This week is the fourth week of “The Management Series” and the Key Performance Indicators ( KPI’s) that every self storage manager should be tracking.
“Our Managers relate to their job like they are running a store, not like a property manager”.
I tell that to bankers, investors, readers, everyone. And it’s true. They are running a store.
The main product they sell is air (units to rent). Their next product is usually truck rentals. And there are retail products to sell.
Just like a store.
There is no faster way to add value to your facility than to focus your attention, and your Manager’s attention, on retail sales.
Start measuring it so your attention is always on it. And if your attentions is on it, you might as well improve it. Right?
If you are currently running a facility take yesterday’s close report and look at two numbers:
1. Total retail sold to date for the year.
2. Total move-ins for the year.
3 Then divide move-ins into the retail sales number.
4. You get “Retail Sales per Move-In.”
That is the 4th KPI (Key Performance Indicator) we track.
Why is this important?
You can add real value to your facility with retail sales and truck rentals.
How much?
Let’s look at a couple of facilities.
First, what I really like about this KPI is that I can compare, very accurately, one facility to another. I can compare the retail sales of a big facility to a small one with very different sales numbers by creating an index. This allows the Manager to see how they rank against each other and where they need improvement
If I only looked at the actual retail sales number, there would be no way to tell which Manager is better at selling retail items, or create contests, or even see which Manager needs support and training to get better.
Facility #1: 57,000 square of storage and, $3922 in retail sales and 238 move-ins. That’s $16.49 in retail sales per move-in.
Facility #2: Over 100,000 square feet of storage (plus a lot of parking), $11,012 in retail sales and 328 move-ins. That’s $33.61 per move-in.
If we get the first manager selling as effectively as the second, we would, in theory, make an additional $17.13 per move-in.
That would equate to an additional $4,076 in retail sales.
And that $4,076 in retail sales would equate to an additional $50,955 in value to the facility.
Really, it would. And that’s only using an 8% CAP rate. Try buying a self storage facility using an 8% CAP rate in today’s market.
Buyers, appraisers, even us real estate agents will use 100% of retail sales as part of the income that determines the Net Operating Income (NOI) of a storage facility. The NOI is the number that determines the value of the facility.
The math to understand that additional $50,995 in value:
If you divide $4,076 (retail sales) by .08 (CAP rate) you get $50,955.
From this metric, I can see we have some work to do with a Manager. It’s is not the Manager’s fault. We just haven’t had her put her attention there yet.
But we will.
Why? Well, an additional $50,955 of found value.
In today’s market where we are full and rates are going up quick, where can you find additional income?
Look at your retail sales per move-in and see if you can improve it.
Imagine if all our facilities had a $50 or $60 per move-in retail sales number? That’s not unrealistic – I’ve seen it happen.
As a company, we’re going to put some serious energy here because I see it as a way to improve our portfolio’s performance, with almost no additional investment.
And also because I’m competitive and like to set a challenge, then beat it.
In the above scenario, we will have the Managers with the lower $/move-in chasing the Managers with the higher $/move-in. We will have the Manager with the higher $/move-in chasing the $50/move-in number.
And what do you think will happen when the $50/move-in is achieved?
We will acknowledge, celebrate, reward, then start chasing a new target.
You’ve got to spend your time doing something. Why not add value to the facility and play a game at the same time?
So if you haven’t purchased your first facility yet, you now know a way to add value to what properties you are looking at.
Have fun creating a new game to play as you get in or grow your self storage business.
