Is there any form of real estate that has lower capital expenditure demands than self-storage? Those who invest in apartments face continual big ticket items such as roofs and foundations. And simple updating can cost a fortune. Office and retail owners also have this perpetual capital drain. But self-storage has several major advantages including 1) no interior finish out 2) all-metal construction and 3) no future updating needs. The very low-tech and simple nature of self-storage has created low cost of operations that is unrivaled among real estate sectors. Since the only thing living in those units is stored goods, there’s no toilets to fix or pools to maintain. For those who are looking to avoid unwelcome capital surprises, then self-storage gives you the ability to avoid big-ticket items that become a regular business cost.
Memo From Frank & Dave
Self-Storage Marketing Is All About Aggressiveness
During the American Civil War, the common plan of successful commanders was to “run at the enemy screaming with your bayonets on. General Patton had a similar viewpoint with his “always attack” philosophy that pushed the Germans back continuously. This view towards aggressive action should be part of any successful marketing plan for a self-storage facility.
Pricing to beat your competitors
You should know the detail of your competitors pricing well – you should be the expert on pricing in your market. You should then design pricing that beats your competition. That does not mean that you have to be significantly lower than their rates, but you definitely cannot be higher. Many consumers in self-storage are extremely conscious of pricing, and you need to always have price-point as a weapon, just as gas stations battle with pump prices.
Here’s one arena in which aggressive pricing is key – specials that bring in first-time users of your facility. It’s an old adage of retail that the hardest part is to get the customer in the door. Once the tenant has laboriously carted in and stored hundreds – or thousands – of pounds of stuff, it’s much harder for them to leave. So you need to the absolute best move-in specials imaginable. Need ideas? Gather the move-in specials of the biggest operators, such as Public Storage – and don’t just gather them in your market but look at their offerings and marketing materials in other places, including very competitive cities like Houston.
Just as Patton would send his tanks in to charge at the enemy, you need to send your ads in to do the same. You should have great visibility on the internet, an array of direct mail, terrific signage, and the willingness to test any advertising platform that you can measure the results of. You cannot be passive when it comes to advertising and just think “if the customer needs me, they’ll find me” – you have to get out there and bang your drum.
Let your marketing “build” your brand
Before you start your marketing campaign, step back and make sure that you are a strong believer in our facility’s name and logo, as well as all your official colors and design. Studies have shown that the worst thing you can do in advertising is to re-invent yourself. Repetition is what builds a brand – you want it to be that customers know your facility just by the logo and colors in the ad. So once you start advertising, you’ll need to stay consistent, hence the need to make sure you love your marketing before you ramp it up.
Terrific effort when the customer walks in the door
Every potential customer should be greeted with a hearty “welcome to [name of the facility] – how can I help you?”. A big, broad smile also helps. Even though you’re renting a $100 per month unit, each customer needs VIP treatment. You might also offer them a bottle of water and having a golf cart to ride on to look at units is also a big aid. The more effort you put in, the higher your closing ratio will be.
High level of customer retention effort
Just because someone is already a tenant, don’t take them for granted. The U.S. average turnover in a self-storage facility is 10% of the customer base per month. It’s a whole lot easier to keep the customers you have than to get new ones. While many of these folks leave for reasons that you can’t control – such as moving to a new city or deciding to cut back on their budget – many can be stopped if you put in more customer retention effort. Often, they just need reassurance that they are getting a good deal. Other times, they just need to know that you care and appreciate their business. Think about creating a monthly newsletter to let them know they’re important to you, or sending them a periodic thank-you card and Christmas card.
Never stop the effort
Once you start aggressive marketing, you must never stop. That’s a mistake that many owners make – they get aggressive and then, when the hit a certain occupancy number, they get passive. Instead, you need to always be on the attack. Even when you hit 100% occupancy you can re-focus your aggression on customer retention.
“Attack, attack, attack” should be your motto when it comes to marketing. If you apply this concept, you will win the battle and the war, and your facility will have great occupancy and beat all revenue projections.
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The Keys To Manager Training
OK, you’ve got a manager for your self-storage facility. But how do you get the most out of that employee? Many times the owner of the property fails to get the manager to produce at 100% of their capacity. And this normally revolves around training. So how can you better train your manager to be highly productive?
Tell the manager exactly what is expected of them. Give them a complete list of their duties and what you feel a passing grade – and an exemplary grade – would be. There are many managers who were just thrust into that job without having a full understanding of what is really expected – they could do many more things but were never asked to.
