I have learned so much more from the investors who work with us than they ever have from me.
Much of it I shared last week in Episode 112. I discussed some of the metrics, benchmark numbers, and issues I’ve learned our investors are interested in.
If you put yourself in the place of most investors, you will see that what they have their attention on is not that complicated.
We aren’t working with people who are trying to create their fortune. Those are usually people like us. If they are interested in self storage, odds are they should be doing what we’re doing, not investing in it.
No, we usually work with people who have already made their fortune and are now trying to protect it and maximize it.
In that order.
So we tell them the self storage story, they get it, and they invest in our deal. Now what?
I have learned the hard way, that there are really only three things that need to happen. But if these three things don’t happen, and happen regularly and at the agreed upon time, it is not fun or pretty.
The first thing is communication.
Consistently and on time. If the monthly financial reports are due on the 15th of the following month, and you get them out the 16th or 17th…. they are late. Just like the rent is in your facilities.
I went through a period as we were growing and changing roles where I was not on top of getting the financial reports I created sent out on time. Big mistake.
It erodes the confidence the investors have that we know how to run a company.
I have found a good rhythm now that works for the people who invest with us. Every month I create the financial reports and a narrative highlighting the ups and downs for each property. Those reports and narrative are posted, or emailed, on the 15th of each month. In some of our companies, we are still actively looking for new deals and construction expansions. For those, I send out an update on the first of the month regarding the status of the property search and current construction.
We have found this rhythm makes our investors feel like they are being communicated with, respected, and informed about what the people who are using their money are doing with it.
It may seem odd for someone who writes these Episodes every week, but ongoing communication is not a strength of mine. It really takes something from me to keep it up consistently and effectively month after month..
But it is critical. It makes the difference between having a one-time investor or ongoing relationships with your current investors. And later relationships with their friends.
The second thing that is critical is to pay what you said you were going to pay, and to pay that on time.
Again, that sounds simple, but try having twenty properties, all with different investors and paying them out monthly.
I’m not complaining, but you really have to have structures in place. Most of our investors are paid monthly, a few quarterly.
Again, I have learned the hard way that many of the people who invest with us like getting a check in the mail. We can do automatic deposits, but when we send a check their wives and husbands see it. It shows their spouses that they’ve made a good decision. If they can count on the check coming on the same day every month or quarter it (1) it makes them feel confident they can invest with people who can deliver and (2) it is a sign of respect for them.
It really doesn’t matter in the beginning if the amount on the check is for the full amount of the preferred return. On our projects, we are often spending the first few years expanding or building the property. We are not yet generating the 11% to 12% return. But if you send them something, even 4%, just getting a check from you speaks volumes and confirms that you are on target and doing what you said you would do.
You are.
Stay in touch by check.
The third thing that is critical in my opinion is to always, constantly, know exactly where you are in relationship to where you said you would be in any time period.
For us, that is where we are in relation to the ten year proforma that is part of our Storage World Analyzer.
I print our that ten-year cash flow statement, and tell our partners, “I may not be exactly on the income or expense numbers, but for the Net Operating Income, we will be on or very close (within 10% to 15%). You can count on that.
They when we hit or exceed it they know.
I try to be careful about what we project, sure about it, and that is what we use as the gauge to measure our performance.
There may be months where I am behind in any given year, even quarters, but in almost all cases we hit or exceed the project NOI for the year.
Our investors get an actual to budget monthly (which is our Proforma broken down monthly for that year) to see where we are.
If you hit it or exceed the numbers in the Proforma, the investors tend to have a lot of confidence in you. It won’t make up for not regularly doing number one or two above, so don’t think just because you are hitting your numbers or exceeding them, you can slide on communication or timely payments. I have also made that mistake. Don’t you do it.
Here is what I know. If you are consistent with your payments and communication, and hit most of your numbers, when you don’t or can’t hit a projection, and you communicate why, your partners (investors) will understand and work with you.
Most investors can take bad news. What makes the difference is who is delivering it. If it is someone they respect and feel they can count on, then together you can come up with a strategy.
If someone who is delivering the bad news is someone who they feel they can not count on to do what they say they are going to do, the investors will sometimes take over because the trust factor is gone.
Nothing I have said here is hard to do, and if done regularly, you will have great ongoing relationships with your investors.
Our experiences is once we got it right and figured out what made the difference, they stayed with us from property to property and are our biggest cheerleaders in achieving our vision. Because they know if we achieve our vision they will make a lot of money in the process and protect the money they or their family has made.
If you do what you say you are going to do, do it on time, and communicate when you can’t do it on time; you will have fantastic relationships with the people who invest with you.
Actually, I think that is a formula for having good relationships with anyone. Perhaps I’ll try that at home as well.
