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Articles from 2001 In November


Promoting Self-Storage in European Markets

Over the last three years, it's been fascinating to watch and be part of the change to first the United Kingdom self-storage sector and now that of Europe. When our fit-out company stumbled across the self-storage industry in 1998, there were approximately 130 facilities in Europe, with the majority in the United Kingdom. The marketplace had taken 10 years to get to this lowly level. It was one of the best-kept secrets in the United Kingdom--the sector was serviced by only two fit-out contractors.

To us, it was like a breath of fresh air compared to our traditional business: building storage systems for an industry in which we had more than 1,000 competitors. We know all about competition and marketing--we thrive on it and live for it. We liked this new "mama and papa" industry so much we even decided to open our own self-storage warehouse. Not only was it a good investment, but it was a great experience that enabled us to give the best advice to our prospects. It is with this experience in mind that I offer a brief overview of the sales and marketing for this new pioneer marketplace.

American vs. European Markets

One of the largest contrasts between the American and European self-storage marketplace is customer awareness of the product. In the United States, self-storage is a well-known industry. (Los Angeles has more facilities than the whole of Europe, for example.) In Europe, it's as well recognized as "football" (soccer) is in the United States. Lack of product awareness is the biggest factor restraining growth.

We know the product is great. Most simple products always are. Our greatest mission is to raise the profile in the marketplace. An educated consumer base makes a vast difference when it comes to filling a self-storage facility. In the United States, an average-size new opening could expect to fill in the first six to 12 months. In Europe, you're doing OK if you hit the industry benchmark of 1,000 square feet of cumulative fill each month! Effective marketing and advertising are therefore of paramount importance to the European operator as big, early trading losses (during the first 18 to 24 months) are par for the course.

Competitive Marketing vs. Raising Market Awareness

The largest similarity between the two marketplaces--mature and pioneer--is the amount of business generated by a good drive-by location. No matter what anyone says, "location, location and location" are the three most important criteria for site selection, and even more so in Europe. If you've got a good location, 50 percent of your business should be ensured through the right signage and lighting; the other 50 percent is where the hard work and/or expense comes in.

In the United States, marketing efforts are generally focused on a facility's unique selling points, price and discounts, and convenience of location and service. In Europe, marketing is focused on explaining the concept, product and service, and educating the customer. It is, without doubt, the consumer who will become the best salesperson for the industry when he tells his friends about the great new product he's discovered!

Two Competitive Marketplaces

The United States and Europe are both competitive markets, with the difference being who the competitor is. U.S. operators compete against each other, while the European operator competes against lack of awareness. Both situations involve hard work. In most of Europe, having a good drive-by location and taking out a Yellow Pages ad will probably not provide your 1,000-square-foot fill in the early days--the operator needs to be entrepreneurial to guarantee success.

There are probably 20 or 30 cost-effective methods of localized marketing. The secret is discovering or inventing them--and not being too scared to try them all until you find the top 10 for your facility. To some, this may seem like hard work. To an entrepreneur, it's exciting, a challenge and part of navigating the uncharted waters. The point is this: Both the mature and pioneer markets require a lot of effort, but in different ways. It boils down to one marketplace being established and predictable and the other being bloody exciting. I know which one I prefer!

The Technology Revolution

The fax machine, the mobile phone, the Internet--each has changed the business world almost overnight, and life has gotten faster and faster. How did we ever achieve anything before the fax came along? The World Wide Web is the latest revolution and it's here to stay. I love change and progress--the launch of five new storage-related websites over the last 12 months confirms this. So you might be surprised to learn I think the latest revolution is only good for two things:

1. E-mail. It's fantastic. It's like the fax machine all over again but quicker and more convenient. I must send and receive about 50 e-mails a day now. As for the fax, it's going the same way as the telex machine.

2. The World Wide Web. This is great for finding stuff! If you have an idea of what you want but don't know where to get it, the web is the place to turn. I predict it will become the medium the European consumer will use to find storage or self-storage in the new marketplace. The web has arrived right on time to raise the profile, create the marketplace and educate the consumer base. At a fraction of the cost of traditional forms of marketing, it is the new global Yellow Pages in one continually updated edition with no border restrictions. It should account for 10 percent of your sales regardless of whether you're a pioneer. If it doesn't, your prospects are "surfing" right by. One final note: Is your web address painted on the side of your building? It should be.

Your marketing medium and approach will be tantamount to your self-storage success in European markets. Investigate and use it wisely.

In addition to being a director of the Self Storage Association of the United Kingdom and Europe, Andrew Donaldson is the chief executive and founder for Active Supply & Design (CDM) Ltd. of Cheshire, United Kingdom. He is also the founder of The Self Storage Sentinel newsletter, Rent-A-Space Limited (now a multisite operator) and selfstorage.uk.net. For more information, e-mail [email protected]; visit www.activesd.co.uk.

Program Partners Shurgard With Independent Operators

ISS: We understand you have been meeting with independent operators at recent tradeshows. What have you learned?

Independent operators are keenly concerned about ways to improve their competitiveness and remain independent. They want to be able to compete effectively in their markets in terms of products and efficiencies, but they don't always have the resources to do so. Most of all, they want to maintain their independence.

ISS: What specifically are independent operators seeking?

Ways to enhance revenue and operate more efficiently. For example, independents want additional channels of distribution and customer contact. They also want better technology and management systems so they can make better-informed decisions.

ISS: Can the needs of these operators be met so they can remain independent?

Yes, there are a number of ways those needs can be met. Independents can seek providers of individual services, such as stand-alone call centers and software packages; but the quality of services varies greatly. A second way is through Shurgard's Preferred Partner program, which packages proven tools to enhance revenue, streamline operations, improve competitiveness and maintain independence--all at a price independents could never negotiate on their own.