Have a way to gauge performance that is simple and fair
Nothing makes someone more unhappy then to feel under appreciated, or unfairly criticized. You need to come up with a scoring system that is easy to understand, accurate, and fair. If you go to visit a property and, despite having great occupancy and collections there is a candy wrapper on the ground, you should not start screaming about the candy wrapper, which might have just been dropped by a visitor ten seconds ago. The big picture items are occupancy, collections, property condition and hitting the facility’s budget each month. Keep things in perspective and don’t unfairly criticize.
Show the systems
There is no worse plan than to improperly train the manager on the actual systems of running the business. This is particularly true in the case of interacting with management software. You can’t just throw a laptop and a pad of paper at the manager and say “now go out there and impress me”. Instead, you have to show the manager everything you expect them to do and exactly how to do it. The best managers have been well trained in this regard, often acting as a “shadow” of you or another manager for a period of time.
Don’t assume anything
When training someone, don’t assume anything. Often, the trainee will not ask questions for fear you will think they are stupid, but they don’t know the answer just the same. Be very, very basic at the beginning until you have complete confidence that they are 100% understanding what you are talking about.
Don’t rush it
Many owners ruin the manager’s training by always being in a rush. Sure, there’s places you’d rather be, but this is a vital moment in making sure your facility is in good hands, so slow it down. When you seem rushed for time, the manager will not ask as many questions and will not grasp the material as well. Constantly answering your cell phone is disruptive and reflects that the training is not our top priority.
Be honest about performance
Many owners cause problems by not being truthful about the manager’s performance. They don’t want to hurt their feelings and think “I’ll just talk to them about it at a more opportune time” – which, of course, never happens. Look at your manage as a professional athlete. It’s just good business to praise the manager’s successes and complain about their failures. When you stay silent on performance, most managers take that as meaning they are doing a good job, when it’s normally just the opposite. You will do them more good by being honest at all times.
Strive to set simple, fair goals
If you are buying a self-storage facility that has 20% occupancy, you would not want to tell the manager “I demand 80% or else” but instead “let’s try to get the occupancy up 10% each month for the next six months. When you set impossible goals, it only makes the entire effort seem futile. Rome wasn’t built in a day and neither was your self-storage facility. Make your goals simple to understand and possible to hit using average performance. If you want to have bonuses for unbelievable effort, then great. But don’t make the 4-minute mile the baseline goal.
But make changes when necessary
There is an old saying that “it’s easier to change people than to change people”. That means that it’s easier to replace a failing manager than to try and rehabilitate them. While a huge company has more patience to re-train those who fail in the job, you don’t have that luxury. So if a manager is clearly not cut out for the job, then you should replace them immediately. Some things training can fix, but others it can’t.
Training your manager and managing them properly is essential to good performance. If you put in extra time and planning, your manager will do their job better and you will hit your budgets more effectively – a true win/win.
Are You Building A Legacy For Your Family?
Every American wants to pass something down to future generations. And a self-storage facility makes for a great legacy.
Generational quality assets
A great asset is one that will be successful until the end of time. A self-storage facility pretty much fits that description. The business model is extremely low-tech and there’s little chance it can be replaced with technology (you can’t store your stuff in the “the cloud”). In addition, self-storage has proven during the Great Recession that it has demand in good times and bad. While some things that people pass down ultimately fall into rack and ruin (think of those 1920s high-rise hotels you see abandoned in blighted cities such as Detroit), self-storage has low capital needs and is well positioned for the future.
Financial security despite what happens in the U.S.
The U.S. economy is in peril. It’s been in constant decline for the past decade – and not even that great before 2007. Self-storage gives your heirs something to depend on even when the general economy is in poor condition. Unlike other assets that may be dependent on a booming America to succeed (can you imagine leaving a yacht sales company to your heirs?) self-storage is a winner in both good times and bad, and gives your heirs a foothold on having a good quality of life regardless of what’s in store for the U.S. economy.
An inheritance that maximizes income and stability
The benefit of any income property is the ability to produce just that: income. If you leave future generations land, they will have to sell it to put food on the table, and it will eventually erode into nothing. But an income property allows you to spend that income and still get more each month. In addition, self-storage has very dependable cash flow. That’s why it traditionally has the lowest loan default rate in the U.S. It’s about as solid an inheritance as you can receive.
Self-storage is a terrific asset to create for future generations. It has a proven track record of success in both good times and bad. As an income property it produces a safety net for your heirs and a much needed one in the cyclical U.S. economy.
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