Develop a Business Plan
As you move through the development process, it is imperative to set aside time to create a comprehensive business plan. Most often, your financial institution will require a business plan before financing approval. Additionally, it will help ensure all important details are covered and your project goes smoothly. Consider each of the following action items when developing your business plan:
Determine When to Build
The busiest times for self storage are spring, summer, and fall. Strive to have your facility ready to rent units by May to maximize the renting season. If your facility is not ready until November, renting will be slow until April. Although it is ideal to build in line with the busy season, it is not mandatory for success.
Obtain a Financial Projection
To achieve a more detailed financial feasibility analysis, utilize our financial projection worksheet. In order to get the most accurate analysis, solicit bids from all subcontractors based on your completed site plan; i.e. bids on pouring concrete, excavation, HVAC systems, etc. Simply input all estimated costs into your worksheet and then contact your Trachte regional manager. Your regional manager will analyze your financial projection in conjunction with your completed site plan and unit mix to help you develop a site-specific financial projection that you can bring to your financial institution.
Secure Financing
Self-storage facilities are typically financed via local banks. Since the industry is in its mature stage, there is a lot of information about the success rates of self-storage loans for bankers to analyze. Some banks have a specific team of people who only handle self-storage loans.
Purchase Insurance
There are two types of insurance coverage for your self storage project. The first is insurance for the buildings and liability for people on your property. The second is tenant insurance, which is insurance you can offer tenants if they do not have renter's or homeowner's insurance.
Determine Your Management Style
Self storage is unique in that there are multiple ways to manage your business. The way you manage your facility depends on your desired level of involvement.
- Managing from an onsite apartment: The owner lives in the apartment and manages the facility, only hiring part-time help for days off. Or a manager lives in the apartment and runs the facility's day-to-day operations, while the owner oversees major decisions and part-time help is hired for days off.
- Benefits and Potential Pitfalls
Benefits:
- The customers are able to talk to someone directly at the site at any time.
- The owner can live at the facility during the rent-up period and move once the business picks up.
- The owner or manager will be able to monitor the site 24/7 and take action immediately if problems arise.
- The apartment is normally only financially feasible if you have over 400 units or 50,000 net rentable square feet.
- It may be difficult to find a manager who is both the right personality and is willing to live onsite.
- This management style does not provide for much down time.
- Managing from an onsite office: Manager(s) and/or staff works in the office during scheduled work hours. A security system is installed to keep the site secure when the office is closed.
- Benefits and Potential Pitfalls
Benefits:
- The customers are able to talk to someone directly at the site.
- Building an apartment onsite can be costly. If you just have an office, more money will be available to spend on security options; which can differentiate you from your competition.
- It's easier to hire a manager because you don't have the problem of finding the right manager who is also willing to live there.
- No one is onsite during non-work hours to handle security problems that may arise.
- Typically the project needs to have over 250 units or 30,000 square feet before it is financially feasible.
- Managing from another business: If your self-storage facility is your second business, you can utilize your primary business personnel to rent out units. This works out very well if your self-storage facility is on the same site as your primary business.
- Benefits and Potential Pitfalls
Benefits:
- The management expense for your site is much lower because you do not have to hire additional personnel.
- The customers are able to talk to someone directly at or near the site.
- If security problems arise, someone is close enough to take immediate action.
- Your self-storage business may drive traffic to your primary business.
- A project as small as 50 units or 5,000 square feet, will still be financially feasible with this option.
- If your self-storage facility is located a fair distance from your primary business, you will have to make sure it is obvious where the customer needs to go to rent a unit.
- Helping your self-storage customers may interfere with the operations of your primary business.
- Managing from home: Customers call you to arrange a meeting at the facility to tour and rent units. This approach is mainly used for small projects in small towns.
- Benefits and Potential Pitfalls
Benefits:
- A project with 50 units or 5,000 square feet is still financially feasible with this option.
- It is critical to have a person answer the phone. Answering machines will deter business.
- This method is not very convenient for customers.
- If security problems arise, no one is available to immediately take action.
- Utilizing a kiosk (an ATM-type machine) to rent the units: A kiosk can be used as your sole manager or to supplement your manager when the office is closed. Renters are becoming familiar with self-service machines and do not object to renting this way, especially younger clientèle. Examples of self-service offices
. - Benefits and Potential Pitfalls
Benefits:
- Kiosks allow you to rent units 24 hours a day.
- They are convenient to customers because they can get immediate attention.
- Kiosks keep your management expenses low, while still satisfying the customers' needs.
- This method allows you to build smaller facilities that are financially feasible.
- If you have an existing self-storage facility with an office, kiosks allow you to open a satellite facility with no manager.
- If the customer has a problem, there is no one onsite to help them.
- Kiosks are not human. If a customer has a question, the kiosk will not be able to help them figure out an answer. This may drive a customer elsewhere to rent.
- Hiring a management company: A management company is an established self-storage operator who may own their own facilities and is hired to manage other's facilities. Typically there is a 6-8% fee (of gross monthly income) to run an existing facility. If you are starting a new facility, there is a monthly flat rate.
- Benefits and Potential Pitfalls
Benefits:
- The owner does not have to be involved in any day-to-day operations.
- The management company will hire all people needed to run your facility and take on the responsibility of supervising staff.
- The management company will be familiar with running a business in accordance with applicable laws and statues, which can protect your business.
- Some management companies will market your business in their yellow page ads, which will save you money on advertising.
- You may not like the way they run your business.
- It can be expensive to hire a management company.
- A management contract typically lasts from 1-2 years.
Plan Security
It is helpful to consider how you will secure your facility in the "site layout" phase of your development. This will allow you to efficiently plan for gates, access, cameras, etc.
You can choose to have no security at all, except for locks and lights. The pitfalls of this option are that the units can easily be broken into and you are more susceptible to getting unwanted items stored in your units.
The next level of security is to put a fence around the property. A controlled-access gate is the most effective type. Units that have a controlled-access gate typically yield higher rental rates.
An even higher level of security is to install surveillance cameras around your site. Strategically place them to observe anyone in the office, at the gate, inside interior hallways, and in the driveways. Cameras are also a good deterrent to people leaving unwanted goods in the units.
The last security item you may want to consider is door alarms for all roll-up doors. As a customer enters through the gate, the door alarm on their unit will be deactivated. The customer will only have access to their unit, which makes it difficult to steal from or vandalize items in another unit.
Examples of gates, fencing, and security sytemsCoordinate Marketing
One of the biggest mistakes new self-storage developers make is to not budgeting enough for marketing. It takes a lot of money to brand your business in your market. Spend some time developing a comprehensive marketing plan that you can analyze and track over time. Consider the following avenues:
- Yellow page advertising: This item is often overlooked-- don't make the mistake of not being in the yellow pages the day you open. Find out the deadline in advance of your target open date to ensure your listing is in on time.
- Website/email marketing: Younger customers tend to utilize the internet over the yellow pages. Consider your demographic and whether e-marketing is important for your business. Website development can be a lengthy process and should be planned for in advance.
- Grand opening: This is a great way to open your business with a bang! Contact local media to get coverage of your event. Involve the local community by sending out invitations and posting advertisements. Make it fun with entertainment, food, or special deals. Submit a press release to your local publications for free publicity.
- Signage: Your signage should be easy to read from the road and compliment the branding of your business. Find out what the local ordinances are for signage from your building department. Be sure to include your phone number and web address, if you have a website.
Ready for the next step? Securing your building permit is an essential step in the development process.
