So, You Want to Be in the Records-managementBusiness

September 1, 1997

12 Min Read
So, You Want to Be in the Records-managementBusiness

So, You Want to Be in the Records-managementBusiness

By Cary F. McGovern

If you own or operate a self-storage facility, you are alreadyin the records business. There are undoubtedly records in many ofthe storage units that you already manage. So, you have bydefault become the literal burial ground of the records industry.

Records take the lowest priority in business until somethinggoes wrong. Then it is catapulted from the lowest position to thehighest overnight. So, what causes this to happen? Usually eitherlitigation or an audit. A key record can't be found, and the bossis furious. That is when we hear the bellow from the executivesuite, "Can't you keep things straight down there?" Ofcourse, prior to that, the records department was given littlefunding and no resources. Records management is indeed themissing link in administrative management.

Why Records Management?

Every individual and organization must keep records--whetherthey like it or not. Usually they don't like it and want someoneto do it for them. Organizations must keep records to fulfilllegal, regulatory and fiduciary responsibility. They have nochoice.

What's the Difference Between Records Storageand Records Management?

There are several levels of service in the records business:

  1. Passive Storage: This is where most self-storage managers find themselves. The customer comes in and places boxes and file drawers of records in your facility. He keeps the key and you collect a space rental fee.

  2. Active Storage and Retrieval: The first step toward records management is to store records on racks at a monthly cubic foot rate. Usually boxes are numbered and maintained by bin location. You provide pickup and delivery service for new cartons and retrieval of cartons for review. Charges are levied for retrievals, re-files and deliveries.

  3. Inventory Control Services: Sooner or later the customer realizes that he can no longer manage to find records when he needs them. The solution is simple. Inventories are gathered on one or more of three levels: the carton, the file within the carton, and the document within the file. Most companies that offer inventory services use an automated bar-code system. The customer is charged for the creation of the initial database and for updates of boxes coming and going.

  4. Extended Records Management Services: This encompasses professional records-management consulting services. It usually includes retention scheduling, active file management and expertise on developing records-management policy and procedure for the customer. Normally this is performed by a records-management consultant with the certified records manager (CRM) certification. These individuals are available as subcontractors in every area of the United States and Canada as well as, other countries throughout the world.

  5. Electronic Data Management: Records are in the process of becoming digital. We are in the midst of a paradigm shift from paper to electronic records. The shift may well take many years to complete. Managing electronic records has both high cost and high rewards. Services in this area range from computer back-up tape rotation to on-line data warehousing.

Storage Racking and Rates in RecordsManagement

In records-management centers around the world, there aretypically two methods of storing records. The most prevalent isin storage cartons. The less common is in file folders on openshelf racks. Let's look at each to determine which is mostappropriate for your business:

Box Storage: The industry standard is the letter/legalsize box. It allows for filing letter-size documents or files inone direction or legal-size files or documents in the otherdirection. It measures approximately 1.1 cubic feet and is calledthe one cube box. Although most commercial records centers willaccept any size carton, it is advantageous to recommend thatconsumers move to the one cube box. This standardization willallow for maximum shelf utilization and ease of handling. Boxeslarger and smaller are assessed a rate based on the number ofcubic feet they measure, usually rounded to the next highestcube. Although rates vary greatly from location to location, itis usually assessed based on volume in storage, and may be theresult of negotiation with the client. It is not uncommon for acommercial records center to charge rates that vary from 15 centsto 50 cents per cube. The rate structure is highly competitive inmost markets.

File Storage: The most common open-shelf filing isperformed for the healthcare industry. Medical records are moreactive and require quick delivery, so the standard is to maintainthem on open shelves. It is appropriate to have a monthly rateper linear foot of files that includes retrieval and delivery. Alinear foot is approximately the same size as a cubic foot.Charges range greatly per linear foot depending on the packagingof services included.

