Efficient, successful operation of a self-storage facility requires a lot of work. As an owner, you’re faced with many challenges as you aim to stay ahead of the curve. Choosing to hire a third-party management company can help you maintain—if not exceed—the pace of your competition. It can also provide peace of mind in knowing your business and employees are well-supported.
If you’re interested in outsourcing your facility management, here are some things you should understand about how it works and what to consider when hiring a partner.
A Team of Experts
A third-party management company is a team of experienced self-storage professionals who provide independent owners or investment groups with a comprehensive set of business-planning tools. It uses a variety of systems to oversee day-to-day facility operation on your behalf.
A management firm can be small or large, regional or national, and can provide a range of services. These include but are not limited to legal and human resources, online and offline marketing, revenue management, and staff hiring and training. All these offerings maintain a focus on increasing revenue and net operating income (NOI).
There are many reasons you might hire a third-party management company, including your own level of industry experience and availability to manage the business. One of the main benefits is the freedom and relief of not having to handle the daily challenges of the business. A strong partner will also help you drive revenue and increase asset value.
There are some differences in how third-party companies work, however. Some are small with a family feel while others are large and more corporate, possibly even a real estate investment trust. Some will require you to rebrand the business, while others allow you to maintain your own identity. You’ll need to determine which kind of approach best fits your needs.
The goal of every management company is to create value for ownership while lowering expenses. An experienced firm understands the levers that drive the business and uses resources to which most independent owners don’t have access. Many can provide an economy of scale through the power of group buying to lower expenses in areas such as online marketing, health benefits, general liability insurance, credit card fees, payroll expenses and much more. All this can be accomplished while yielding strong revenue and NOI growth.
The Owner-Partner Relationship
Your role and relationship with the management company depends on your preferences and the type of partner you choose to hire. Some owners prefer less communication, satisfied with quarterly meetings or updates. Other like to speak with the management team more frequently. A well-structured firm will work around your inclinations so you can be informed when and how you’d like.
How should you evaluate a potential partner? Create a list of factors that are most important to you, focusing on your plans and goals for the business. Once you have your list, write questions that’ll help you assess the company’s ability to meet those objectives. For example, you might ask:
- Can I keep my current branding, or will I need to rebrand under your company name?
- What types of reporting can/will I receive and how often?
- How will you communicate with me?
- How will you handle my existing employees during the transition?
It’s also vital that you understand the company’s fee structure, what’s included as part of those fees and what’s considered an add-on service. Make sure you ask every vendor the same questions, so you’re ultimately comparing apples to apples. Thorough due diligence can save you from misunderstandings and additional costs.
The Price Tag
The cost to hire a third-party management firm can vary. However, the industry standard is 6 percent of total business revenue. Still, this can be misleading and an area in which it’s critical to communicate with the management firm. You need to ask what exactly is included in these fees. Sometimes the percentage will roll up to 10 percent or more after adding all the pass-through costs. Find out what’s include and get it in writing.
Choosing the right third-party management company for your self-storage operation is an important part of your facility’s long-term success. Whichever type of company you choose, make sure it’s in sync with your goals and needs. Look for a responsive partner and have a clear understanding of the agreement between you. If possible, solicit insight from the firm’s existing customers to gauge their level of satisfaction. This will help you further identity if the company aligns with the goals for your business.
Christina Rita is vice president of operations for StoragePRO Management Inc., an independent management company specializing in self-storage. Founded in 1975, it manages more than 80 properties in eight states. For more information, call 877.915.7806.