I work as an operations manager for a small self-storage provider in Toronto, with four locations and growing. After studying to be an engineer, shifting into self-storage property development was an easy transition for me. What wasn’t easy was realizing the product is such a complex and intrinsic animal. A passion for buildings and people collides in this service-oriented, property-management business.
Our company recently went through a major transition, and as I started to work with the managers—who have all been with the company 10-plus years—I noticed a common theme: They’re afraid to raise rental rates, both with their current client base and new customers. It’s easy to understand why this happens. They form relationships with their tenants, which they don’t want to jeopardize; and they feel the need to offer a lower price to attract new tenants.
To truly push your facility to its peak revenue potential, you need to change this mentality. People naturally think that by increasing price, you’re being unfair to your customers, but this isn’t true. Think of it terms of buying a car:
- If you buy a car with more options, let’s say a sunroof or leather seats, do you expect to pay more?
- Do you feel it’s fair that a luxury car comes at a premium price?
- Would you expect a luxury car to keep you safer, i.e., with automatic breaking systems, lane-change sensors, all the things that come at a premium?
The answer is YES. Things that come with a luxury premium come at a luxury price. It’s fair for car companies to price their product this way, so why don’t self-storage managers feel they can follow the same structure?
The first way to combat this is have your managers do an in-depth market analysis. Typically, they’ll call around to competitors and ask for unit pricing, but they should also be seeking to answer:
- What is their customer service like?
- How well do they answer the phone?
- What are their office hours?
- What kind of extra services do they provide?
- How clean/dated is the facility?
All these things will allow a self-storage operator to charge more. These real questions will also help your managers see exactly where your facility lies within the market.
Once you’ve established your market position, start to determine what makes you different. Are you open later? Is your site cleaner? These things can easily justify a higher price for your product. Chances are, you’ve realized your product is worth more or the same as your competitors and you’re not charging enough.
You and your managers should choose a price point based on what’s in the market. This is where the real challenge begins. Start by establishing your new preferred pricing range. Is it higher or lower than your current price? Why do feel your facility is worth these prices given what other sites look like?
Go through each unit and see what your rental velocity is. Can you charge above market on certain sizes? Are there units you have trouble renting? Think about each unit as its own product, not dependent on other units. Now that you know where the market is, pick a price that works for your site but doesn’t shortchange its value.
There are two items to deal with for this new pricing structure to be effective. First, you must post your new street rates and still have rental traction. You’ll do this by continually motivating your managers. Once you know why your prices should be at a certain level, you have the ammunition to sell to every new potential client. Push those points! Why are you better? Clients need to be educated, so educate them.
Second, you must push all your existing client up to your street rates—all of them. This is easier for managers to do now that they’re aware of the product they manage. They have the best customer service, the cleanest facility, etc. This is an easy motivator to expect those clients they see everyday to be paying for their services. Keep pushing the facts that have been identified in the market research. Have your managers explain these points to the existing customers if they’re upset about increases.
This is simple. If you conduct proper market research, you’ll have all the tools you need to maximize your income. If you discover you’re not top-of-market, you’re now aware of all the items you need to fix. Chances are those are low-cost and can easily be handled to shift your facility into the market slot in which you’d like it to be. Customers will rent from you if you can explain why you’re No. 1, and existing customers will not leave if you can explain why you’re still the best.
Matthew Midgley is senior operations manager for Cowie Capital Partners Inc., which operates four Self Stor self-storage facilities in the Greater Toronto Area, with locations in Etobicoke, Guelph, North York and Richmond Hill. To reach him, e-mail [email protected].