ISS: What are the primary elements and benefits of being a Preferred Partner?

Preferred Partners are served by Shurgard's 24-hour, seven-day-a-week sales and service call center. When calls are made to an independent operator's locations after hours, or in a roll-over situation, our call center will answer with the name of the operator and provide current information on rates, available inventory, hours and even driving directions. Calls can be answered in the priority set by the independent, so sales calls can be answered before service calls. And customer-service issues can frequently be resolved over the phone, enabling on-site managers to assist walk-in prospects or on-site customers. Incidentally, we prefer to call it the sales center because our staff is specially trained to close sales. It is a strong revenue enhancer for us.

ISS: What about the Internet?

When a customer brings up the Shurgard website and searches by city, state or ZIP code, the name of the independent operator will appear with all of the information a customer might want. Units can even be reserved right online. Our website also contains a number of affiliated marketing programs that provide strong leads to Preferred Partners.

ISS: Can you give us an example?

One of our strongest affiliations is with AAA, and we market promotional discounts throughout the year to the 43 million members of that association. Preferred Partners can benefit from our national commercial-accounts sales team, which works with large corporations that require storage at multiple locations across the nation. These corporations tend to be long-term customers with excellent payment histories. Preferred Partners also benefit from the strong relationships Shurgard has formed with national cellular-phone and wireless companies that could be interested in leasing space on the properties of independent operators. The same applies to the nation's billboard-advertising companies.

ISS: How can your program help with operating efficiencies?

First, we offer management-reporting software that enables managers to analyze all aspects of their facilities' performance--from rates to inventory and costs--so they can make financially informed decisions. Second, Shurgard includes Preferred Partners in its group buying program. We have negotiated prices on a whole range of products and services, such as packing supplies, locks, credit-card processing and waste management, and Preferred Partners can enjoy those savings. Finally, Shurgard includes Preferred Partners in its mystery-shopper program. Once a month, each location will be shopped. Four times a year, they will shopped in person, and the other eight months, they will be shopped over the phone. The results of these shops will improve staff performance through better training.

ISS: Is this program a way for Shurgard to scout potential acquisitions?

No. This program is actually a poor way to scout around. Instead, we're looking to serve current customers who want storage where we do not have facilities. This program is the best way to meet that demand. It is a win-win situation for independent operators and Shurgard.

ISS: What is the price of the program?

The fee structure is a flat monthly fee, tiered according to the size of the independent operator's square footage, and a one-time set-up fee. I'm happy to discuss the details of the program with any interested parties.

For more information, contact Sunil Dewan at 800.873.8594.

Self-Storage in the International Arena

The first European self-storage facility was built in the United Kingdom in 1984, though the first self-storage facility in Continental Europe was built in Brussels at the end of the 1980s. At the beginning of the '90s, the first two French facilities were built. The first was built in Nice in 1990, the second was built in Paris in 1991. In Italy, the first facility was built in 2000.

Where Does Self-Storage Stand Now?

There are more than 200 self-storage facilities in Europe, with approximately 40 facilities in Continental Europe and approximately 190 in the United Kingdom. In Europe, more than 80,000 people use self-storage units to store their goods. In Continental Europe, 90 percent of the existing units are occupied. In the same area, the percentage of demand for business storage is 60 percent.

What Lies Ahead

The business sector is very profitable because it uses larger units and rents for longer periods of time. Small businesses, artisans, professionals and institutions in Europe provide great market potential for self-storage, and there is a high demand for commercial storage as a result. The demand for business storage is also due to the high density of businesses that lack a centralized storage area and face high rents. In Europe, small shops and businesses are typically spread throughout downtown and the suburbs. Renting shop premises to satisfy storage needs is becoming increasingly expensive. Small businesses have to contend with higher prices for smaller spaces, which explains why they find self-storage more convenient. The cost of self-storage units is insignificant compared to the price they would pay to rent or lease shop premises.

The demand for personal storage in Europe has a high market potential as well. Houses and apartments located in residential areas and downtown are usually small due to the population density. The European real estate market lacks flexibility. The demand for houses, flats and apartments exceeds the supply. Residential properties are sold and rented at very high prices, especially considering their small size.

Actual trends toward globalization, increased labor mobility and the search for a better lifestyle are changing Europeans' nesting habits. More people are moving to different countries and different areas inside their own country. More of them use self-storage to satisfy their moving needs.

The creation of the universal euro will make it easier for the self-storage business to develop a Europe-wide strategy. At the same time, the Internet is helping to promote the self-storage concept throughout the European public. It helps to support and sharpen people's receptivity to this new service.

In conclusion, Europe has the potential to develop a strong self-storage market. The total population living in Western Europe is 40 percent higher than that of the United States. To better understand the potential of the European self-storage market, one specific example can help: San Diego has approximately 2.5 million inhabitants and 200 self-storage facilities. The United Kingdom has the same number of facilities, but hosts 60 million inhabitants. Supposing the demand for self-storage units in Europe is only 50 percent compared to the demand in the United States, Western Europe should be prepared to build one facility for every 20,000 inhabitants. This means 18,865 new facilities should be built in the next 20 years--that's a rate of 930 new facilities per year.

Educating the Public

In Europe, the concept of self-storage is not as popular as it is in the United States because it is new to most consumers. Being a new concept, it requires a special effort to be understood. The best results are obtained through methods that get directly to the public: distribution of fliers; billboards on buildings intended for self-storage use; radio commercials; billboards on trucks and vehicles intended for self-storage services; direct mailing of brochures to professionals, businesses, institutions and families; and participation in major events related to the target market (local fairs, grand openings, etc.).

Special support is provided by the Internet. This new tool is very helpful not only in describing and explaining self-storage to the European public, but also in providing customers with additional services: online information, online booking, online space and rental estimates, online advice on moving and packing, online sale of packing materials, online truck and vehicle rental, etc.

