Storage Business Owners Alliance
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Phone: (248) 254-9000
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How to Make Money in Self Storage

Date: 11/16/2018
Author: Bob Corcoran
Link: 6storage.com/how-to-make-money-in-self-storage/

Congratulations! You survived many years of operating your storage units. Hopefully you are "in the black" and you are operating somewhere between 90% - 95% full. Now the question becomes, how do you become more profitable?

The S.W.O.T. analysis for a storage unit facility looks something like the below.

Strength

A strong perceived need to store possessions, limited availability, low sensitivity to price increases and a high likelihood of long-term customers.

Weakness

Cost of increased inventory or adding more units, a limited amount of additional products to supplement income, zoning restrictions on what  and how much can be built, threat of being sued for improper liquidation procedures or damage to personal property stored at your facility.

Opportunity

Expansion through acquisition of mismanaged facilities, improving efficiency through the use of technology, upgrading perceived security and charging a premium, adding additional services, potentially adding different units or different types of storage.

Threats

Litigation, local ordinances, aging facilities, online reputation.

The following reviews how you can maximize the strengths and opportunities and how to potentially minimize the weaknesses and threats.

Strength

Fortunately for those of us in the business, there is a psychological principle that states the perception of a loss is roughly twice as great as the equivalent gain. What this means for us is that people will tend to overvalue, by at least a factor of two, the opportunity to keep possessions rather than liquidate them and replace them later or just live without them. This is a contributing factor to the low sensitivity to price increases once you have a customer. From the customers perspective the relatively safe storage of their possessions is weighted against a 2X estimation of their value at a minimum PLUS the opportunity cost of all the labor, effort, and time it will take remove them from your facility and place them someplace else. The exception to this is someone who is completing an upgrade in their normal housing.

Weakness

A major impediment to expanding our business model is the high cost of additional inventory. Essentially there are only two ways to expand your business: either new construction or acquisition. A case could be made for alternative storage solutions such as low-cost shipping containers, but these tend to be a bit unsightly and may be off-putting to more sophisticated customers and local laws may prohibit them, so be careful if you choose that path. There is the pre-manufactured route as well, but the ROI on these can be a bit extended.

Additionally, the threat of litigation is real. You should have your contract reviewed by an attorney familiar with your state and local laws, keep the best records you can and avoid storing personally identifiable information (PII), such as Social Security numbers.

Opportunities

If you have the capital and patience it is likely that there are some mismanaged storage unit facilities in your local area that are just begging for new ownership. Additionally there may be properly-managed facilities in your area whose owners got in when the industry was new and are now ready to retire. My experience has been that these original pioneering entrepreneurs are not always technically savvy and many have literally decades of paper and pencil records storage boxes. 

You also have the opportunity to increase your revenue by offering additional services such as battery charging for vehicles, selling packing supplies and locks and/or increasing the rent.

Using electronic documents and electronic signatures, if legal in your state and local area, greatly reduce the time spent on such items. With 6Storage software, this can be handled remotely with or without a phone call. With this technology, tenants can find you online and reserved a unit. This cuts contact time from three or more hours per customer to as little as ten minutes.

Threats

Litigation is probably the single biggest threat that the self storage operator encounters. This is why 6Storage always recommends that you have your documents and processes reviewed by an attorney familiar with your local laws.

The next threat we believe you encounter, especially if you use the acquisition model, is aging facilities. Another potential high-maintenance item in an order facility are the door springs.

The last threat we want to talk about is your online reputation. You can also somewhat offset this by having a competent website. 6storage will help you by creating your own website. 

Self storage business offers the flexibility in the form time invested. We all only have the same 24 hours in a day and the more profitability you can squeeze into the same 24 hours, the better. 

With 6Storage, you can try them out alongside your current provider or start from scratch with a 60-day trial offer, no obligation at all. Even if you decide that 6Storage is not for you, you will still have the opportunity to compare what is available for $29.99 a month vs. what other companies are charging.