When entering the self-storage business, you are choosing to become an entrepreneur. In other words, you are starting your own business.
This may sound like a simple statement, but if you have never been a business owner or if you have always had a “job” working for a company, it can be a big step. It’s a whole new world.
This business is advantageous, fulfilling, and can be profitable, but it is not always for the faint of heart. It can take something.
So I thought I would create a self-storage startup checklist that begins to organize someone’s thinking around becoming a business owner, so your chances of success in this fantastic business are increased.
What I have learned over the years is that success in anything in life is 20% knowing what to do and 80% mindset. Hopefully, this checklist is inside that framework.
Step One: Business Strategy
I call the first step, or space I think someone needs to move through, a Business Strategy, not necessarily a Business Plan.
However, the strategy is really a function of your goal for being in the business.
Now, when I ask people why they want to be in the storage business, as a first response, I usually get either the benefits of self-storage (like high income for the type of asset it is or the steady cash flow it can throw off) or a vague answer like I want to make money, and storage seems safer than most ways.
That’s all well and good, but you need to go deeper than that. Why do you want the money? How much money?
Are you just trying to replace a current job with a job where you own the company, or are you trying to create long-term wealth? Which is more critical in the next 12 months? Five years?
Once, I was working with a person who had a great sales job, making an excellent income. He wanted to replace that income with self-storage income. That is clear and precise. We knew how much income.
I worked with someone once who said their goal was to double their net worth every five years. That was very clear.
With each of these people, we devised a self-storage strategy to achieve their goals, but the plans were entirely different.
With the first person, he had just enough money to do one deal in the $4 million range. We had him use his own money to buy a self-storage project expansion.
After the expansion was constructed and the lease-up was almost complete, and he was cash flowing, he started looking for the next deal to put under contract. This time, he was going to raise the money from investors. He had to do about five of these deals to replace the money he was earning in his job.
Then, at some point, he was going to sell the four or so projects, take his profits, and go back to owning a couple more by himself. Fewer projects but more ownership, and all of the cash flow.
That was his business strategy.
The person who wanted to double his net worth every five years (actually, while we worked together, it was more like every three years) had a developer mindset.
While this person could have looked at the exact same deals as the first person, it was a different strategy. His goal was to do the value add or ground up construction, get close to stabilization, sell it, then 1031 into the next and larger deal (or into multiple deals). His eye was not on income as much as it was on value creation and how to realize that gain.
That was his business strategy.
Is it a function of their goals?
What are your goals for wanting to be in the self-storage business?
That is the first step and the most important one in my opinion. It will inform you what type of self-storage you are looking for and how you will execute the deal. It will define your angle in the business.
This is how business owners think and approach their business.
Step Two: What Are Your Strengths
No one person has everything needed to succeed in business. The success of your self-storage business, to a large degree, will be a function of the team you assemble.
To determine your team, we start with your strengths.
For example, in our Inner Circle group, a group of us who meet once a week and support each other, we have a member named Rich. Rich’s superpower is using the computer to find unlisted potential deals, land, and buildings that are potential conversion targets. I’ve never seen anyone more adept at this than him. (Information on Inner Circle if Interested)
His strategy is to present deals, then partner with others in the group who want to do them. If no one in the group wants to do the deal and he thinks it is a good one, he will wholesale them out.
When I first started, I could find deals, analyze them, and present them to potential investors. I didn’t have the money to invest. So I partnered with investors and partners who would help me manage them.
Take an honest inventory of what you bring to the table as strengths. You can also get a coach or consultant to assist. Your strengths could be as simple as being good with numbers and spreadsheets, but you need to learn how to analyze storage specifically. It won’t take a lot to learn that.
Once you have your strengths written down, you move to the next step.
Step Three: Where Do You Need Support?
The spaces we generally have to move through as we get into the self-storage business are:
- Creating a deals flow to look at.
- Analyzing the potential opportunities.
- Controlling the opportunities we want to consider.
- Legal services for acquisitions and contracts.
- Ability to go through a due diligence process.
- Managing the facility after purchase or construction.
If there is construction involved, and there usually is in the type of projects we do (expansions, conversions, and ground-up construction), you will also need:
- Estimating
- Preliminary layouts
- Engineering services
- Architectural services
- GC, construction management, or construction experience.
These are some of the skill sets needed as one gets into the self-storage business.
Based on your strengths, where do you need to fill in the gaps?
One doesn’t have to have a fully vetted team in place before you start looking seriously at opportunities, but some of the basics that need to be in place are how to find deals, analyze them, and control them.
Start with your strengths and/or what you think you can learn to do, then find team members for the rest.
A team member can be a vendor, an employee, or a partner. I use all in my business.
Step Four: Assemble Team
At a minimum, you need to have someone who can create a deal flow to look at, analyze the opportunities, and a legal service to move quickly on controlling deals when you find them. One can always start there.
Have your attorney or legal services lined up before you find your first storage opportunity. Often, one has very short time frames, and I have seen many lose a week or more of vital time finding an attorney, then the deal is gone.
If you are unsure who to use for real estate or self-storage, ask your current attorney for a reference, or contact a commercial real estate agent, ask for a legal reference, and start there. This is usually the first and most important vendor to have lined up before your first offer.
I have seen more people get off to a rocky start, or no start at all, because they skipped these first steps as outlined in this episode.
So to summarize, know what you are looking for before you start. This increases your chances of seeing the right type of self-storage deal rather than looking for a “good deal.”
Next, learn how to generate deal flow to look at. You can also get a vendor or partner to help.
Learn how to analyze or have someone on your team who can.
Have you already lined up your lawyer before the first deal is found so you can move fast and seamlessly?
To a large degree, your success will be a function of how good your team is. So start with these steps.
This is a great business, but success is not guaranteed. Stack the deck in your favor by using these steps first. I look forward to connecting with you on your self-storage journey.