The staff of a facility plays a major role in explaining the self-storage service to members of the public. Workers are responsible for answering any questions about the service and assisting customers. The sales team also plays an important role in educating the public. A toll-free number should always be made available to consumers.

How Many Challenges Do Foreign Developers Face?

Throughout Europe, people speak different languages, have different habits and cultures, and live in different environments. Developing a self-storage business in Europe requires taking these differences into consideration.

The self-storage service performed in the United Kingdom is very similar to that of the United States, but significant differences exist between Northern and Mediterranean European countries. With respect to architectural and structural matters, northern countries such as Germany are more focused on practical aspects. In these countries, the climate and environment are typically harsh and the demand is for sturdy buildings. In Mediterranean countries, such as Italy, the climate and environment are more mild. In these countries, self-storage service is more focused on amenities and comfort.

Legislation ruling the building sector differs from country to country. Planning permissions are subject to local rules. Plans should comply with local area rules for building.

With respect to promotions and communication, different cultures and languages require different approaches. Mediterranean cultures appreciate more direct ways of communicating (such as door-to-door promotion and other direct-marketing techniques), while Northern cultures are more oriented to indirect modes of communication (such as billboards and distribution of fliers through the mail).

European countries also have different financial systems. Despite the fact that European countries have unified their currency with the euro, differences still exist in the ways they manage their finances. When developing a Europe-wide self-storage strategy, these differences have to be understood and handled carefully.

In general, in order to develop a successful self-storage facility in Europe, a number of requirements need to be satisfied. It should include: a wide range of units in different sizes; a pleasant, clean and secure atmosphere; professional and technical assistance for customers; personalized insurance policies; efficient customer service; a toll-free phone number; and online assistance. To satisfy the demand for business storage, there are a few aspects that cannot be ignored: convenient prices; dry, safe units where papers and documents can be safely filed; 24-hour accessibility; fax and copy services; a flexible payment system; high security standards; and technical, professional customer assistance.

Approaching the European Market

The best approach to the European market is based on a deep understanding and knowledge of Europe and the differences between its countries. Each country should be approached as a unique and peculiar environment, and a dedicated marketing strategy should be developed. Self-storage facilities in different European countries should be managed as divisions totally independent from each other.

Cesare Carcano is a board member for the Varese, Italy-based Carcano Transport and Logistics Group (Carcano Logistica e Trasporti), which operates Casaforte Self Storage. The group has seven logistics platforms operating in Italian cities: Asti, Genoa, Lucca, Milan, Modena, Rome and Vicenza. For more information, visit www.selfstorage.it.

Talking Tongues

In the October issue, I shared in my letter about my experience living abroad in Siena, Italy during college. Although I won't say I was perfectly fluent in the language upon returning to the States, I did acquire a reasonable working knowledge of the native tongue. I wondered whether I'd ever again have opportunity to use it. Then, while attending the annual conference of the Self Storage Association of the United Kingdom and Europe back in March, I met an Italian gentleman whose company built the country's first self-storage and now operates facilities in Varese, Milan, Rome and Lugano.

I'm embarrassed to say, my Italian was extremely rusty and just about worthless to me. But his English was just fine, and he was generous enough to contribute an insightful article overviewing self-storage development in Europe. You'll read it on page 32.

Also in this issue, you'll read about the conquests and challenges met by Devon Self Storage in its experience developing and operating in France, Germany and The Netherlands. Though the company's leaders were skeptical when an Amsterdam site was proposed for its first overseas venture, doubts soon gave way to determination. Read the story on page 27. On page 34, one Australian entrepreneur shares insight on the pitfalls of European development and, on page 36, read advice on promoting self-storage to a public largely uneducated about the service.

With American developers such as Devon and Shurgard concentrating their efforts overseas, and European companies such as Access, Big Yellow, Safestor, Mentmore Abbey, etc., stepping up to the plate, we're seeing facilities sprout up rapidly throughout the United Kingdom and continental Europe. In response, industry suppliers are seizing the opportunity to distribute product throughout these unpermeated areas. Marketing efforts are set in motion to educate the European public and create product awareness. All told, shifting our focus toward European expansion seems to be the next natural phase in self-storage evolution.

To that end, our tradeshow division is hot on the heels of a premier overseas location at which to host a tradeshow and conference in the fall of 2002. Keep watch in the magazine and on our website for more details of this endeavour. And dust off those language dictionaries from college-courses past--you never know when they might be useful.

Happy holidays,

Teri L. Lanza
Editor
[email protected]

Landmark Interest Corp.

The history of Landmark Interest Corp. and its president/owner, M. David Boothe, began 40 years ago in the residential, multifamily, commercial and industrial construction markets. Seven years ago, Landmark's focus changed with Boothe's first self-storage project. Since then, the company's forte has been the construction of self-storage facilities.

Landmark, with an office conveniently located in Baytown, Texas, is a multitalented, multiservice construction firm with more than 100 years of construction experience. The company offers a variety of services in several divisions, from metal-building components to retrofit standing-seam roofs--including site-formed, one-piece roof panels for extended building widths.

The company's self-storage division offers proposed site layouts for maximum property use and complete engineered self-storage buildings. Projects include boat and RV storage, climate control, single- or multistory, and drive-thru. Landmark can deliver material or erected packages nationwide, including doors and insulation from multiple plants.

On a local scale, throughout Texas and Louisiana, Landmark offers additional construction services such as general contracting, construction management, and working with potential customers on negotiated projects as well as hard-bid construction. The company's turnkey division works closely with independent real estate agents on finding site locations and independent feasibility services to protect potential clients from building in areas that lack demand.

