What a difference a decade has made. Ten years ago, records storage was considered to be in opposition to self-storage. Since then hundreds, if not thousands, of self-storage facilities have entered the records-storage business. This article explains what’s happened to change the perception of records storage and why self-storage entrepreneurs are more aggressive about offering it than before.
More than a decade ago, there was a myth about the application of records storage in the self-storage industry: “Self-storage and records storage cannot work together!” Well, that myth has not only been allayed but shattered. Today, it’s common for a facility to have both services under the same roof.
For the most part, the “naysayers” have either gone away or become proponents. The self-storage industry has become more competitive, and overbuilding has occurred in several geographic areas, escalating the need for more ancillary services. Years ago, these involved the sale of boxes and locks and a handful of other items. Today’s ancillary services are unlimited—from wine storage and wine-tasting parties to car washes. However, nothing beats records storage as an ancillary service in terms of revenue per square foot.
Records Storage, Now More Than Ever
Storage space is the primary commodity of the self-storage and records-storage businesses. In addition, the cost of entering the records-storage business when coupled with self-storage is minimal when compared to that of entering a traditional standalone records-storage center.
Whatever your business plan is, you only have a finite amount of space to generate revenue. The self-storage plan involves renting square feet, while the records-storage plan involves renting cubic feet or “airspace.” Your self-storage revenue is increased through raising rates, but that’s hard to do in a flat economy. With records storage, it’s possible to have a five-year contract with businesses that have residual storage growth of 9 percent to 25 percent annually from existing accounts. There would also be rate increases on an annual, predetermined basis, including a self-renewing contract clause and charges for withdrawal to protect your investment.
Records-storage growth in North America exceeded 10 percent last year, and commercial records centers expect more than 10 percent growth again this year, even in a poor economy. PRISM International, a records-storage association, issued a mid-year report to members in 2009 showing growth throughout the industry. It indicated that records storage is generally “immune” to recession or market changes.
Annuity revenue is the key component of records storage. Records-storage revenue never goes down. There are a dozen or more companies who buy commercial records centers. Most are private-equity businesses that are actually buying permanent revenue. New startups provide an “estuary” for building volume in large and small cities. These businesses are nurtured to become plum purchases for buyers.
The records-storage industry has often been compared to the software industry. Software and records centers have the unique factor of guaranteed ongoing revenue―software because of the annual service fees of 18 percent to 22 percent, and records storage due to the cost of pulling out or changing vendors.
While there has been talk for years about the “paperless office,” it has yet to happen. However, the subject of digital records is complex.
Everyone expects records to be digital because everything around us is digital—music, videos, games, television and so on. What’s stopping the world from digitizing records? Most documents today are created digitally, so it seems easy to the uninitiated. However, we have not yet learned how to keep these records for long periods of time in a digital format without the chance of error, corruption, loss of integrity, or even loss of the document itself by accident or theft. We may know how to do it technically, but the actual practice is difficult, expensive and fraught with problems.
Let’s look at a hospital’s records for example. The president and the U.S. Congress are pushing for digital records as a way of improving healthcare and reducing costs. This is a grand idea, but hospitals have many types of records beyond medical records and X-rays. Some have exceeded more than a thousand types of records. Can you imagine the effort, time and cost it would take any hospital to complete the transition to digital just for medical records, let alone business records.
Other records-storage service opportunities are unlimited. It’s true that a commercial records business can include services from a menu of options. The four sister services—storage, imaging, destruction and data media—are just the beginning. The number of potential services within each of those categories is nearly limitless.
While records storage is a great business, it’s not simple. The cost of entry is inexpensive compared to self-storage and the exit strategy can be set at the beginning. The question is, what do you want to do with your business and how many revenue streams can you manage effectively?
Cary F. McGovern has been in the commercial records-management industry for 32 years. He has assisted more than 500 companies in 23 countries enter and excel in this unique business. He is a member of ARMA International and PRISM International, and is a speaker at numerous industry tradeshows and conferences. To reach him, e-mail [email protected]; visit www.fileman.com.