There is one big benefit from having been in and around the self storage business for almost 30 years ( in other words being old).
You learn some lessons you did not and could not have known when you began.
Let me share five of the lessons about self storage operations I have learned. Sometimes the hard way.
I share these with you in the hopes of shortening your learning curve and helping you avoid some of the headaches I’ve had over the years.
These are also not “operation” topics I see being addressed in most articles and training around self storage.
I am going to move from general to specific.
Lesson Number One: Do Not Get Too Comfortable With How You Run Your Facility
It is human nature to seek patterns that work and stay with them.
Developing good habits is a trait of successful people, and as self storage owners and operators, we seek to find what works, then repeat it.
But like many areas of life, our strengths can soon become our weaknesses.
When I started, self storage was a vastly different business than it is today.
The most significant innovation that happened in the last 20 years when I got going was the advent of climate-controlled space.
Self Storage is not a slowly evolving industry today.
It changes fast.
I remember when I stopped using yellow pages around 2013 or so. You never meet a happier owner than me.
I learned that if you handle SEO right, claim your Google business listing, and do a few other simple things, customers find you easily, and the $20,000 to $50,000 per year we used to pay for the yellow pages was no longer necessary (yes, we had a facility with a $50,000 per year yellow pages contract).
My simple process worked…until it didn’t.
With all the new space coming online, much from REITS using pay-per-click and banner ads online, I fell behind the curve quickly.
Why did I need to change and learn something new?
Wasn’t what I was doing working?
Well…no. It wasn’t.
I had to play catch up.
This has happened over and over, and I learned the hard way not to get too attached to any process and or procedure I am currently employing in the operations of a facility.
The odds are I will need to change it to stay relevant.
Lesson Number Two: Do Not Get People Dependent… Get Procedure Dependent
This may sound like I contradict what I just said in lesson one. But it is not.
I cannot tell you how many owners and regional managers I have met that find someone good to manage their projects, then step away.
I have been guilty of this as well.
I have learned there is a difference between empowering people to work and abdicating my responsibility as an operator.
Yes, set guidelines, establish goals and measurements, then support and empower people to achieve them. But it does not work just to step away and “say this is now handled, and I can do other things. They are good, and they know what to do.”
That has caused me real problems over the years.
Yes, what we do to run our facilities is constantly evolving and changing, but as an owner or head operator, I need to be in charge of that, not the employees.
In a few-year stretch, as we were growing fast, “empowering managers to run the facilities” was our slogan. I came one day to realize every facility had developed its own procedure for doing almost everything.
It seemed like it happened overnight (or perhaps I just came to).
It is not that the managers we had in place were not good. I just realized I had abdicated my role to ensure we had a company that had a system to run our facilities.
What happens if a manager at a facility quits or gets sick?
Everything would have come to a grinding halt.
Yes, empower people. But empowering them to run the facility how you feel is the best way to create your company.
Get their input, and have them involved in setting company procedures, but don’t just turn this responsibility over to a manager.
It will come back and bite you at some point.
Lesson Number Three: Know Your Numbers
We are going to talk about online marketing in a minute. But it would be a worthless conversation if you did not know your numbers.
I never ceased to be amazed at operators I talk to who do not know the average value of a customer at their facilities.
Do you know it is different for every facility you own or manage?
Do you know this tells you how much you can spend to get a new customer?
Whatever you measure, as an owner or operator, you can impact.
If you are interested in what we track, here is a free e-book on the five KPIs we measure at every facility.
Know how much every customer is worth. Know your per-square-foot rent, your rent growth as a percentage, and your expense growth as a percentage.
Do you know if your expenses go up faster than your rent, the value of your facility is going backward?
You may say, “well, yes, of course.” But, last quarter, last year, what was your rent growth and expense growth as a percentage?
“Well, I can figure all that out if I need to,” you may say. Well, figure it out. You need to. It will inform you what actions you need to take today.
Owners and operators running their facilities with zero attention on this area are the reason we can step in and create so much additional value when we purchase a facility.
Sure, know your occupancy, know your economic occupancy, your rent psf, rental trends at your facility and at your competition, but know and track the numbers that create the value for the facility.
