One of the most challenging aspects of owning a self-storage business is managing the money side. This relates to both the funds coming in and what’s going out, which always seems to be on the rise!
If revenue management isn’t your favorite part of ownership, you’re not alone. It can be difficult to master but it can be done. As we approach the end of the year (we all know it’s downhill after Halloween), now’s the time to think about how things are going and what changes you can make so your business does even better in 2022.
Let’s start with the fun part: funds flowing into your business. The most prominent of this is, of course, is revenue from your rental units. Even though the industry has done well during the pandemic, many storage operators continue to shy from evaluating and, ultimately, raising their rates. Some storage businesses never do it. It’s often said that if your facility is enjoying 100% occupancy, it’s time for a bump.
There are so many ways to tackle this task. You can do a small increase across the board or rely on your software to automatically scale up pricing. There’s also the option to raise the rental rate on customers’ anniversary dates. The point is, you should evaluate your existing tenants’ rates regularly and look for ways to tweak them.
When and by how much to bump rental rates for existing tenants is always under discussion on Self-Storage Talk, the industry’s largest online community. Two recent threads focus on signs that’s it’s time to raise rates and timing it. See what others recommend or add your own advice.
As for rates for new customers, that door is wide open. Sure, you need to stay competitive, but you never want to be the “cheapest” facility in the market. That’s really just asking for trouble.
A great way to approach your street rates is through value pricing. Airlines and hotels have been doing this for years. Why not self-storage? It’s not complicated, either. Essentially, will some prospects be willing to pay more for a specific unit? Perhaps it’s one that’s closer to an access gate, on the first floor of a multi-story building or near an elevator. People want convenience and most are willing to pay for it. Moreover, don’t let discounts weaken your rental income. There’s a time and place for concessions but they shouldn’t be your main strategy to closing a sale.
Rentals aren’t your only source for revenue either. Think about the fees you’re charging. Could they be too low or are you be missing some? Facilities that offer retail merchandise and services such as vehicle or wine storage generate more money. If you’re not providing these add-ons or others, you’re missing out on some customer cash.
Now, the more complex part of revenue management—your expenses. Self-storage operators have become really, really efficient since the pandemic began. Much of this was out of necessity. However, it’s now become a practice for many.
First, you need to understand your fixed and variable costs. Once you know this, you can find places to nip and tuck. One obvious area is your existing contracts. Many will likely be up for renewal in January. Are there better deals out there? You won’t know unless you check. Credit card fees are crazy these days. Would renegotiating your terms or switching vendors help?
You need certain tools to maintain your site, but if you’re purchasing cheap versions every year it’s probably not saving you money over time. Maybe invest in better quality equipment. It might sting now, but the purchase will pay off in the long run.
Now’s also a great time to consider your mortgage. Interest rates and finance terms are amazing right now. If you haven’t spoken to a lender since before the pandemic, make the time and learn about your options.
Speaking of options, we have plenty for you as well! If you haven’t already, check out the October print or digital issue of Inside Self-Storage for expert advice on financial planning. You can also visit our revenue management page online for articles, blogs, news, videos and more, or the ISS Store for additional resources.
There are so many ways to generate new revenue as well as trim operational costs. It takes effort and it can be overwhelming. Think little steps. Take a look at your company from the top. Where is it at today and where can it be in six months? Don’t wait until Jan. 1 arrives. Act now so you enter the new year with a clear focus on how to improve your self-storage company in 2022 and beyond.