By Cary McGovern
Over the past 22 years I have been asked many questions about how the records business works and what are the most important considerations. Like starting up any new business enterprise, it requires diligent research of the marketplace to assist in the development of a business plan. Although it is impossible to list them all here, the following are the most frequently asked questions about starting your own records-storage business:
1. What is the most important factor for maximizing my revenue?
Answer: The ceiling height of the facility is always the most critical component for storage revenue. The more cubes per square foot, the more storage revenue your operation will have.
2. How do I charge for storage?
Answer: The basis for storage fees is the cubic foot. Since boxes are all different sizes, the lowest common denominator is the cube. Usually there is a minimum box size of one cube, while odd-size boxes are generally rounded up to the next cube size for billing.
3. Is there a standard storage box that I should recommend and supply to my customers?
Answer: Yes, the letter/legal box has become the most predominant box in the records-storage industry. It allows for filing letter-size documents in one direction and legal size in the other direction within the box. Try as you might, you cannot control the size of boxes coming into your facility. It is common to get many different box sizes, including letter-size and legal-size (2-feet long) transfer cases into storage. These are very heavy and break quite easily and should be discouraged. You can change the percentage of these cases coming into your center by providing and selling the standard letter/legal boxes to your customers. This also presents a marketing opportunity since each box can be printed with your name and logo.
4. How can I measure my potential market size?
Answer: The rule of thumb for market analysis is as follows: Draw a circle depicting the radius of your planned service area. Determine the number of people that live and work in that area. Multiply the population by five. This number approximates the number of storage boxes in existence in that area. Divide by two, since some of the boxes are already stored and managed somewhere. The factor of two approximates the number of boxes that are typically not in records storage. Remember that this is only a rule of thumb and can vary greatly depending on your market, although it usually seems quite accurate based upon my personal experience in more than 100 communities in North America.
5. How fast can I expect to grow?
Answer: The first two years will be directly related to the aggressive nature of your initial marketing plan. The more aggressive, the better. Although it is possible to bring in 100,000 cubic feet of records during your first 24 months, it is somewhat difficult. (This is discussed fully in our start-up manual.) For years three through five, you can expect approximately 18 percent to 20 percent annual growth.
6. How do I determine the storage capacity for my planned facility?
Answer: This is an extremely complex question. The general rule for computing the floor space in any building is the square footage multiplied by the average effective ceiling height (below the fire- and building-code restrictions) multiplied by between 40 percent and 65 percent. This difference is rather wide since racking differences vary greatly, and the mix of open-shelf filing to box storage can also vary based on your marketing plan. Additionally, the use of mezzanines within your shelving grid can guarantee much higher storage density. The FileMan start-up manual discusses in detail the alternative methods for computing this essential part of your business plan.
7. Is it best to target vertical or horizontal markets?
Answer: The answer to this question depends greatly on your area's market demographics and the extent of your existing competition. Many commercial records centers specialize in vertical markets such as healthcare. Others offer services to a broad base of businesses.
8. What kind of vehicles do I need?
Answer: You may consider using a local courier service in the beginning. However, most commercial-records centers utilize at least one standard van for regular pick-up and delivery service. Large initial customer pick ups are commonly done using rental trucks from Hertz, U-Haul, Ryder or another truck-rental service.
9. Can I start-up a commercial records center from an existing facility regardless of the ceiling height?
Answer: Yes. If you have an existing facility such as a self-storage facility or a warehouse, you can start-up as is. If your ceiling height is low, you will not generate as much gross storage revenue, but it may be a good way to get your feet wet in the records-storage business. (For more information, refer to my column in Inside Self Storage, October 1998, entitled "Records Management and Storage With Little or No Start-Up Cost.")
10. What about software?
Answer: The most predominant software products made specifically for operating a commercial records center are O'Neil's "Record Storage for Windows" and Andrew's "Corporate Keeper." Both of these packages require an initial investment for software, hardware, set-up and training. It can easily exceed $20,000 to start. There is another alternative through FileMan Records Management. "FileMan" is a Web-based software product that allows you to pay per transaction with no initial software start-up cost required other than Internet access and a Web browser.
The records-management and storage business offers new opportunities for the self-storage operator and entrepreneur today. Now is probably the best time to go into the business within the last 20 years.
Regular columnist Cary F. McGovern is a certified records manager and owner of File Managers Inc., a records-management consulting firm that also provides outsourcing services, file-room management and litigation support services for the legal industry. For more information about records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, Abita Springs, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected] or Web: www.fileman.com.