Self-storage managers, did you know you’re running a multi-million-dollar business? You’re the voice and face of that operation and, as such, you hold power to make or break it.
Being a facility manager is no longer about being the caretaker and picking up trash. It’s about being proactive, closing leads and hitting the numbers. As the industry becomes more competitive, we need managers who can drive the business in the direction it needs to go. That hinges on your understanding of cash flow and how your day-to-day decisions affect it. Let’s look at ways you can positively impact the bottom line.
The most important number to most storage owners is occupancy. We want tenant locks on doors, as this usually means money in the bank! But as a manager, you sometimes need to discount the rental rate to close a deal. Let’s talk about some common rental decisions and how they can affect the bank balance. We’ll pretend our 10-by-10 rate is $100, and we charge a $20 admin fee. When trying to close a rental, we have a few choices.
$1 move-in special. With this offer, the most we’ll lose is $99. It’s a good deal if the tenant would have gone to a competitor. If your average length of stay is a year, then you’ve given up $99 to earn $1,101, which is worthwhile. However, if the tenant is already prepared to sign the lease, offering a special is just giving away money for no reason. A move-in discount isn’t a reward for customers you like. It’s a way to close the deal for someone who’s on the fence.
Waiving the admin fee. I’m a big fan of waiving one-time fees instead of giving away rent. It’s a single reduction in cash instead of a monthly one. If we waive the admin fee, we only lose $20.
Giving a free lock. Most locks cost the storage operator $4 to $8. I would gladly give away $4 to make $1,200 over the lifetime of the tenant’s stay.
Dropping the rental rate. When we make it all about price, it’s all about price. Great managers sell on benefits instead. Let’s say we rent a unit for $90 instead of $100. We’re losing $10 every month until we raise the tenant’s rate, which may not be for a year. This creates an annual loss of $120. If you want to get fancy and apply a 7 percent capitalization rate on that amount, it’s $1,714 in facility value. Renting units at the highest possible price should be your main goal. Everything else helps feed it.
Waiving Late Fees
Once you rent the unit, keeping customers happy is critical to maintaining a stable property. One challenge to this is late fees. No one likes to pay them, which makes enforcing them one of the hardest parts of your job.
Your owner should provide guidance on when it’s OK to waive late fees and to what limit. Some owners don’t want you to waive even $1, while others want happy customers by any means, even if it means waiving $1,000 in late fees each month.
Just remember, you can provide great customer service without giving away money! You can be sympathetic to a customer’s situation while upholding your company policy. Explain the late-fee policy again so there’s no confusion, and then offer to sign him up for autopay.
Think about it this way: To waive a fee, would you be willing to take the money out of your pocket and put it in the company’s bank account? Your owner is paying bank loans, property taxes, flood insurance and your paycheck. Keep this in mind the next time a tenant asks you to waive a late charge.
Hand-in-hand with late fees is collections. A good manager teaches tenants to pay on time, every month, and doesn’t give much leniency. When you start bending the rules, you’re asking for trouble. I’ve heard managers say, “Rent is due on the first, but you have until the fifth before we charge extra.” Guess what? They just taught their customers to pay on the fifth.
It matters how you handle rent payments, late fees and collections, and how you discuss them with tenants. Your actions teach them how to treat the business and tell them how seriously you take your responsibilities. Being firm about policies will make your job easier and your boss much happier.
Knowing When to Spend
As a good self-storage manager, you must know when to invest money in the business. I once knew a manager who wouldn’t perform maintenance on the golf cart because he didn’t want to spend the money. This was harmful to the business because it forced customers to walk around the property rather ride in safety and comfort. Another manager ran out of locks and didn’t buy more because she felt she’d spent too much that month. But we make money reselling locks! One manager wouldn’t stock up on supplies in advance, which inevitably led to last-minute store runs. This left the site unmanned, plus the products cost more that way.
It’s your job to keep office supplies and retail shelves properly stocked. You also have to keep up on facility maintenance. Knowing how to spend money to make money is the mark of a good manager.
The self-storage industry is getting more competitive, which could lead to lower rental rates. That means fewer dollars going into the business bank account, so each one counts. Keep this in mind when making decisions about discounts, late fees, collections, and purchases or repairs. There’s a phenomenon called “other people’s money” in which we’re bolder when we’re playing with money that isn’t ours. Be aware of this and make the best decisions possible for your facility.
Magen Smith is a former self-storage manager turned certified public accountant (CPA). Her company, Magen Smith CPA LLC, helps storage operators understand the financial side of their business. Services include monthly financial management, bill-pay functions, revenue management and strategy. She also offers a curb-appeal checklist available for download and has created an online revenue-management course complete with checklists, cheat sheets and guides. For more information, e-mail [email protected]; visit www.selfstoragecpa.com.