Top Five Ways To Boost
Your Bottom Line

No matter how friendly the service, how accurately the paperwork is done, or how sparkling clean the property, no owner can afford to keep a manager who doesn’t run a profitable facility. In fact, the primary measurement of a manager’s value to the business is to what extent they have maximized income. Scores of compliments from customers and even high scores on mystery shops won’t make up for a manager’s inability to bring in the money.

Fortunately, there are surefire ways to take care of your store’s bottom line. Follow these five guidelines and you’ll be a hero to your owner or operator.

1. Increase occupancy through maximized marketing.
The main source of income at your facility, of course, comes from renting storage space. Empty space means there is potential income that is not being collected on a monthly basis. In essence, having unoccupied units is somewhat like burning money. Before a customer can rent a unit, however, something must compel them to call or walk into your facility. How will they know you’re there? That’s where marketing comes into play.      

Lynn Prather, president of Sound Storage Management, Inc. in Everett, Wash., says her company has recently made a huge effort to analyze their marketing efforts. “With increasing competition, it’s important to make sure every advertising dollar is spent wisely,” she says. The company’s efforts include interactive Web sites with virtual tours, optimizing their position on the Internet, and surveys and calls logs to track what generates business.

With increasing results from the high-tech tools the company is now employing, Prather says they are moving away from using Yellow Pages as a primary advertising media. What is most important, however, is to track what works best in your market. The bottom line on advertising dollars is the cost per lease of each effort. The aim should be to bring in new customers at the least possible cost. 

Susan Head, vice-president of operations, sales and marketing for S & W Property Management, LLC, says using call centers can reduce expenses, control receivables, sell more retail, sell services, and allow your management team to maximize their marketing efforts. S & W has their own call center called Phone Advantage. Call center representatives are often highly trained and effective sales people.

Sales is another critical aspect of increasing occupancy. Marketing efforts that are highly effective in bringing people to the facility are futile if the manager cannot close the sale. Hence, many operators invest in extensive sales training for their employees. 

Occupancy is key, but a word should be said regarding occupancy rates that are too high. The old rule in real estate is that you never want to be 100 percent full,” says Charlie Fritts, COO of Stillwater, Minn.-based Storage Investment Management, Inc (SIMI). “That is an indication your rents are too low. It would also place you in the position of not having anything to further to rent, meaning you will turn people away.” 

Carol Krendl president of Lodi, Calif.-based SkilCheck Services, Inc. agrees. “They need to track the ‘economic occupancy,’ which is the dollar deposited divided by the potential occupied rent,” she explains. “Many stores are over 90 percent occupancy, but they are only depositing as if they were 80 percent.” The way to fix economic occupancy is by raising rents for all customers to the standard rental rate. This brings us to what is perhaps the most important bottom line booster—keeping rents as high as the market will bear.

2. Raise rents.
It is all too frequent to hear a manager proudly announce that their facility hasn’t raised rental rates in several years. While this is undoubtedly a delight to their customers—the same managers will often boast 100 percent occupancy—it is not the way to professionally manage a self storage property where bottom line profits are key. 

“Instead, it is better to adjust your board rates higher as your occupancy climbs,” says Fritts. “Like the hotel and airline industries, the fewer they have of something, the higher the cost. Storage rates should move around. Setting a rate once a year and not adjusting it based on demand and occupancy is leaving money on the table.”

Fritts says discounts should be treated likewise. “Turn them off and on the same way. I once shopped a facility during a market study and had to wait while the manager completed a rental. After that new tenant walked away, the manager told me with pride that three months ago, the owner told her to discount 15 vacant 10-by-20 units by one-third. She was so happy to announce. ‘My boss will be so proud I just rented the last of those units!’ Now they had rented all 15 vacants by offering the discount, resulting in the same income they would have had from renting 10 at the regular rate—and they now had no more 10-by-20s to rent!”

Catching on? It would have been much more beneficial to offer the discount only when price was a decision factor in the rental. “Never, ever offer the first month free!” Fritts adds. “It’s foolish; where else can you go and get the first month of anything for free?”

Fritts says it is also a concern when a facility has a poor unit mix (too many or too few of certain sizes) and attempts to create demand by cutting prices. “Folks, if you have 70 5-by-5 units but can only rent 50 percent of them, you are not going to rent more by cutting your price. You need demand to rent space. Try doing something else like converting them to larger units that are in higher demand.”

