Inside Self-Storage

APR 2019

Inside Self-Storage (ISS) is an information source for industry owners, managers, developers and investors covering news, trends, facility operation, finance, real estate, construction, development, marketing, technology, insurance and legality.

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Improving Your BOTTOM-LINE IMPACT Making management decisions that positively affect cash flow By Magen Smith LEARN MORE Learn more from author Magen Smith at the ISS World Expo in Las Vegas, April 1-4, where she'll present as part of two dynamic, deep-dive workshops: Management Mastery Workshop and Ownership Excellence Workshop. Get details and register at issworldexpo.com. S elf-storage managers, did you know you're running a multi-million-dollar business? You're the voice and face of that operation and, as such, you hold power to make or break it. Being a facility manager is no longer about being the caretaker and picking up trash. It's about being proactive, closing leads and hitting the numbers. As the industry becomes more competitive, we need managers who can drive the business in the direction it needs to go. That hinges on your understanding of cash flow and how your day-to-day decisions affect it. Let's look at ways you can positively impact the bottom line. Discounting Rent The most important number to most storage owners is occupancy. We want tenant locks on doors, as this usually means money in the bank! But as a manager, you sometimes need to discount the rental rate to close a deal. Let's talk about some common rental decisions and how they can affect the bank balance. We'll pretend our 10-by-10 rate is $100, and we charge a $20 admin fee. When trying to close a rental, we have a few choices. $1 move-in special. With this offer, the most we'll lose is $99. It's a good deal if the tenant would have gone to a competitor. If your average length of stay is a year, then you've given up $99 to earn $1,101, which is worthwhile. However, if the tenant is already prepared to sign the lease, offering a special is just giving away money for no reason. A move-in discount isn't a reward for customers you like. It's a way to close the deal for someone who's on the fence. Waiving the admin fee. I'm a big fan of waiving one-time fees instead of giving away rent. It's a single reduction in cash instead of a monthly one. If we waive the admin fee, we only lose $20. Giving a free lock. Most locks cost the storage operator $4 to $8. I would gladly give away $4 to make $1,200 over the lifetime of the tenant's stay. Dropping the rental rate. When we make it all about price, it's all about price. Great managers sell on benefits instead. Let's say we rent a unit for $90 instead of $100. We're losing $10 every month until we raise the tenant's rate, which may not be for a year. This creates an annual loss of $120. If you want to get fancy and apply a 7 percent capitalization rate on that amount, it's $1,714 in facility value. Renting units at the highest possible price should be your main goal. Everything else helps feed it. Waiving Late Fees Once you rent the unit, keeping customers happy is critical to maintaining a stable property. One challenge to this is late fees. No one likes to pay them, which makes enforcing them one of the hardest parts of your job. Your owner should provide guidance on when it's OK to waive late fees and to what limit. Some owners don't want you to waive even $1, while others want 26 ISS I April 2019 www.insideselfstorage.com

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