy the same product or service from someone else. Convince them you are their best and most convenient choice.
Upselling starts with listening. It’s understanding customer needs and then matching those needs with the products and services you offer. That’s actually the best way to sell anything. It doesn't require any pressure, and you aren’t trying to push an unnecessary purchase to your buyer. You're simply identifying a need and meeting it.
The easiest way to upsell your add-on merchandise to every self-storage customer is to have a conversation with them. It's amazing how many facility managers don't ask these basic questions:
- What are you storing?
- Where are those items now?
- When and how do you expect to move them?
The answers to these questions are key. They uncover clues that’ll help you suggestively sell your merchandise. For instance, if the tenant says they’re moving tomorrow but it’s supposed to rain, you can suggest products such as mattress covers and furniture pads that’ll prevent their belongings from getting wet.
When you ask what your customer they’re packing, they might say grandma’s collectible Hummel figurines. You immediately follow up by asking how they plan to pack these items safely. You can then offer them newsprint, bubble wrap, foam and boxes. You can even demonstrate the proper way to wrap them. If you ask questions and really understand the customer's needs, it's very easy to sell!
If your self-storage business employs a call center, the strategy for these sales is similar. Just keep in mind that most call centers incentivize their agents based on total rentals completed rather than total sales, so their focus might not always be on ancillary items. That said, it's a simple part of the process for any salesperson.
Common Items to Sell
Retail product. When determining which items to carry in your self-storage retail center, be conservative, especially when opening in a new market. Stick with the core products such as boxes, tape and basic packing materials. Set a probationary timeframe and see how much money comes in from these sales. A good manager can generally increase facility revenue by about 1.5% with this merchandise.
Truck rentals. If you’re in a market that does exceptionally well for this service, the major truck-rental providers will reach out to partner with you. As with retail merchandise, these sales make sense for your customers and business, and you can typically make up to 2% additional revenue. Just be aware that renting trucks can be a bit of a time-suck and can take your manager away from their core duty to rent units. You’ll need to determine whether you have the staff to cover this service and the proceeds will be there to support it.
Tenant insurance. This can be a very profitable add-on, generating $8 or $9 per customer, or 5% to 6% of store revenue. That percentage can go up if your staff is adept at discovering tenants’ needs and matching it to a higher tier of coverage.
Again, the most effective way to present this product is through conversation. Customers don't want to feel sold to; they want you to help them find the right fit and ensure they have everything they need. If you present your product effectively, it's very easy to meet those needs without ever having to press your customer or force any sort of sale. It creates a better relationship and builds trust.
Building Community Partnerships
One of the best ways to boost sales of your self-storage profit centers is to build partnerships with local businesses that can facilitate and send you referrals. For example, one connection that might present value is with local real estate agents. Attend a chamber of commerce meeting and introduce yourself. Let them know about your facility and perhaps offer a small discount to their clients.
If your chamber allows it, offer to speak at a meeting and tell everyone about your business. Provide information on what you offer and how you can help other members. It could result in sales.
Also, reach out to local moving companies, as they use a lot of boxes. While larger businesses will be well-stocked with these products, smaller ones could possibly use a backup supply. Like any small business, they're trying to keep costs down. If they can buy boxes as needed from your self-storage facility, it’ll save them from needing additional warehouse space. They may even rent a unit to hold all their stuff!
Before committing to any add-on profit center, it’s a good idea to first maximize your self-storage business. Make sure your marketing is on point, operations are running smoothly and your curb appeal is fantastic. Build up occupancy and regularly increase your rental rates. Then everything else is gravy.
Michael Baillargeon is senior vice president of operations for Store Space Self Storage, which owns or manages more than 100 facilities in 20 states. The company fuels growth and value through operational experience, its state-of-the-art Storage360 proprietary platform and strategic digital-marketing programs. To reach him, call 833.786.7366 or email [email protected].