“Raising rents more than once or twice a year is a relatively new concept for self storage, but it is very effective,” says Prather. “An example of a success story using this technique involves a 10-year-old facility, occupancy consistently in the high 90 percent, and few units to rent. The first year they began to raise rates to match the demand, they had a 14 percent jump in income.”

Anne Ballard, president of Smyrna, Ga.-based Universal Management Company, says it’s important to manage both street rates for new rentals and contract rates for current customers. “Managing these structures and processes separately allows for maximization of profits by dealing with each size code’s rate separately for the street rates,” she says. “We use the ‘Rental Activity’ report from SiteLink to do this quite easily. This is based on that size code reaching 90 percent or higher occupancy and/or having three or less of that type available, and then boosting the rate upward.”

Raising the street rate in this way doesn’t affect their current customers, so Universal performs that process separately. “For contract rates, we print a report that shows the number of days the rate has been unchanged,” Ballard says. “We go to the back of the report of the oldest customers, and for all those that are 300 days or more at the same rate, we start the rent increase letter process.”

Fritts says he has heard operators say they never raise rents because some people move out if they do. “A well-timed and prudent rent increase to existing tenants will almost certainly result in more income, even after a few vacate,” he says. “Tenants will generally stay as long as they need storage and will tolerate reasonable increases.”

3. Reduce expenses.
If your economic occupancy is high, you can still contribute to bottom-line profits by reducing your operating costs. These costs include utilities, marketing and advertising costs, facility maintenance, business insurance, payroll, and several other items. 

“In self storage, there are some fixed costs you can do little about, but it’s wise to keep a rein on consumables,” says Prather. “Our goal this year is to reduce Yellow Pages costs substantially. After analyzing which of our marketing efforts are most effective, we discovered that there are many less costly methods that bring us business.”

Fritts says his preferred method of keeping expenses under control is to refuse increases. “Simply tell vendors that increase their charges, ‘Sorry, but I refuse your increase. If you want to keep my business, you cannot charge me more,’” he says. “Try it. You may be surprised at how well it works.” If you can’t get the increase waived but still want to stay with a particular vendor, you may be able to negotiate having the increase deferred for six months. The best way to proceed is to look at each expense, even those that are “fixed,” and ask yourself how they might be reduced.

4. Reduce delinquencies.
High delinquency rates can have a great impact on a facility’s bottom line. Not only is the amount of these uncollected rents missing from each month’s income, delinquencies cost employee’s time. Moreover, a unit sold at auction seldom brings a sale price that compensates for the lost rent.

There is no pleasant way to do collections. The key is to make calls early in the process—frequently and consistently. Fritts suggests that, for repeat offenders, once you’ve cut the lock in preparation for an auction, you might consider making a deal in lieu of the lien sale. “Try suggesting they pay you in cash for the back rent and you will waive the late fees,” he says. “In turn, they must vacate the same day. Better to collect $300 from the tenant than to sell the space for $50 at lien sale.”

5. Sell products and services.
You can also increase income by selling more than space. This include services such as truck rental and safe deposit boxes. Some services are considered “giveaways” by many operators, while others gain income by charging for extras such as 24-hour access and package acceptance.

Retail sales can add a tremendous boost to a facility’s bottom line. Although boxes, locks, and packing supplies may first come to mind, operators have had success with many other items as well. “Success in retail is very dependent of the location and market,” Prather says. “We stock RV and boat supplies at our sites that specialize in RV/boat storage. Occasionally, a specialty item will come out that does well at certain of our sites—Forearm Forklifts come to mind.”

Krendl reports that a couple of her company’s stores do $5,000 a month in ancillary sales. That’s a sizeable addition to bottom line profits.

Fritts says the key is to not just have an inventory on display, but to sell these items to your customers. “I know you can sell 50 percent more furniture and mattress covers if you simply suggest they are a good idea,” he says.

With all of these strategies, the important thing is to stay focused on profitability. Set specific goals for net income and attack from all of these angles. The ability to boost bottom line profits to the maximum is the mark of a true self storage professional. 

Tammy LeRoy is Editor of Self storage Now and Associate Editor of Mini Storage Messenger magazine.