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The Power of a Penny
Posted 2/1/2017
Author Mark Poole
 
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If I could offer you a penny more on your rates per square foot value, would you take it? How would it impact the bottom line? 

As an operator, my primary responsibility is to maximize every single dollar at each of our facilities. Each day, we use revenue management as the heart of our revenue growth. We maximize dollars, yet we focus on the pennies.

The following outlines our process:

1. Determine your current RPSF value: Do you know what you are currently earning per square foot at your facility? The basic (RPSF) rates per square foot calculation is the total rental revenue in, divided by the actual occupied square feet at your facility. For example, for $90,000 actual monthly revenue, divided by occupied square feet of 60,000 equals a RPSF value of $1.50 or $18.00 as most REITs report (multiplied by 12).

2. Now, add a penny: Take the original earnings of $1.50 and move it to $1.51. The same occupied 60,000 square feet multiplied by the new rate of $1.51 becomes $90,600. A net gain of $600 per month or $7,200 annually.

3. Earn the penny: In the example of above, it was easy to simply just move the penny, but how can it be earned? There are a variety of ways to influence the earnings of your RPSF value. The following are ways to get you started:

      - Internal rate increases
      - Reduce concessions/discounting
      - Raise asking rates

Overall, the power of a penny can leverage tremendous growth for your organization. Multiple cents can be gained throughout the year and it can add significant value to your site. The next time you meet with your management team ask them, “can you earn me one penny more?”

About the Author

Mark Poole
Regional Manager, Storage Operations
Liberty Investment Properties, Inc.

Mark joined Liberty in 2012, bringing a fresh perspective to their self storage operating company. His previous sales and management experience has brought energy to daily operations and driven steady top line growth.

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