On design-build projects, Landmark works closely with the customers, architects and engineers to ensure a quality project that will function for years to come.

A part of the contracting business is staying on top of everchanging national and local code issues, the Americans with Disabilities Act and, in Texas, the Texas Accessibilities Standards Act. Landmark is familiar with work in all of these key areas.

The lifeblood of any business is its customer base. Landmark works closely with several repeat accounts and welcomes new business. The company's repeat clients are primarily upscale, "A-class" facilities offering many amenities. The base buildings are steel construction on concrete slabs, with alternate exterior finishes such as reverse-roll metal panel, stucco, brick veneer, CMU and insulated Rockwell.

Landmark's buildings are standard rectangular boxes or unique sizes and shapes, depending on the site layout. A variety of floor plans can be used to accommodate unit-mix demand. Single-story, multistory and drive-thru buildings contain climate- controlled as well as ambient units. Climate-controlled units are normally accessed via well-lit corridors with video surveillance, epoxy-painted floors, ceilings and individual unit alarms. Larger units are also used for office, warehouse, RV and boat storage, or covered parking.

Through market studies, Landmark has found amenities--such as extensive landscaping, wrought-iron security fencing and matching gates with keypad entries--attract potential customers. Well-marked buildings and wide concrete drives allow easy access to units. Finally, Boothe offers this advice: Business signs are a vital part of advertising in any business, but visible roll-up doors (whether operable or dummy doors) are the best way for a customer to recognize a storage facility.

Landmark is willing to work with clients in any way possible to provide the kind of service they will be proud to recommend to others. For more information about the company, site-planning assistance, quotations or other services, call 877.427.8085; visit www.landmarkinterest.com.

Jump-Start a Records-Management Business

There has never been a better time to enter the commercial records-management business. There are several factors at work that make this the precise time for such a business opportunity. But records management is not for the faint at heart. It requires hard work and capital to reach the intermediate goal of 100,000 cubic feet of box storage ($500,000 in gross annual revenue) in 30 months. The return on initial investment can exceed expectations, but it requires very careful planning and the right set of resources.

Why Now?

1. The future of the "paperless office" is questionable.

The paperless office is a myth. It has not and will not exist for a very long time. Most industry observers believe it could take many years or may never come to fruition at all. There are numerous technological and sociological issues at play in this concept. In the meantime, the rate of paper-records growth is enormous. In an article titled "The Evolving Commercial Records Center Industry," Michael Faber, certified records manager, wrote, "The 'paperless office' remains an elusive target for most companies and organizations ... The commercial records industry should continue to function traditionally for the next 12 to 15 years."1

2. There is still availability in 60 percent of the U.S. market.

Richard Reese, CEO of Iron Mountain, presented this year's keynote address at the PRISM International Conference in Bal Harbor, Fla. (PRISM is the trade association for the commercial records-management industry. For more information, visit www.prismintl.org.) He pointed out that in a study commissioned by Iron Mountain, it was confirmed only 40 percent of the U.S. market and 10 percent of the European market have been captured by commercial records-management businesses. The study also shows the industry should expect peak growth years for the next 10 to 15 years.

3. Industry consolidation has produced some key effects.

Iron Mountain, Pierce-Lehay, Recall and other records-management companies have purchased many of the largest commercial records businesses in the United States and major markets around the world. In fact, Iron Mountain merged with Pierce-Lehay last year to become the giant of the industry. This majority of the consolidation is basically over, although there will be more acquisitions in time. The consolidation has taken most of the competition from the market, leaving room for entrepreneurs to develop new businesses. Studies have concluded most business owners prefer to do business with local companies. The locals, therefore, have a key advantage over the international giant--as long as service levels are maintained in line with client expectations.

4. Paper-storage volume continues to grow.

Regardless of the impact technology will have on business as we move into the future, the pure mass of paper records is increasing every year. As Faber pointed out in his article, the number of tons of paper stock made into file folders increases every year (per the American Paper Institute), filing cabinet sales increase by 18 percent each year (per the Business Equipment Manufacturing Association), and the sales of paper-fed fax machines grew by 16.5 percent from 1998 to1999, and continuing increases are likely through 2004 (per the Associated Press). Next to nearly every PC are a printer, fax machine and copier--and people will continue to use them.

5. Disaster-avoidance issues are increasing.

The Sept. 11 tragedy has given additional cause to send more and more active records off-site. There has been a trend in many industries to take files typically considered active off-site because of the cost of storage and, now, because of disaster-related issues. As long as access to the records can be ensured, more commercial records centers will see active records-management opportunities.

I could go on about the reasons ensuring continued business for traditional records management, but neither time nor space allow. I must emphasize that businesses offering commercial records-management services will be required to provide high levels of service and use technology-related techniques. The industry has changed and delivery systems have improved. But this business opportunity is excellent for those willing to take the right steps. There are several requirements to meet the goals of this growing business.

Business Requirements

1. A full-time sales effort.

Records management is sold best using a consultative-selling method. It has a long sales cycle and requires diligence in the sales effort. One full-time salesperson who has no other responsibilities is absolutely necessary.

2. A sales-cycle process that works.

The sales method for selling records management requires managing 100 or more prospects through a seven-step consultative-sales cycle. It cannot be done manually to produce the results you want. The selling process leads the client through a method that can ensure a 75 percent close rate for those prospects that make it though the third step of the process.

3. Sales management.

Selling requires management--simple as that. An unmanaged sales process never achieves the results you expect. The problem lies in the fact companies typically can't afford a sales manager to oversee one salesperson. A new concept called the Distance Sales Manager2 allows for traditional sales management from afar via coaching, mentoring and closing assistance using an Internet-based tool.

