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Tips for Hiring a Third-Party Management Company for Your Self-Storage Business

Third-party management companies offer a number of benefits to self-storage owners who are looking to outsource their facility’s day-to-day operation. Get the lowdown on the advantages and drawbacks as well as some insight to choosing a provider.

March 8, 2015

8 Min Read
Tips for Hiring a Third-Party Management Company for Your Self-Storage Business

By Paulina Pineda

“Think of yourself as the pilot of a facility and the management company as the mechanic,” says Mel Holsinger, owner of Professional Self Storage Management LLC, which oversees more than 50 facilities in seven states. “You may be able to fly the airplane yourself, but can you take care of all the details that allow you to do so safely and efficiently?”

Some self-storage owners like to have “skin in the game,” so to speak. In other words, they want to be on—or at least near—the front lines. They enjoy the challenges that come with operating a successful facility. They may even fill in behind the desk regularly, walking the property, performing maintenance tasks or handling other responsibilities.

Then there are other kinds of storage owners. Perhaps the facility is just one of many properties a person owns. Or it’s owned by a development or real estate company that doesn’t have the desire or manpower to focus on the daily operation. Maybe an owner is new to the industry and lacks the expertise to properly manage the business. Some might just be stuck in a rut, unable to achieve new growth.

Fortunately, there’s an option that allows these owners to reap the rewards of their investment: a third-party management company. A management firm can provide solutions on several levels and may be an excellent alternative for the hands-off owner or one who simply wants operational support. Of course, you must weigh the pros and cons and ensure the company you choose is the right fit for your business. Here are some of the benefits and drawbacks to outsourcing a facility’s day-to-day operation and insight to choosing a provider.

Advantages

Third-party management companies offer a range of services, from overseeing day-to-day operation to all-inclusive management plans. They can bring a wealth of experience, branding, resources and economies of scale to the partnership. Some of the perks include formal hiring and training programs to ensure the highest-quality staff, comprehensive marketing programs, established branding, and proven programs to increase occupancy and profit.

“The owner can take advantage of a sophisticated revenue-management system that can forecast rates to maximize revenue systematically and quickly,” says Dale Payne, sales manager for Uncle Bob’s Management, the third-party management arm for Sovran Self Storage Inc., which owns and operates more than 500 storage facilities nationwide. “A team of analysts with access to a plethora of self-storage data interacts with the system, providing a series of checks and balances.”

Another advantage to hiring a management company, particularly for investors, is “more time to run your other businesses and less stress,” says Genevieve Elefante-Sigmund, president of Platinum Storage Group, which owns and manages 51 facilities six states. “It takes a lot of time, energy and expertise to properly manage a self-storage facility. Why not leave it up to the experts?”

Peggy Heimann, vice president of storage operations for Texas-based Blue Llama Storage, says management companies also know how to handle the “nuts and bolts of the business.” It makes sure staff is up-to-date on lien laws and knows how to assess risk management as well as tackle other daily challenges. “Established management companies also have collective buying agreements with call centers and vendors and can bring those resources to a [new] owner,” she adds.

Another pro of hiring a third-party company is an improvement in results, says Michael Haugh, president of Absolute Storage Management Inc., which manages 65 properties in 11 states. The company can assure owners their company’s financial performance is being maximized by lowering expenses and strengthening Internet marketing, he says.

Having someone on your side and working toward a common goal can also be a huge boon. “When you hand over management of your facility, it’s a team effort. The management company can be a great source of information for the owner, and the owner can also be a resource for the management,” Elefante-Sigmund says.

Drawbacks

There are also some potential disadvantages to allowing a third-party firm to run your company. Some owners, particularly those who’ve been hands-on, might feel like they’ve lost all the decision-making power. But this concern is often unwarranted.

“The owner remains the final decision-maker in capital expenditures that are suggested and prioritized by the management company; the management company controls the daily operations. We need that autonomy to effectively run the business for the owner,” Payne says. “We do provide a liaison between the owner and management when concerns or questions arise, so the owner has a voice and a platform to address any issues.”

There can also be a lack of trust in the beginning, even if an owner thoroughly vetted the management company. “It takes time to build trust [with] the company that’s managing a high-value asset,” Elefante-Sigmund says.

Others may not feel comfortable rebranding their stores, which is often a condition of hiring a third-party management company. The new partnership could also lead to other changes for the business including hours of operation, software, new technology such as call centers or kiosks, property upgrades, and staffing.

In addition, owners are often concerned about what’ll happen to their managers, particularly those who’ve been with the company for a number of years. The majority of management companies will attempt to retain existing staff as long as it’s beneficial for all parties. “We review current staffing and make decisions on who will be running the store on a daily basis,” Payne says. “Depending on what we feel is best for the success of the store, there may or may not be a change in store personnel.”

Most management companies will offer the current staff training and an opportunity to assimilate to the changes. “We typically will give a manager 90 days to adapt. Many times, they do adapt to our culture,” says Brad North, CEO at Advantage Consulting & Management, which manages 10 facilities in the Midwest and Southeast United States. “Typically, our owners are educated on what the culture is like and what they can expect from us. If we don’t fit what they’re looking for, it’s important they know that on the front end.”

The cost to hire a management company is often a huge concern as well. Most companies charge about 6 percent of a facility’s gross revenue in addition to a start-up fee. This percentage may be higher for stores that gross lower revenue or lower for those that produce more. While the price tag may seem excessive, owners should consider the total cost of running the business themselves, factoring in overhead items such as staffing, payroll, online marketing, property maintenance and more.

“We always develop and review a detailed budget with a prospective owner. This eliminates any surprises and highlights where we can either save on costs or expect improvements in revenue,” Haugh says. For the partnership to be successful, an owner must be agreeable to let his new partner take the lead. “You have to willing to give up control of the asset—personnel and marketing in particular—for the third-party operator to execute its strategy,” he adds.

Choosing a Provider

When you consider third-party management, the cost of the service should be considered, of course, but it shouldn’t be the deciding factor, according to Payne. “What a storage owner has to really look at is the cost of not hiring a management company and trying to compete at the same level as larger companies with greater resources and a stronger Internet presence.”

Owners who’ve tried to outsource and had a bad experience might be hesitant to take the leap again, Heimann says. “That company did enough damage that they won’t want to consider hiring another company. Don’t let that stop you. There are great management companies out there.”

Thoroughly research any management company you consider. “Sit down and talk with the management company, see some of the properties they manage, and get a good understanding of their management style and culture,” North advises. “Hire a management company that understands sales, marketing, operational efficiencies, customer service and training. Some management companies are very operational-driven, but not sales- and marketing-driven.”

Consider what the company can provide that you can’t do or may not be able to do cost-effectively on your own, Payne says. “Make sure the management company can deliver an increase in revenue and value to the property that surpasses the costs to bring them on to manage operations. Most companies will host a presentation of their operations. This is one thing I highly recommend for anyone considering a full-scale service offering.”

Your relationship with a third-party management company should be a partnership, where trust and respect are established. Your new partner should remain transparent and open to discussion on every aspect of the business. It should never be a battle for control, but a team working toward the same goals.

“It’s like adding an additional team member to the roster,” Elefante-Sigmund says. “It’s a symbiotic relationship where both parties benefit from helping each other.”

Paulina Pineda is a senior journalism major at Arizona State University (ASU) in Phoenix. Her emphasis is print journalism with minors in “Spanish for the Professions” and history. She recently interned as a daily wire correspondent in the Washington, D.C., bureau of ASU’s Cronkite News Service and hopes to find her way back to the nation’s capital after graduation. To reach her, e-mail [email protected].

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