A Solid Self-Storage Operations Budget: What to Include, How to Track Progress, And Why Flexibility Is KeyA Solid Self-Storage Operations Budget: What to Include, How to Track Progress, And Why Flexibility Is Key

“Money isn’t everything, but it's right up there with oxygen!”

—American Author Zig Ziglar

As a self-storage operator, you’re likely fond of money. I know I am! And there’s no better way to ensure that more cash flows into your business than out of it than to build a solid budget. This financial compass not only helps you track income and expenses, it provides essential information that allows you make smart spending decisions throughout the year. You can use it to handle your funds more efficiently and track your asset’s performance. Perhaps the biggest advantage of sticking to a budget is it forces you to closely monitor your business goals, so can achieve your short- and long-term objectives.

Financial planning is crucial to ensure your self-storage facility is profitable, now and in the long run. It does, however, require careful attention. So, let’s look at how to build an operations budget. I’ll address what it should include, how to track progress, and why it’s important to be flexible.

What Your Budget Must Include

As you start building your self-storage budget, you’ll focus on revenue and expenses. This exercise can be straightforward or complex. Accounting isn’t my first language, so when I look at a budget, I see it from an operator’s purview, not that of a CPA. Just make sure that your budget works for you.

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Self-storage rental income is the main source of revenue for your business, but you likely have other sources, too. Make sure you include administration and late fees, tenant-insurance and -protection programs, and other profit centers such as retail sales, truck rentals, wine storage and anything else that contributes to your bottom line. (Quick tip: I estimate late fees for the year as 6% of monthly rental income.)

Of course, no self-storage operator wants to think about operating expenses, but we must. We all have them. Many are out of our control, but we’re often able to manage small expenditures here and there. Regularly examine everything you spend as part of your business and determine whether any costs can be reduced or eliminated. If they’re essential, they must be in your budget, so you can get a clear picture. To begin, you’ve got your heavy hitters:

Next, you’ve got your basic operating expenses, in other words, the day-to-day costs of running your self-storage business. These include but are not limited to:

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Make note of whether each expense is a one-time cost or ongoing. If the latter, is it annual, quarterly, monthly or weekly?

Include subcategories for each expense, too. Take marketing, for example. This category might include website hosting, website maintenance, search engine optimization, pay-per-click advertising, reputation management, social media, printed collaterals (business cards, brochures and fliers), and online aggregators. You can get as detailed as you like. Personally, I catalog more than is really necessary, since every little cost matters, and the nickels and dimes add up.

Frequently Missed Budget Items

As I’ve reviewed operating budgets for other self-storage operators, I’ve noticed there are a few items that are often missed. First, there are staff costs. Most people will add salaries  and even benefits but forget to include payroll processing, taxes, workers’ compensation, mileage reimbursements, or employee gifts and bonuses. For example, do you host a holiday party or treat staff to pizza a few times a year? You need to account for these expenditures.

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Next are legal and other professional services and fees. For example, do you pay an attorney to review your self-storage rental agreement each year? Do you pay for live or online auction services? What about dues for national and state associations, or other professional memberships such as the chamber of commerce?

Finally, many self-storage operators forget to adjust their budget for rising costs. We love giving our customers rate increases but despise it when it happens to us. I get it! I hate seeing software costs go up or insurance premiums increase. However, these items will rise over time. Be sure to build these variances into your annual financial plan.

Tracking and Updating Your Budget

Creating your self-storage operating budget is just the first step. Tracking and adapting it as needed is crucial for long-term business success.

I speak with a lot of facility operators who are so hyper-focused on the budget that they forget to come up for air and pay attention to what’s happening in the world. They think of their financial plan as a quasi-divine decree, like Moses himself brought it down from Mt Sinai. It’s important to understand that new competitors can always enter your market, causing rates or occupancies to drop. Sometimes units simply don’t fill up. It happens.

To help counteract these market shifts and effectively manage your self-storage budget:

Again, it’s your budget, so it must work for you and your business. Just make sure your operational house is clean. You can have the best financial plan in the world, but if you drop the ball on facility performance, you might as well smoke it.

Your Roadmap to Success

Self-storage is a very different beast than it was 10, five or even a year ago, and your operations budget needs to reflect this. You must be informed. Keep up to date with industry trends and best practices. Attend conferences, join professional associations and network with other facility owners. You need to keep up with how the business is evolving.

When deciding where and how to spend your hard-earned money, invest in items that’ll provide the most return. Self-storage is becoming flooded with new technology and services. While they may be great, be selective about what can move the needle and what’s just the latest shiny object. A great rule of thumb is to ask, “Will this give me more rentals or revenue?” If not, it isn’t worth the cost.

Budgeting isn’t just a financial exercise; it’s an essential strategy that provides you with a roadmap for facility success. It helps you control expenses, make informed decisions, efficiently allocate resources and plan for the future. Ultimately, it’ll lead to a more prosperous and profitable self-storage business.

Remember: Tracking and adapting your budget to what suits your operation is equally important as building one on the first place. Stay vigilant, be flexible and always prioritize investments that drive growth and efficiency.

Rick Beal is cofounder of Atomic Storage Group, a third-party management and consulting firm for the self-storage industry. His expertise includes business and management consulting, project management, marketing and pricing strategies. To contact him, email [email protected], or stay up-to-date with his publications and speaking engagements on LinkedIn.