Developers with existing self-storage assets and plans for diversity in services can find no better model than nontraditional records management, which can be adapted to a low-cost model with little or no new capital and very low manpower requirements. A recent calculation by informed industry sources estimates there are 40 million records-storage cartons in existing self-storage facilities, which may be a low number. A box averages 1.5 cubic feet, which means there are at least 60 million cubic feet of records stored in passive self-storage.
AS A SELF-STORAGE OWNER, YOU HAVE THE OPPORTUNITY TO PAINLESSLY convert existing storage with single-month contracts to active records management with permanent revenue. Over the past six years, many self-storage operators have successfully provided these services with simple systems, and little or no new capital or staff.
Self-storage developers and entrepreneurs have an amazing business opportunity in their reach. If you are in a startup mode or have an existing facility, you can leverage your existing assets into a companion business that will add value and improved revenue to your existing business plan. If you have at least one full-time employee, you already have the primary components of a nontraditional records-management business: storage space, a site manager, a computer system and existing clients. Let's take a look at each one and how nontraditional records management works:
- Storage space--Existing storage units are simply and easily converted to rental by the cubic vs. square foot. The addition of standard storage racking in a predefined design is added one unit at a time. Racking can be leased or purchased and depreciated.
- Site manager--You must have at least one employee to make records management work. That employee becomes responsible for coordinating the outsourced resources you need, selling records-management services across the counter, contracting clients and billing.
- Computer system--Your present computer system can be used for records management as well. There are several records-management software packages designed for use in self-storage operations.
- Existing clients--Some of your existing clients already have business records stored at your facility. A simple conversion-marketing plan can migrate them from monthly passive storage to permanent active storage.
Nontraditional records management uses a simplified marketing approach. These ingredients lead the prospect through the decision-making process without a pushy sales pitch. The ingredients include:
1. A training process for your site manager, usually an hour, including a reinforcement video.
2. A step-by-step process manual.
3. A flip-card marketing presentation with a script that leads the client to the correct choice.
4. A simple cost-benefit sales card.
5. A brochure listing the services and fees.
6. A simplified records-management agreement that protects you and locks customers in as permanent clients.
7. An outsource resource guide.
The nontraditional revenue strategy is quite different from the traditional records-management model. The storage and service revenue components are viewed from a different perspective:
- Storage revenue--Storage revenue must be viewed by examining yield rather than price per cubic foot. The difference between yield and price can be huge. The revenue strategy starts with selecting an appropriate minimum monthly fee for the records- management storage. As a rule of thumb, the minimum should be approximately 75 percent of the 10-by-10 storage unit rental. For example, if a 10-by-10 earns $100 per month, the records-storage minimum should be $75.
- The average self-storage unit may contain about 100 boxes or 150 cubic feet of records. Even if your contract states a charge of 25 cents per box, the client must meet your minimum. On a $75 minimum, each box yields 50 cents. That's twice the yield of the contracted fee. In addition, about 5 percent of boxes are out of storage at any one time, but their rent must still be paid. This yields up to an additional 5 percent for each storage unit. Finally, it is a common industry practice to round the cubic footage of odd-size boxes to the next cubic foot, e.g., a 1.5-cubic-foot carton would be charged as 2 cubic feet. These three ingredients may improve the yield to as much as 75 cents per cubic foot.
- Service revenue--Your first marketing approach should be to identify clients with low service requirements. For those with higher requirements, outsourcing is easy. Examples of outsourced services include courier, retrieval and indexing. In nontraditional records management, it is advisable to offer only a handful of services and outsource them all with a residual profit.
- Box-sales revenue--One of the added values of providing records-management services is you will get most of the box sales. As you already know from your self-storage experience, boxes are high-margin items. You should sell high-quality records-archive boxes that can be purchased in relatively low quantities.
Revenue and Volume Potential
Many self-storage owners have exceeded their revenue and volume expectations when converting to nontraditional records storage. Some have moved their business into a more traditional model as they grew. Others maintained the simplicity of the nontraditional model. The choice is yours. The results will be improved revenue and product diversification regardless of which you choose.
Regular columnist Cary McGovern, CRM, is the principal of FileMan Records Management, which offers full-service records- management assistance for commercial records-storage startups, marketing assistance, and sales training in commercial records-management operations. For assistance in feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail [email protected]; www.fileman.com.