I recently audited a self-storage facility where the owner left control of the finances with the manager. I discovered many personal expenses had been charged to the business. No one was reviewing the bills before paying them! This site also had no budget or financial goals. The staff was complacent and had kept things the same for more than 30 years. Not only were policies violated, there were areas in which the property could have saved money.
Regularly monitoring your self-storage business expenses is critical, as it holds everyone accountable and helps keep the business on track. Let’s explore why and how to do it, and where you might find cost savings.
Sticking to Budget
Every self-storage operation should have a budget. This is a living document that should evolve over time to suit your facility’s needs and goals based on past performance. Recognizing that you’re over or under spending can help you determine whether to make cuts or increases for the next month or year.
It’ll also help you identify when expenses are increasing, sometimes unexpectedly. A good example is your utility bills. For most of us, they come in and we simply pay them. But what if your water bill suddenly spikes and you aren’t sure why? It’s a sign that you need to investigate. Perhaps you have a broken water valve that’s been leaking for months!
Tracking your expenses every month is essential. You must have a sense for your cash flow—what’s coming in and going out. You’d be surprised to learn how many self-storage operators don’t pay attention to where all the money goes! Take inventory of all your business accounts, including your checking account and credit cards. You might discover that you’re paying for a service you no longer use or costs much more than in previous years. It might be time to cancel or switch providers.
It’s always worth your time to keep tabs on your expenses. Tracking will help you understand what's really going on with your business. Knowing what you’re spending weekly, monthly and annually—and on what—will help you better manage your operation.
So, now you know it’s important to have and stick to your budget, but honestly, that isn’t enough. You must also set goals for saving money where possible and make strides toward meeting them. In which areas do you need to make the most improvement? How does your self-storage facility compare with others that are similar?
On average, facility expenses will run 30% to 36% of revenue. Industry statistics show a range of $5.40 to $7.50 per square foot. While some annual increases are to be expected, many operators are experiencing larger than normal bumps associated with the pandemic. I have one site where the insurance premiums went up 25% this year!
So, examine your costs. Know what they are, and constantly be on the lookout to minimize them. For example, what can you do to can reduce your energy bill? Are your office lights and equipment energy-efficient? What about your heating and air-conditioning system? Consider options such as window film and solar panels that could lower your utilities. Perform preventive maintenance to enhance the life of your systems and equipment.
Payroll is one of the highest expenses at any self-storage facility, consuming up to 25%. Take a careful approach to all steps in the hiring process, from recruitment to onboarding, as that’s one of most helpful cost-control measures. Bad hires are expensive, and an employee who can’t keep up with work demands takes a heavier toll on a business than you may think.
Other large expense items include property taxes, insurance, repairs and maintenance, and marketing. Some we can control, others we can’t; but they’re all part of doing business. You need to review and shop them around when possible. Don’t sign an annual renewal without ensuring you’ve got the best deal! In fact, your contracts with third-party vendors are a great place to trim. Multi-year contracts usually favor the supplier, so if you can reopen them to annual bidding, you might be able to lower your costs.
Don’t throw dollars to the wind! Audit every aspect of your self-storage operation’s expenses and make every effort to lower them where you can.
It’s a Team Effort
Regardless of the size and structure of your self-storage operation, you need a person you can trust to review the financials and keep the business on track. This is a team effort, from the day-to-day property manager to the person paying the bills. If they’re the same person, are their interests aligned with those of the business?
Tracking your spending on a regular basis can give you an accurate picture of where your money is going (and where you might like it to go instead). Challenge all employees to identify ways to save time and money. Most everyone can point to inefficiencies or activities that have a poor return on investment. Your outside partners, suppliers and vendors might also offer ideas on how your company can reduce expenses, or how they may be able to work with you at a lower cost by changing payment terms or ordering patterns. Consider rewarding employees and partners whose suggestions are implemented.
I challenge you to go find some cost savings in your self-storage operation today! They might not come from where you’d expect. However, until you start regularly checking and tracking, you could be leaving money on the table.
Susan Haviland is the owner of Haviland Storage Services, which specializes in auditing, manager training, market studies and operational reviews. She has more than 32 years of industry experience, from serving as a site manager to acting as vice president of operations at Extra Space Storage Inc. and Price Self Storage. She's a frequent speaker at industry conferences and tradeshows. For more information, call 760.401.0297.