I often say, “If you keep your eyes on five things in self storage you’ll do great.”
What’s strange is that very few people ever ask me what those five things are. Very strange.
Part of building a thriving self storage business is tracking these top 5 self storage metrics. This is important even if you haven’t purchased your first facility yet. As you talk to bankers and investors, it lets them know you have a solid business strategy.
These next series of posts are going to discussing just this topic: The Management Series.
In a perfect world, every manager of a facility should track these self storage metrics too. I recently realized that each manager in our organization is tracking Key Performance Indicators ( KPI’s). Which is great. However, they weren’t all tracking the same ones.
As you grow your company, one of the important things to do is standardize operations. Everyone should be measuring the same things in the same ways.
I’ve noticed over the years is that good things don’t happen around areas that people aren’t focusing on. With our managers in particular, when they direct their energy towards something specific is when things begin to happen.
So let’s dive into our procedure.
We measure daily, monthly, quarterly, and yearly the following KPI’s in each facility:
1. Income per month:
Each facility has a monthly target to hit that is a function of the budget. (Our budgets come from our ten-year cash flow Proforma.) Budgets get created in the fourth quarter for the following year and are broken down month by month.
If the property is in lease-up mode, each month increases as per the lease-up schedule. If stabilized, it’s the same each month for that year.
Each manager knows the monthly budget number and gets acknowledged and celebrated when they hit it.
2. Occupancy Rate:
Each manager knows their occupancy rates. If the facility is in lease-up mode, they have monthly net square foot absorption numbers to hit. They also have big benchmark numbers, like 25%, 50%, etc., and target dates for them. When they hit those numbers, they get bonuses.
3. Percent Delinquent:
The most recent KPI introduced for our managers to track is the percentage of delinquent income to total potential income. You measure this by taking the total amount of unpaid rent in all the report columns (0-30 days, 30-60 days, etc.) and divide that number by the total monthly GPI (gross potential income).
In a perfect world, this percentage will be 3% to 5%. Some facilities tend to run higher, but if they are much over 5%, it is an sign that either
- more training on collection calls is needed,
- it is time for an auction, or
- both.
4. Retail sales per move in.
Again, this a newer one for us. We tracked retail sales in the past but didn’t have a way compare one facility to another other than the total sales number. That was not always an apples to apples comparison, and it was hard to tell which manager were over or under-performing.
Now it’s not perfect, but it does level the playing field some. A good number is $60 per move in, but start where you are, then create games and contest to get those numbers up.
We measure this by total retail sales divided by the number of move-ins.
5. Two options here (a) Tenant Insurance, or (b) Sales Increase Over Last Year.
You can definitely have both measurements, but we (the owners) are tracking the sales over the previous year and the managers are tracking tenant insurance sales.
Tenant insurance sales are also fairly new to us because we have just recently been allowed to sell it in our home state. We track sales numbers and percentage of the facility that has it.
We create games and contest to get these numbers up. Build target dates for certain percentages of the facility to have purchased it (i.e. by mid-year 25% of our tenants the facility have it). You can also have target numbers for new move-ins, such as 50% of new tenants each month purchase it (35%, 25% – you make it up).
If you don’t sell tenant insurance, try sales over the same time last year. Create bonuses for certain increase percentages. That will keep your manager’s eyes on when they can raise rents.
If you keep your eyes on these numbers, and are moving them up each year, you will have a great business.
Which brings up one more item, the sales over last year.
As an owner, one of the KPI’s we should always know is how much our facility has improved. You know this by tracking sales, as well as all the other KPI’s, over last year.
When you know and talk about these numbers to your partners, bankers, and employees, it builds everyone’s trust in doing business with you.
Over the next few posts we will dive deeper into these KPI’s. Even if these are the only ideas you’ve got firmly planted in your mind, it will make all the difference in the world.
