How Your Third-Party Management Company Should be Adding to Your Self-Storage Facility's Bottom Line

Third-party self-storage management companies provide a full gamut of services, but their real goal should be to increase your facilitys bottom line. How do they do this, and what should a self-storage owner expect? This article tells you.

March 25, 2011

5 Min Read
How Your Third-Party Management Company Should be Adding to Your Self-Storage Facility's Bottom Line

By Bryce Grefe

Whether youre looking to enjoy semi-retirement, are involved in other business ventures, or need help to make your self-storage facility more profitable, a third-party management company could be your answer. Comprehensive management companies provide a full gamut of services, including financial reporting, hiring and more. But their real goal should be to increase your facilitys bottom line. How do they do this, and what should you expect?


First and foremost on the list should be staffing. We know the person behind the counter makes or breaks a self-storage operation. Finding proper staff is difficult. The reality is you have a 50/50 chance of selecting a person appropriate for the position.

Through a series of hiring processes, a good management company should be able to improve those odds substantially. Starting with a telephone interview and following up with an in-person interview is a good beginning. There are other tools to improve the process beyond the gut-level reaction to the interviewee. Personality profiles are an excellent method to help determine if the candidate has a personality conducive to the job. Drug tests and credit and background checks further ensure the potential hire isn't an accident waiting to happen.


Once the candidate has been hired, the training process begins. Does the management company have a formalized program? Does it include onsite training addressing facility operation, phone skills and customer service? A comprehensive two-week training program should result in a manager capable of handling most day-to-day activities, but this is just the beginning. It takes approximately one year to get a new manager running on all eight cylinders. Constant training on various skills is an ongoing process; and in reality, it never ends.

Does the management company have an incentive structure for the sales manager? These incentives should be income-oriented, for the manager and the facility. Every dollar paid in a well-designed incentive will yield multiple returns in actual income to the operation.

Improving Income

Once youve hired and trained a good manager, what does the management company need to do to improve the bottom line? The income side of the equation should be the first area of attention, including the implementation of supply-and-demand pricing. If a prospect shows up at the door at closing time and wants a unit, you dont need to give him the same discounted price as someone who called and is shopping around. On the other hand, the Internet has made the market very price competitive, so you want meet or beat any price for unit sizes with excess inventory. Your management company should have a clear strategy for maximizing rental income.

Other income-producers a management company may suggest include late fees (5 percent of gross revenue) tenant-insurance administrative fees, the sale ancillary merchandise and administrative fees in lieu of deposits, just to name a few. These items in themselves won't pay your mortgage, but they all add bottom-line dollars and increase facility value.

The other side of the bottom-line equation is facility expenses, many of which can be controlled or reduced through bulk-purchase programs. Management companies usually get discount pricing on products and services such as retail merchandise, Internet hosting, website design, search engine optimization, Yellow Pages advertising, waste disposal and others. Property-insurance costs can often be reduced substantially through the use of a management companys bulk-buying power. Credit card processing fees can also be substantially decreased; this reduction alone can add hundreds of dollars each month to the bottom line.

Real estate taxes are another area where substantial savings can be derived. Although most management companies are not prepared to deal with the real estate tax process, they should have access to professionals who can provide these services without direct out-of-pocket costs to the owner. Income taxes and estate planning are other areas where a management company should have access to partners.

The Physical Plant

What about the physical self-storage site? Has the management company provided a detailed short- and long-term capital-improvement plan? Although many of these items require the outlay of dollars to effectuate, many can be implemented over time. Although painting or seal-coating may be an out-of-pocket expense for the facility owner, the increase in curb appeal and, hence, added tenants, can improve the bottom line.

Electricity is a significant operational expense that can be mitigated by the installation of high-efficiency lighting. These costs can often be offset through rebate programs from utility providers. Exterior security lighting is the single largest user of electricity at traditional self-storage facilities. LED wall packs can significantly reduce these costs. In my experience, Ive seen a two- to three-year payback on these types of capital lighting costs.

Your management company should provide a comprehensive business plan for increasing revenue and decreasing expenses for your project. It should address the entire spectrum of strategies needed to improve the facilitys bottom line. Not only is the plan important, the management company should have a proven track record at implementation. In addition, it should have access to a wide range of professional services to successfully navigate these economic times.

Yes, a professional management company will initially increase your operating costs. But with time and attention to detail, it will improve your bottom-line results. Your investment in an effective management company will provide a better return than your property.

Bryce Grefe is vice president and a principle in Storage Investment Management Inc., a boutique management company that manages 31 facilities representing more than 1.5 million square feet of self-storage storage, from the mid-Atlantic region through New England. SIMI's principals have more 75 years of successful self-storage management experience nationwide. For more information, call 781.335.1604; e-mail [email protected] ; visit .

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