April 2, 2007

4 Min Read

All self-storage owners must decide between self-managing a site or hiring a management company. How will you decide the best direction for your facility?

Many lenders and partnership agreements require an experienced management company to operate facilities they finance. The reasons vary, but most often a third party has more experience and will operate in the best interest of all involved. Lenders know a management company is in business to do just thatmanage well.

Management companies dont profit if the businesses they operate arent successful. They have a multitude of resources ranging from personnel recruitment and training, marketing, accounting, networking and, last but not least, the ability to save money by quantities of scale.

The role of management companies is to operate the business to its maximum potential and allow ownership entities to focus on other business ventures. Owners should still maintain involvement in operations, but this alleviates the day-to-day activities that run a site smoothly. With experience in operations and marketing, management companies have working knowledge of what techniques are effective; self-storage owners benefit from the experience directly, avoiding pitfalls and costly mistakes.

Fact vs. Fiction

Many potential investors have misconceptions that storage facilities are easy and inexpensive to build, and will more or less manage themselves with little overhead, yielding great financial returns. While this may have been true in decades past, its not that simple now.

Storage facilities have become a competitive real estate venture in todays market. It takes a great deal of time and experience to effectively compete. Management companies are often called by owners whove made the decision to run sites themselves. These owners believed their experiences in other businesses would help lead them, and they didnt need the expense of paying a management company.

In these instances, management companies are often called in to fix the situation. Make no mistake: No overnight miracle cures have been discovered to make up for lost momentum. It takes time, strategy and experience to turn around a failing project.

Remember, its more costly to revitalize a project than to get it right from the start. For example, it can take up to two years to dig out a reduced-rent or free-rent situation with customers, a scenario created by managers whove learned the hard way such strategies can backfire. Raising rents for existing customers can be especially difficult because they forget their initial rate was a move-in deal and resent the adjustment.

Management Fees

Management fees should be considered an investment instead of an expense. Most management fees are based on a percentage of the facilitys gross collections, with a minimum charged for new or struggling facilities that havent collected enough in rents for efficient operations.

The minimum fee hires the management company, which only begins to profit when occupancies and cash flows increase, making it a win-win situation for both sides.

The Hiring Process

Finding the management company to make the register ring at your site begins with an inquisition. here are the criteria and questions upon which to base your decision:

  • Background principles of the company 

  • Experience of personnel directly supervising daily operations of your facility including accounting 

  • Do the personality characteristics and experience of the supervisors command respect and credibility of those they manage?

  • How many facilities do supervisory employees oversee?

  • Are they actively involved in day-to-day operational issues?

  • How often do they visit sites?

  • How often do they communicate with onsite managers?

  • What are the policies and time schedules of reporting to you?

  • Do they provide policy manuals and other back-up support for onsite managers?

  • What are their hiring and training practices?

  • What other expertise do they bring to benefit the project?

  • Do they have any conflict of interest that could affect the management decisions of your facility?

  • Are there other fees assessed other than the minimum or percentage of gross? If so, what are they? How much? (Be specific!) 


One of the biggest challenges facing management companies is the inability of owners to let go and allow them to manage facilities and onsite personnel without interference. The situation can be counterproductive to the objectives and confusing to staff.

This can be avoided by direct communication between the contracted company and owner. Any directives, questions, ideas or changes an owner has should be discussed with the appropriate representative; that person would then direct management personnel.

Management companies must always provide facility owners with reports to keep them informed of progress. Reports can be weekly or monthly. Regular communication and meetings are essential in the overall success of the relationship.

Owners and chosen management companies should be realistic in their expectations, creating a mutual understanding of goals and objectives with a reasonable plan to achieve them. Through regular monitoring of progress, the hired company can make proactive changes when needed and communicate these to the owner.

In closing, the relationship between the ownership and management company should be conducive to achieving what both parties want more than anythingto make the project profitable to everyones mutual benefit. 

Cheryl Kelley is the president of G&C Holdings Inc.s Innovative Management Solutions, providing self-storage consulting, management and training services. For more information call 972.396.0511; e-mail [email protected]

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