As a self-storage operator, watching your expenses is just as important as keeping an eye on facility revenue. We often hear about innovative strategies to increase income but rarely about approaches to decrease expenses. Don’t get me wrong—it’s good to make more money. However, if that’s your only focus, the time and effort you spend to grow your bottom line could be in vain. If you also work hard to minimize your costs, you’ll be surprised at how the savings can add up.
Fixed vs. Variable
Controlling your self-storage operational expenses should be part of your everyday thought process, even at the onsite level. Facility staff should be aware of how their actions, and even their inactions, could cost the company money.
To begin, it’s helpful to know which expenses are fixed and which are variable. Your facility has some of both. A fixed expense is one that doesn’t change in conjunction with the level of site activity. They include:
- Mortgage payments
- Property insurance
- Management software
- Property taxes
- Phone services
- Internet services
- Pest control
- Elevator maintenance
- Trash removal
A variable expense, on the other hand, changes in proportion to production output. They include things like:
- Advertising and marketing
- Capital improvements
- Credit card processing
- Office supplies
- Retail supplies
While there are many more expense categories, these give you a general idea of the kinds of things to include in your budget.
Budgeting is critical to your ability to plan, monitor and control self-storage expenses. The more detailed your budget is, the easier it’ll be for you to see where you have shortfalls and overages against your financial projections.
To start, it’s a good idea to complete a thorough facility inspection. It’s also smart to have someone who doesn’t work at the facility perform it. This person will have a fresh perspective and may see things you and your team don’t.
To aid in the inspection process, you’ll want to create a form, something to serve as a checklist. It should break down the property by category. For example, it might include:
- Asphalt and driveways
- Exterior paint
- Gutters and downspouts
- HVAC units
- Unit doors
- Video cameras
If you have resident managers, you’ll also need a home-inspection form. It should contain items such as appliances, countertops, electrical, flooring, paint, shower, toilet, etc.
If both forms are detailed, you’ll get a complete picture of the projects you need to plan for in the coming year. From there, you can add in fixed expenses and, using an average from the prior year, come up with projected variable costs. Be mindful that some expenditures may qualify as capital improvements, which is a separate expense category.
While working through the budgeting process, review all costs and see if you can implement any reductions. An important exercise is to bid out some of your fixed expenses to see if you can find a similar product or service at a savings. I’ll address this in more detail in the next section.
Once your projection is complete, you’ll have a better picture of what your overall expenses should be. Make it a priority to review the budget regularly to ensure you’re on point or understand what might’ve caused you to go over. Ideally, you’ll review it once per week. At minimum, check where you stand halfway through each month and again at the end.
One way to find savings is to shop your service contracts every year. Get new bids for services like property insurance, landscaping, pest control, snow removal, etc. As a business operator, you have many choices when it comes to vendors. While many may be long-term providers to whom you feel some sense of loyalty, it’s always good to see who else is out there and how their pricing compares. You may ultimately find that you can get the same service at a lower cost with even better results! Loyalty is good, but not at the cost of your bottom line.
You’ve likely heard the adage, “An ounce of prevention is worth a pound of cure.” Establishing lists to ensure maintenance tasks are completed on a schedule is really helpful in controlling self-storage expenses. Tracking things such as changing AC filters and maintaining unit doors and security components will help you keep equipment in tip-top condition, which saves money in the long run. The more emphasis you put on maintaining facility assets, the fewer repairs and replacement costs you’ll have.
For some equipment, you might even create an individualized task list. For example, you could build a maintenance log for your golf carts. These vehicles aren’t cheap. If they aren’t well cared for, the repairs can be costly. Think about what regular inspections and upkeep are needed to keep your carts running well, then create a timeline so these tasks are done.
While items such as elevators or fire-sprinkler systems often have required maintenance timelines and contracts, other big-ticket items like your HVAC might not. These are just as important to preserve on a monthly, quarterly or annual basis. A detailed task list will ensure all items are covered.
Onsite staff are key to expense management in self-storage. In fact, it should be company policy to discuss the budget with employees, so expenses can be better monitored and controlled. It’s vital to give managers the tools they need to assist in this endeavor.
Your team should know what their financial parameters are and the threshold at which they need to get supervisor approval for expenses. For instance, many owners regulate petty cash by giving staff a credit card with a monthly limit. This allows the team to purchase small items they need with the assurance they won’t overspend. You might also have a policy whereby any vendors must deal with the owner or corporate office directly before performing any work. You never want to find yourself in a situation where the job has been completed before you even approved the bid.
Question every item that doesn’t match your budget projection and be aware of anything that may have caused expenses to unexpectedly increase. For example, I’m certain most self-storage operators experienced added expenses in 2020 to purchase the safety and cleaning supplies necessary to remain open during the pandemic.
Creating and monitoring an annual budget, shopping out service contracts, creating task lists for maintenance, and working with staff to track and control costs are all imperative to decreasing your self-storage expenses. Look at it this way: All the hard work you put in to know where your money is being spent and why will only add value to your investment. If a refinance or sale is in your future, you’ll thank yourself!
Diane Gibson is owner and president of Cox’s Armored Mini Storage Management Inc., which manages self-storage facilities in Arizona. Currently president of the Arizona Self Storage Association, she’s participated in roundtables and panels at the organization’s conferences. For more information, email firstname.lastname@example.org.