4. Capital.

How much is enough capital? That depends on you and your current business circumstances. If you already have a self-storage operation or a moving and storage company, your capital requirements are far less than if you do a traditional startup. I have developed financial models for both scenarios. Either way, the return on initial investment is quite considerable and may even amaze the nonbelievers. This business is not easy. It requires diligence in sales and operations, patience and a great deal of management; but the returns are surprising.

1 Faber, M., "The Evolving Commercial Records Center Industry," The Information Management Journal, ARMA International, July 2001.
2 The Distance Sales Manager concept and process is a copyright of Amalgam Solutions LLC, a FileMan and FIRMS Services Resource Partner.

Regular columnist Cary McGovern, CRM, is the principal of FileMan and FIRMS (FileMan Internet Records Management Services), which offer full-service records-management assistance for commercial records-storage start-ups in self-storage operations. For assistance in feasibility determination, operational implementation or marketing support, or for questions on the FIRMS Sales Manager, call 877.FILEMAN, e-mail [email protected]; www.fileman.com.

Your Rivals: Friend or Foe?

Developing personal relationships with your competition may cause you to be conflicted. This is especially true if your entry into the self-storage business occurred after having particularly positive experiences visiting other facilities in your area. You may have felt like pioneers in your market; perhaps you were. Others in the business were then your friends. I want you to understand what active competition does to that mix. What was a friendly, open, "we're in this together" attitude somehow segues into a dog-eat-dog mentality.

People in agriculture experience a similar type of competition, but experience it much differently. They all grow identical produce, but none has any direct influence on the price any of them gets for their individual efforts. Thus, there is no reason for the animosity that signifies competitive behavior. Moreover, there is often regular cooperation between neighborly farmers--cooperative use of machinery, exchange of personnel, etc. The friendships are deep, enduring and can extend over generations. One of the laments about the passing of the family farm is the concomitant passing of that great way of life.

The Crucial Difference

But there is an important difference between the situation in agriculture and that of self-storage. While both are often commodities, in agriculture there is no chance the actions of any one farmer can alter the market conditions encountered by customers. Farmers and ranchers are, therefore, free to work openly with each other as well as state agricultural schools and county and federal extensions. Such cooperation has resulted in marvelous improvements in productivity.

And self-storage? In any local market, cooperation among facilities can easily result in price management, where operators control the prices or terms to be exacted on tenants. The laws allow only for distant relationships between rivals. They are not to have any contact with each other regarding pricing, increases, discounts or other competitive elements. Breach of such rules can result in Federal Trade Commission proceedings in which no sane person wants any part. Consider this riddle: If prices are identical among rivals, is that evidence of collusion or competition? You know how the government sees it. If challenged, you get to prove differently--at your own expense.

Togetherness Is Not All Bad

It gets more complicated. There are areas where industry cooperation is both needed--and dangerous. Self-storage operators share common problems. All facilities need state laws guarding them from responsibility for tenants' properties, illicit activities of tenants on-site, lien-processing standards, critical planning groups, etc. All of these legitimate problems defy solution without cooperation, since no political body will move without there being consensus from the industry. Associations are the usual vehicles for achieving political progress, but they have also been seen by the FTC as a hotbed for conspiratorial acts. The FTC is wary of the temptations facilitated through informal and social circumstances of association activities.

Say It Isn't So

The reality of the situation is more and more facilities are sprouting in the various markets, which reduces or eliminates the role of location in isolating and protecting your facility from straight competition--usually price competition. Your rivals do benefit from your loss. How can a friendly relationship survive a situation where your loss is reason for celebration on behalf of your "friends"?

A competitive market is defined by prospects. They become aware of having multiple options and shift into shopping mode. No longer do they appreciate good service at a fair price. They become preoccupied with getting the best deal. Does that make them bad people? No, it makes them normal. And your rivals? Are they bad people for responding to the behavior of prospects by lowering their prices and taking tenants that could have been yours? Of course not. They have families to feed, partners to appease and mortgages to pay. So what are your choices? The same as those of your rivals. You're in the same boat and must resort to the same tactics to garner tenants.

You and your rivals are subject to one other factor. You must give the prospect a basis on which to decide. If you are competing on price, you cannot stop at meeting the price of your competition, because your tenant would still have no basis on which to choose. You must lower your price still further, setting in motion the downward price (death) spiral. This is not a prescription for a friendly relationship with self-storage comrades.

Am I Overdoing It?

Do I exaggerate the effect of competition on members of the industry? In sports, members of opposing teams are often friends. It's only when on the field that there is aggression. But with business competition, the game never ends. Every day you are planning or executing a plan to keep your facility profitable. That includes doing what you can to keep it occupied.

Because self-storage markets are relatively small, you can regularly encounter your rivals on the street, at the grocery store or anywhere. Each time it happens, it's hard to avoid wishing the rival would just go away. Competition is the culprit in causing animus among otherwise fine people. While it may be good for society, it can be painful and destructive for any one supplier, whether an individual person or a business.

Your prospects and the government want you at swords' points with your rivals. Emotions run high. Straight price competition is often destructive to suppliers of commodity products. The only way to avoid it is to plan your business so you are not seen as the equivalent of the others; that is, you need to differentiate your offerings. That way you aren't directly competing with anyone. You have your niche and your would-be rivals have theirs.

Harley Rolfe is a semi-retired marketing specialist whose career includes executive-level marketing positions with General Electric and AT&T. He also owned lodging and office facilities for more than 20 years. Mr. Rolfe holds a bachelor's degree in economics from Wabash College and a master's degree in business administration from the University of Indiana. He can be reached at his home in Nampa, Idaho, at 208.463.9039. Further information can also be found in Mr. Rolfe's book, Hard-Nosed Marketing for Self-Storage.