Rack Alternatives: Unlike self-storage, records-storagerevenues are tied directly to the density of filing. The mostimportant question always is, "How high is yourceiling?" In box storage, the most recommended shelvingconfiguration is pallet racks nine levels high with twomezzanines. Mezzanines are walkways at the fourth and seventhlevels. Although they are not absolute requirements, theycertainly are recommended. As your records storage volume grows,the volume of retrievals grows proportionately. Pulling files andcartons from ladders is difficult and ineffective for personneltime optimization. Open-shelf filing systems usually have sevenshelves that are approximately 72 inches high. Typically theseare stacked on mezzanines where possible.

Pickup and Delivery Methods and Rates

There are two schools in this area of the business. The firstis to provide services using your vehicles; the second is tooutsource the service. I have concluded based on personalexperience that it is best to provide both. As you grow, yourdelivery schedule will become more hectic. I have witnessed manydebates about this subject, but I believe that the best scenariois to have one vehicle--usually a step van--and outsource therest.

This will give you several benefits. Your van driver can builda rapport with the customers who are on his regular route, youwill have a mobile advertisement that drives throughout thecommunity and you have the flexibility of using regular andon-call couriers for other deliveries. Most communities have anumber of independent contractors that are available on call oron certain high-volume days for deliveries. Additionally, it isvery difficult to plan for "STAT" or emergencydeliveries. Bonded courier services can provide this for you ondemand. You may have several couriers on call who have beentrained with your procedures and wear your T-shirt for delivery.

Charges vary for delivery services and are based oncompetition, distance and volume or number of pieces. Typicallythere is both a pull charge and delivery charge. The pull chargemay be $1 to $5 and the delivery may be $3 to $50 depending onregular, emergency or evening delivery requirements.

Pickup Requirements and Charges

Since it is rare to have an emergency pickup, these can bescheduled over a weekly or monthly basis depending on theactivity of the customer requirement. On regular, scheduledpickups, it is normal to have many boxes--25, 50 or more. Chargesfor this service are calculated using an hourly rate. Perhaps $25per hour for one man, one truck. New cartons coming into storagefrom an existing customer may require a set-up charge for eachbox to be indexed into the computer system. New customer pickupsare best done on a schedule basis at the least busy time at youroperation--perhaps Thursday afternoons. Charges for this servicerange from free to an hourly rate. This will greatly depend onyour marketing strategy. Most commercial records centers want asmuch volume as possible and will pay for the cartons to come ininitially.

The cost of bringing a carton into storage is related to threecomponents. The first is the assembly of rack for storage, thesecond is rack cost, and the third is the manpower and vehicleexpense for the movement. The rule of thumb for this cost is thatit usually equals approximately 75 percent of the first year'sstorage revenue. After the first nine months, the rack andmove-in cost are paid for. After that the only direct cost to youis the cubic foot space in storage and your overhead. Since youeffectively get 18 cubes per square in a nine-level rackingsystem, your rental for one square equals the revenue of 18cubes. If you want to compute the number of cubes that can bestored in your facility, simply multiply square footage byceiling height and multiply that by 60 percent. Typically 40percent of the storage space will be used for receiving, aisles,space between the ceiling and the top of the rack, andadministrative space.

Carton Storage Volume Formula

square footage

20,000 sf

mutiplied by rack height

x 20

multiplied by 60 percent

x .6

equals # cubes

240,000 cubic feet

Offering Other Services

You may want to consider offering services along with thestandard storage, pickup and delivery. The most common additionalservice is indexing. Indexing can be provided at three levels:the carton, the file and the document. It is rare to index at thedocument level unless there is some urgent need, such aslitigation.

Carton indexing usually includes the following attributes:


Customer name

ABC Company

The record series (name)

Accounts Payable Files

The department generating the record

Accounting Dept.