If you are an owner, it is your job.
If you are a manager or operator tasked with managing a facility, do this as well so you can be the person who not only maintains the project but creates real value for your owner.
I learned the hard way; if I take my eyes off this for even a short time, inertia sets in, and we just drift.
“Things are going well. Our occupancy is high.” I heard these from operators as I realized they have been losing asset value and not keeping up with the industry.
Lesson Number Four: Do Not Just Turn On-Line Marketing Over To A Vendor And Hope For Best
On-line marketing today requires somone, almost daily, at least weekly, at the helm of the ship.
There is no “procedure” that works for all facilities. Every facility is different.
Google or Facebook add campaigns that work for one facility, most of the time will not perform the same way for another. facility Even in the same city.
Also, Google is altering its algorithm all the time. They average 500 to 600 times per year.
So, just choosing a website provider abnd paying extra for a off the shelf adds add-on, in my experience, rarely produces any results.
And what I mean by results are not hits to my website. I mean rentals.
The majority of customers today find us through some form of on-line connection. Even if they call themselves a “drive by” customer when they move in (i.e. “I have been driving by your facility for years” or something like this), they will usually Google us to connect or get our number.
Operators today have to show up online, show up on the first page, and most likely above the fold (i.e. customers don’t have to do a lot of scrolling to see your facility).
This unfortunately today requires pay per click and sometimes banner adds.
Operators have to know what their market are, and often it is not just a 3 or 5 mile radius. Also, in your trade area, operators need to know what the customer base is using to do keyword searches.
My experience is, in cities where we have owned multiple facilities, each facility’s customers use different key word searches most of the time. And these keyword searches change, sometime many times a year.
Someone needs to be monitoring this, as well as advertising campaign performance, constantly.
The challenge with self storage is we don’t sell a lot of widgets. Some businesses sell hundreds or thousands of things per month on-line, and tracking tweaking, and having a vendor do this work is easier.
The larger the market area and people exposed to online adds, the easier it is to make adjustments and see what works and does not work.
In our industry a “market” is a small number of people who happen to live round the facility and 10, 20, or 40 move-ins per month (i.e. 40 sales ) is excellent.
This is an online marketing company’s nightmare. Very hard.
To do it right, a self storage owner would be spending thousands of dollars per month for a vendor to manage the online marketing the way it should be done. The economics of an independent self storage operator just don’t support this.
REIT’s have full time people who spend all day, every day doing this exact thing.
So, for us, the way we had to make it work was to hire a Google adds coach, have them work with us once a week, or once every two weeks, and train us on how to run our own Google adds.
We are constantly adjusting the campaigns and the adds themselves based on new performance data.
Also, each facility has a different average value of a customer, so in each facility, we can spend different amounts for on-line marketing to attract a customer. Every facility is different.
Every facility has a different customer base and ad spend.
This is the best way we have found so far to address the challenge of on-line marketing.
Lesson Number Five: Not Having The Right Insurance Riders On Property Insurance
The number one liability exposure for a self storage owner is not slip and fall. It is a wrongful disposition.
That is fancy legal speak for doing an auction wrong.
As a self storage operator, your job is to minimize liability exposure, and the best way to do this around wrongful disposition is to have a rider on the property insurance policy that covers it.
Each state has different lien laws, and even for the best operators, it is sometimes not too hard to run afoul of the state lien laws.
One time, one of our managers, one of our best ones at that, auctioned off the wrong vehicle in an auction sale.
Wow. It actually happened. Something I would have never thought could happen to us, did.
Thank goodness we had wrongful disposition coverage as a rider on our insurance policy.
We just turned it over to the insurance company to handle.
I see all the time when we purchase facilities or when I coach people in the business; they have never heard or thought about this.
Make sure, as an operator, you have the right insurance riders.
We always get the wrongful disposition insurance and environmental clean-up. If someone left a glowing 55-gallon barrel of stuff in a unit, we have up to $25k per incident to clean up the unit.
We have never used it, but it is there if we need it.
Conclusion
My goal was to offer some not often thought of lessons we have learned as operators of self storage facilities that will afford you the chance to avoid some major headaches that can come your way.