Court Rules

U.S. District Judge Colleen McMahon's opinion in Herrington v. Verrilli (2001 U.S. Dist. LEXIS 10168) is more than a humorous telling of the travails of the Adams Organ, a huge church organ that spent more than five years in storage after being replaced by another instrument. This New York District Court opinion could have far-reaching and very favorable implications for self-storage operators in New York and across the nation.

After a short life in a New York City church, the Adams Organ came to rest in a storage building in Germantown, N.Y. The building owner agreed to rent street-level space to store the organ for $1,800 per year. No rental agreement was ever executed, but the arrangement was memorialized in a letter describing the terms of the rental. A key to the premises was also given to the plaintiff. Sometime during the first year of storage, the organ was moved by the building owner to a storage area below street grade and may have suffered water damage. Herrington brought suit against the building owner, alleging the organ was stored pursuant to a bailment agreement. The suit demanded the return of the organ in its original condition or money damages equal to its value.

Judge McMahon rejected the claim that a bailment was ever created. When the organ was originally delivered to the storage warehouse, the relationship was a rental of storage space and not a bailment. The court noted the letter stating the terms of storage described a lease of space rather than a bailment relationship. The plaintiff clearly shared control over the rented space with the building owner. There was no evidence that the building owner undertook any duty to monitor or care for the organ.

The judge then observed that a rental of premises could not be transformed into a bailment by later actions of the landlord, writing, "Tenancies and bailments are two separate and distinct legal relationships, and a contract cannot create both a tenancy and a bailment at the same time." Judge McMahon concluded the building owner may have breached the lease agreement, but he was not a bailee.

This finding is very important as the judge ruled landlords couldn't be changed into bailees by mere conduct. A landlord can breach a lease or be guilty of conversion of tenant property, but he does not become a bailee by such actions, even if those actions are wrongful.

Judge McMahon's ruling is just a U.S. District Court order interpreting New York property law, but her opinion gives important insights into the legal distinctions between the rental of a premises and the creation of a bailment. The legal relationship between storage operators and their customers is a recurring question. It is clear they are landlords when they rent a storage unit. Does this change when they exercise their lien rights? Do they become bailees when they deny delinquent tenants access to their storage space pursuant to state lien laws? What if property is stolen from a space that is overlocked?

Judge McMahon's ruling suggests the relationship is still landlord and tenant, and no bailment arises. If the storage operator acts in accordance with the state lien law, there is no conversion of goods and no breach of the rental agreement. And there is no greater duty of care for the goods while the storage operator has control over the storage space because of the tenant's breach of his obligation to pay rent. Judge McMahon's opinion could influence courts around the country. Self-storage operators involved in litigation with their customers should alert their attorneys to this opinion if the plaintiff's lawyer has made allegations that the self-storage operator is a bailee.

This article is based on another that appeared in the September/October 2001 issue of the Self Storage Legal Review.

D. Carlos Kaslow is an attorney in Berkeley, Calif., and is the founding partner of the Self Storage Legal Network and author of the Self Storage Legal Review, a bi-monthly newsletter covering self-storage legal issues. He is also general counsel for the national Self Storage Association. For more information, visit www.selfstorage.org.

Do You Have a Disaster Plan?

People don't generally enjoy anticipating things that could go awry--in their businesses, their personal lives or otherwise; but nothing demonstrated with greater impact the importance of a disaster plan than recent, tragic events in this country. Although your occupancy rates may be high and you are enjoying the fruits of your labor, it's never a bad idea to consider whether you are ready to face an emergency or disaster if one should strike at your facility.

Emergencies or disasters can occur in many forms. Some examples include fire, flood, tornado, hurricane, landslide and earthquake. Disasters also include arson, environmental contamination by hazardous waste and/or criminal activity. When a disaster strikes is not the time to decide who does what and in which order. During a disaster, stress runs high. Emergency authorities are in and around your facility, and life and property are endangered. Clearly, this is not the time to decide whether you should be "breaking all the rules."

The time to create an action plan is when you and your employees are calm and thinking clearly, when everyone can understand their responsibilities and know their duties. This will help avoid terrible mistakes that can compound an already disastrous situation. There is no doubt that, during an emergency, you will be forced to operate differently. The on-site staff, management and ownership should all know their responsibilities and the new rules that apply during the crisis.

This article suggests some things to include in your action plan. Not every suggestion is appropriate for every type of emergency or your particular number of employees. For those of you with on-site staff, management and even supervisory management, a disaster plan is critical to avoid chaos and mistakes, to save as much of the facility and your tenants' property as possible, and to comply with all regulations and requirements of your insurance policy.

  • You should stress to your employees that the foremost concern in any emergency is to ensure all people on the premises are accounted for and safe. Each facility has to develop its own policy as to whether personnel will attempt to provide any first aid or care for injured parties. Even being a good samaritan can involve liability, and this will vary from state to state. Under no circumstances should an injured person be left unattended, even if you do not provide first aid.
  • After accounting for all human life, you should attempt to preserve as much of your tenants' property and your facility as possible. The goal of property preservation must be balanced against the issue of endangering life, staying out of the way of emergency personnel and complying with whatever regulations are imposed by emergency personnel. Entering individual spaces at any time typically violates lease agreements that state that you will not enter anyone's space for any reason. It is, therefore, important to have a provision in your lease that states you will enter if it is necessary in an emergency situation.

For example, you are not going to enter a burning building to remove tenants' possessions; however, if there is a landslide or snow accumulation causing part of a building to collapse, and the authorities have determined it is safe to enter other parts of the building to remove property, you might be able to enter. Make certain managers or on-site personnel understand no human life should be risked--whether that of employees or tenants--simply to save property.

  • On-site personnel should have a list of people to call in the event of an emergency, complete with phone numbers. In any emergency, you'll want to contact the appropriate authorities immediately: police, fire department, life squads and hazardous-materials teams. In most communities, this can be done by dialing 911. If not, make certain these phone numbers are posted in a central location in the office. This list might also include the facility's attorney, facility owners and managers, facility employees who may be able to assist with the emergency, and the facility's insurance agent.