Dated "from and to" represented in the carton

Jan. 1996 to Dec. 1996

Alpha/numeric sequences "from and to"

Alpha to Cable

Destruction date

Jan. 1, 2003


File level indexing is considered normal and can be quiteprofitable. Charges are based on keystrokes, hourly rates orsometimes an algorithm. My personal experience is that whenmanaged well, this can offer a 50 percent profit margin. It isusually an easy sell to customers. File level allows ease ofaccess for customers to find what they really need, avoiding thedelivery of several cartons to find one item. Delivery can thenbe at the file level at a reduced rate. The best way to index atthe file level is to set up a production shop. I have used10-by-16-foot work huts with simple conveyers running throughthem. Typically, you can set up three work stations in thisspace. Staffing depends on your volume. For example, sometimesit's ideal to have one full-time person plus a relationship witha temporary agency to provide trained personnel on demand.

Other services range from professional records services, suchas retention schedule, to managing on-site customer file rooms.Each of these opportunities deserves separate articles. You canoffer these services by forming resource partnerships withprofessionals in your area. Electronic or digital recordsmanagement services can also be provided through partners.

So what are you waiting for? Get going on developing yourrecords-management business. Existing customers offer anexcellent opportunity for a fast start. Additionally, a kick-offrecords management symposium can spark interest immediately.Whether your business plan calls for slow growth or a fast pace,you can have a successful addendum to your existing self-storagebusiness.

Cary F. McGovern is president of Mandeville, La.-basedFile Managers Inc., which provides outsourcing services,file-room management and litigation support services for thelegal industry, as well as records-management consultingservices. Mr. McGorvern is a certified records manager and afrequent speaker for organizations such as the Association ofRecords Managers and Administrators, the Association of LegalAdministrators, the National Business Forms Association, the BankAdministration Institute and the Association of CommercialRecords Centers. He also is a contractor to Xerox Business Servicesas records-management consultant and has developed the XBSrecords/file-management product offering.
Mr. McGovern may be reached at (504) 845-1720 or via e-mail at[email protected].

Construction Issues for Records Management

Constructing a building ideally suited for use as a commercialrecords center is very important to your financial success. Thereare several issues that should be considered.

  1. Location and access to downtown or business centers.
    The attractiveness of the commercial record center usually centers around ease of access to the primary customer locations in your community. Records centers that are strategically centered around the entrances to freeways have more appeal to customers who might need quick service. Hospitals are particularly interested in "STAT" service.

  2. Optimum ceiling height.
    Ceiling height is always the most important issue in any commercial records storage operation. The storage density is directly proportional to ceiling height, as is gross profits. One of the key formulas for success is usually the question, "How many cubic feet do you have per square foot?"

  3. Physical security.
    Records represent the corporate memory of any organization. They usually are of no concern until either litigation or an audit takes place. It is important to build into your facility access-control systems on all doors and premises protection including motion detectors. Additionally, bonding of employees coupled with a security of information training program will ensure customer confidence.

  4. Disaster avoidance and management.
    Disaster management includes things like fire-detection systems. These are important in addition to sprinkler systems. Although most communities require sprinkler systems, they can cause more damage than the fire itself. Cross bracing of racks is imperative for earthquake-prone areas of the country. There have been horror stories about racks that dropped like dominoes, even in small quakes. Disaster management should be an integral part of your daily operation. It must include data protection and back-up for your computer system.

  5. Electronic media facility.
    If you choose to provide electronic media storage, it is important to provide higher levels of physical security within your facility. Typically, the additional components are temperature- and humidity-control systems monitored 24 hours a day, fire-suppressant systems and moisture detection.

  6. Optimization of floor space.
    Floor-space optimization is important. The areas that you will define are administrative space, receiving area for pallets, aisles and project-support areas. Receiving areas are important since it is common not to shelve record boxes for several days after they are received. The most commonly referred to carton is the carton that was received yesterday. Placing cartons into temporary receiving areas saves labor cost.

  7. Mobile project work space.
    Project work is a major revenue producer for commercial record centers. This is discussed in the article. Building a small, moveable project room that can be relocated from facility to facility is important. Simple construction-type huts built with computer work stations and manual conveyers work well.

  8. Room to grow.
    You should always consider a location that offers growth potential. The average increase in storage just from existing accounts can be 15 percent to 20 percent compounded annually. No matter how well you plan, you will eventually run out of space. Of course, aggressive sales will make this happen sooner.

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