To effectively manage your self-storage facility and maximize profitability, you must closely monitor and control expenses. Knowing where your money is going is pivotal to ensuring financial stability, identifying cost-saving opportunities and making informed decisions. In this article, we’ll explore expense tracking and discuss which investments help create more value for your business as opposed to those that are required to keep things running.
The Importance of Tracking
As the self-storage industry becomes increasingly complex, controlling expenses is an ideal way to increase profit. But to do this, you need to track them. In fact, you can gain a comprehensive overview of the financial health of your business by accurately recording and categorizing your costs. This enables you to monitor cash flow, identify potential budget concerns and take timely, corrective measures. It also provides you with the necessary data for creating accurate financial statements, which are vital to secure capital, attract investors and demonstrate business growth.
To begin, it’s critical to have a solid accounting system and clearly define who’s responsible for using and updating it. A robust program should include controls over invoice approvals and payments in addition to providing monthly financial statements. Bear in mind, however, that it’ll look different depending on whether you own one property or multiple, so consider whether you plan to grow your portfolio.
Diligent tracking will help you identify areas in which expenses can be reduced and operational efficiency enhanced. Through careful analysis, you’ll be able to detect patterns, outliers and areas of unnecessary spending. This information can empower you to make more informed decisions, negotiate better deals with suppliers, and implement cost-cutting measures that won’t compromise your quality of service.
Tracking is also fundamental to effective budgeting and forecasting. By understanding historical expense patterns, you can create accurate projections, set financial goals and appropriately allocate resources. With a clear understanding of the financial landscape of your business, you can make strategic decisions regarding investments, expansion plans and revenue-generating initiatives.
Rising Costs and the Impact on Value
It’s important to note that inflation in concert with intensified competition has led to higher costs to run and maintain self-storage facilities. Utilities, for one, have been steadily increasing nationwide. Climate-controlled units require higher electricity use, which leads to higher utility bills. Costs are also higher for some electable, variable expenses; but in many cases, these are attached to areas of the business that create value, so continued investment, even at a higher price, is often warranted. As the old saying goes, sometimes you have to spend money to make money.
For example, expenses earmarked for marketing, payroll and planned maintenance can pay back dividends throughout the future of your business. Since the overall operating-expense margin in self-storage is low, every dollar brought in is amplified. Let’s look at how each of these areas contributes to the value of your operation.
A self-storage marketing program generally creates more value than it costs, but it must be strategic and strong. For starters, it should effectively communicate your facility’s unique selling points, showcase its amenities and security features, and highlight the convenience and benefits of using the product. This drives customer awareness, helps increase occupancy rates and fosters long-term customer relationships.
Your program should also include a combination of online and offline tactics. Web efforts ought to focus on establishing a strong web presence, optimizing search engine visibility and leveraging social media platforms to engage with your target audience. These can be complemented by more traditional tactics like print advertising, direct-mail campaigns and community outreach.
Be aware that the largest self-storage real estate investment trusts have made major investments in pay-per-click (PPC) advertising in the last year, and they aren’t likely to slow down any time soon. This has contributed to rising costs. In our own operational portfolio, we’ve seen PPC expenses increase from 10% to 30%, depending on the market.
It may seem counterintuitive, but paying higher wages and salaries to self-storage staff can offer several advantages that outweigh the investment. Skilled and experienced employees provide exceptional customer service, which ensures a positive experience for tenants and enhances a property’s reputation. Well-trained team members effectively handle customer inquiries, assist with unit rentals and address any issues promptly, which leads to higher tenant satisfaction and retention. Competent employees also improve operational efficiency, as they’re more likely to perform tasks accurately, thus reducing the risk of errors or delays.
Investing in a high-quality workforce ultimately contributes to a more streamlined and successful self-storage operation. It can also generate long-term benefits and potentially attract more customers through positive word-of-mouth recommendations.
Implementing a proactive maintenance program is crucial to ensure your self-storage facility functions optimally for the long haul. Preventive measures such as roof inspections, HVAC servicing and pest control help identify potential issues before they escalate into costly repairs or business disruptions. This is particularly important since this is another area in which costs continue to rise.
Routine upkeep of building components is essential to provide a safe and secure environment for tenants. Pay attention to parking lots, driveways, doors, signage, landscaping, security equipment, etc. This won’t only enhance curb appeal, it’ll will leave a positive impression on customers. By prioritizing facility maintenance, you can minimize downtime, reduce expenses and maintain high levels of tenant satisfaction, which ultimately contributes to long-term business success.
Of course, there are many other expenses involved in self-storage operation. I won’t delve into all of them, but here are a few others on which to keep a close eye:
- Business insurance: This is one of the largest costs faced by facility operators. get quotes through a specialized agent to ensure you have adequate protection but aren’t overspending for coverage.
- Property taxes: These are based on a storage facility’s assessed value, but the assessments made by local authorities aren’t always accurate for the market. Appealing your bill may help reduce your tax burden. During the process, you’ll present evidence, such as recent sales of comparable properties, income and expense statements, and market data, to demonstrate why the assessed value is too high.
- Revenue-management system: This can be an excellent investment, specially if it allows you to generate relevant reports and help you synthesize pricing information quickly.
Regularly review all recurring expenses to determine if you need to keep them all, and cut those that aren’t absolutely necessary. Renegotiate prices with your vendors at least annually. Make sure every dollar you spend is working for you and bringing positive returns to your company.
Protecting Financial Health
Diligent tracking of expenses is a fundamental practice that contributes to the success and profitability of a self-storage business. It not only allows you to benchmark your results against industry standards and competitors, it helps you evaluate performance and make strategic adjustments. It also ensures compliance with tax regulations.
By paying close attention to where your money is going, you learn vital financial information, identify cost-saving opportunities, and engage in more effective budgeting and forecasting. Review your financials each month to help you spot trends and discrepancies, and then take action where necessary. By embracing a disciplined approach to expenses, you can make informed decisions, drive financial stability and unlock the full potential of your business.
Magen Smith is a co-founder of Atomic Storage Group, a boutique self-storage management company, and owner of Magen Smith CPA, an outsourced accounting firm specializing in self-storage. She’s also a partner in Safe Space Development, which builds self-storage properties. Magen started in the industry as a facility manager and has held nearly every operational role. She has a passion for the industry, helping owners improve their businesses, teaching asset management and conducting facility audits. To reach her, e-mail [email protected].