I recommend against notifying the insurance company directly because your coverage may have been pooled or split among various insurance companies. In that situation, it is necessary for all companies involved to be put on notice of a claim within the times required by their policies. If you notify one insurance company and not other pooled companies, you may forfeit coverage. Let your insurance agent handle this for you. You should also require your agent to notify you of what insurance companies may provide coverage in this situation so if adjusters call and ask to speak to you, you will know which ones represent your interests and which ones represent the interests of tenants.

  • Staff not on-site at the time of an emergency should be trained to report to the facility and know their jobs on arrival. You should have a list of responsibilities to be executed in order of importance--after the emergency has been discovered and the authorities have been notified.
  • When emergency personnel arrive, someone from the on-site staff should provide them a gate-access printout for the day. This will help them determine whether there are any tenants or invitees at the facility who are not accounted for. They will want this information before they go to work on the disaster issues, such as firefighting, earth stabilization and hazardous-material cleanup. Also make certain the gate is open so emergency authorities can enter the premises. Have a staff member posted near the gate to guide the emergency personnel to the appropriate area.
  • Make certain to move everything you can out of the way of emergency personnel before they arrive. If a building is collapsing next to RV and boat storage and it is safe to move the vehicles, tow them to another part of the property. Once the emergency personnel are in, close the gate. Unless it poses a violation under your state's statute, turn off the gate and suspend all access to the facility during the disaster.

You can post notice at the gate that due to an emergency, entry and exit can only occur by sign-in and sign-out procedures at the management office. Permission to enter will be determined on a case-by-case basis. The last thing you want is anyone other than actual tenants picking through the property pulled from the building. Further, you want to make certain you keep reporters and others seeking to survey the damage from coming onto the property.

  • On-site staff should use stickers to mark all property with the unit number from which it was removed. If it becomes necessary to store property in a different storage unit, it will then be possible for it to be identified by individual owners. This is an odd step to be taking at the time of an emergency, but the extra time spent will help keep items organized and make the tenants feel better about the actions you have taken to safeguard their property.
  • The manager must obtain an incident-report form from every person who was involved or in the facility at the time of the emergency. These forms should be ready on a clipboard to leave the office with the manager at the time of an emergency. The form should be dated and include the name, address and telephone number of the witness. Ask the witness to write in his own words what happened. Make certain the incident report is signed. Nothing is less useful when litigation begins than an undocumented recollection.
  • After the incident reports are completed, they should be kept in a safe place for management, ownership, the company attorney and insurance adjusters to review. The manager should interview anyone who has filed an incident report to see if there are any additional recollections not listed. The manager should be careful to note the names of the people he spoke to and what he was told. These recollections should not be added to the incident reports, but included in the manager's report, which should be completed as soon after the incident as possible. It is amazing how many details and other important facts escape memory within 24 hours.
  • All of this leads to a detail that is most often overlooked: safeguarding evidence. In every case of disaster I have been involved with, my clients have let the police take tenant records, incident reports, managers' statements, even video-surveillance tapes--all without keeping a copy. This can later hurt your position in litigation. In a recent fire case, my client turned the videotape of the surveillance cameras over to the police, who promptly lost the tape. This made it a much more difficult case for the client's insurance company to defend.

With the declining cost of technology, it is imperative to have a photocopier and a VCR with two decks in your office so a copy of evidence can be made and given to the police on demand. Once you turn your records over to the police, they are potentially lost forever. Your insurance company, attorney, management and ownership will need these records, so it is an absolute mistake to part with the originals.

  • One employee should be charged with the duty of determining all available, unaffected space on the property so tenants who are affected can be moved. If space is not available at your facility, spaces in nearby facilities should be located and held for those tenants. This type of preparation along with communication with tenants will go a long way toward avoiding litigation and restoring tenants' confidence in your facility.
  • Once the disaster is under control, one employee should be responsible for contacting all affected tenants. If they have not heard or seen about the disaster on the news, you will need to let them know their property was involved in the disaster, the condition of the property, where it is located, and whether, when and how they can get into the facility to inspect it. Also make sure you have a list of who is authorized to enter into the damaged premises. If possible, schedule tenant visits to the facility so you can accompany tenants to their property. Try to have staff available to help them move or remove property that can be salvaged.
  • If appropriate, temporary fencing or other security measures should be ordered and placed around the damaged building(s) to ensure other tenants are not wandering around the area picking through leftover items. Once the damaged area is secure, reactivate all appropriate gate codes.
  • Make certain employees know they should not under any circumstances speak to the media. Only one person from the company should be authorized to speak to the media, and that person should never admit fault or responsibility. No one should speak to any insurance adjuster or attorney without an owner's or manager's consent. Adjusters and attorneys representing tenants should only be granted access to employees, witnesses or records with the consent of your insurance company--and then only with your legal counsel present.
  • In the days following a disaster, it is important to communicate with all tenants to explain, in limited terms, what happened. You should avoid making explanations about how the incident occurred unless it is obvious (i.e., a tornado). You should avoid making any representations about safeguards you have taken to prevent the incident from happening again. Do not admit responsibility, liability or remedial action. For instance, if an air conditioner on a climate-controlled building caught fire, you would not want to say you are now having all of your air conditioners serviced. This is a fine line to walk because communications with tenants will help preserve the relationship, but admissions against interest can be a problem.

The worst thing you can do is keep tenants completely in the dark, because they will feel you are not responsive and will begin looking elsewhere to rent. You can tell them about the condition of their property and what arrangements are being made to care for or preserve it without discussing the event that caused the disaster. This is the kind of training your employees need before a disaster takes place so they are not making mistakes in communicating with the tenants afterward.

With a solid plan in place, any disaster will be handled more smoothly and appropriately. While we all hope there is never a disaster on our property, a much bigger disaster can be created in not being prepared. A well-trained staff will carry the day and allow you to be back in business much quicker.

Jeffrey Greenberger practices with the law firm of Katz Greenberger & Norton LLP in Cincinnati, which primarily represents owners and operators of commercial real estate, including self-storage. Mr. Greenberger is licensed to practice in the states of Ohio and Kentucky, and is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association. He is a regular contributor to Inside Self-Storage magazine and the tradeshows it sponsors. For more information, Mr. Greenberger can be contacted at Katz Greenberger & Norton LLP, 105 E. Fourth St., Suite 400, Cincinnati, OH 45202, or by calling 513.721.5151.

Turning Callers Into Visitors

Storage is a simple business, but it's not an easy business. It's simple because the steps are obvious. First, you have to generate phone calls from prospects. These result from a strong and well-executed marketing campaign. Second, you have to get those who call to visit your facility. After they visit, you must get them to sign a rental agreement. The fourth and final step is to get them to stay "forever" and tell all of their friends about you.

Four steps. Simple? Yes. Easy? No.

I'd like to explain how to convert a higher number of your callers into visitors. To see if you're improving, you're going to have to track your numbers. Based on my own research, I've learned the average conversion ratio in this industry runs a little less than 50 percent. That means less than half the people your manager talks to on the phone come into your facility to visit. Frightening, isn't it? Half of your marketing dollars are being wasted.

To understand how much each call is worth, calculate how many total dollars you spend on marketing in a set period of time and divide that number by the total number of calls you receive. If you do this over the course of a year, you'll get a fairly accurate number. I've seen the cost per call range from a low of $20 in a small market to as high as $100 in larger, more expensive markets. To stress the importance of each phone call, one of my clients has even taped a $20 bill to the phone receiver.

If you blow an opportunity with a customer over the phone, it's going to cost you money. For some of you, it will cost big money. That being said, there is only one goal for the phone call: to get people to come in and visit your facility. The goal is not make them think you're a nice person or that you have the best telephone technique; it's to sell them on visiting your operation. Don't get me wrong--you should be perceived as a nice person over the phone and have a pleasant technique, but for purpose of maximizing revenue, this is not the end goal.

If a prospect is calling you, he is probably calling your competition as well. To have the best closing ratio, you need to highlight your unique selling proposition (USP). If you don't have something unique about your facility, you'll need to come up with something. Without a USP, all you have to sell is your price.

It is also perfectly acceptable to bribe people to visit. What kind of a bribe do you use? Whatever generates the greatest number of visitors at the least cost. Some managers use what I refer to as a coupon system. They get local merchants to contribute a coupon on their products and services. A restaurant owner may agree to a two-for-one offer on dinner, for example. If you can collect a good number of coupons from your local merchants, you can put them together in a book and offer it to prospects. This has very low cost to you but a very high perceived value.

Let's make it even simpler. Assume each phone call to your facility is costing you $20. If you offered callers $10 in cash just for taking a tour, would this increase the number of visitors you received? You bet. Is this what I'm suggesting you do? Perhaps. It's the lazy person's way to entice people, but I have seen it work. If the average rental customer is worth $300, it would be worth it to give away $30 (the cost of the phone call plus $10 in cash) to get people to visit.

The most important thing to remember in converting callers into visitors is you must not give out your price before you let people know your USP. Here's how a typical call should go:

Customer: Hi, I'm interested in knowing how much you charge for a 10-by-10 unit.

Manager: Let me grab the price sheet here (stalling). Do you mind me asking how you heard about us? (It is essential you record the source of your calls.)

Customer: I got your name out of the Yellow Pages.

Manager: Could you give me an idea what you'll be storing so I can make sure you actually need a 10-by-10?

Customer: You can skip to the price, because I've stored the exact same stuff before and I know I need a unit that size.

Manager: Great. I'll give you the price in just a moment; but please remember, if you're shopping around, we're the only facility in town that gives people a crisp $10 bill just for coming in to take a tour.

Customer: Really?

Manager: Yup! We're so confident you'll like what you see and want to store with us, we're willing to pay you to come by and visit.

This example uses cash. You could come up with any number of items. Test a few to see what might work better. You might offer people a free pizza or movie tickets--anything you can think of to get them to come in and visit. In addition to the bribe, you'll want to present any other USPs. Instead of the line above, you could change the dialogue to: "If you're shopping around, we're the only place in town that has individual door alarms. That way we know when an unauthorized person has attempted to enter your unit. In addition, we're also giving people $10 just for taking a tour of our facility." Never give out your price before you give people your USP(s).

Be sure to track your numbers meticulously. This is the only way to know if a certain system is working. Most managers are resistant to tracking. They often look at it as busy work. You, as an owner, need to explain the "why" behind the tracking you're doing. This will help secure the cooperation of your manager or other employees. I also suggest auditing your facility to see if employees are following your phone directives. There are a number of companies that can help you in this area.

Your short-term goal should be to raise your closing ratio by 10 percent. If you can move your closing ratio from 50 percent to 60 percent, you'll be doing a great job and your occupancy rates and profitability will increase accordingly.

Fred Gleeck is a self-storage profit- maximization consultant who helps owners/operators during all phases of the business, from feasibility studies to creating an ongoing marketing plan. Mr. Gleeck is the author of Secrets of Self Storage Marketing Success--Revealed! as well as the producer of the only professional training videos on self-storagemarketing. To receive a copy of his Seven-Day Self-Storage Marketing Course and storage marketing tips, send an e-mail to [email protected]. For more information, call 800.FGLEECK; e-mail [email protected].