I recently audited a self-storage facility where the owner left control of the finances to the manager. I discovered that a lot of personal expenses had been charged to the company. No one looked at the bills before paying them! This site also had no budgetary or financial goals. The staff were accommodating and had kept things the same for over 30 years. Not only were the policies violated, but there were areas where the property could have saved money.
Regularly monitoring your self-service storage business spending is essential because it empowers everyone and helps keep the business on track. Let’s see why and how to do it, and where you might find some savings.
Respect the budget
Every self-storage operation must have a budget. It is a living document that should evolve over time to adapt to the needs and goals of your institution based on past performance. Recognizing that you are spending too much or not enough can help you determine whether to make cuts or increases for the month or year ahead.
It will also help you identify when expenses increase, sometimes unexpectedly. A good example is your utility bills. For most of us, they come in and we just pay them. But what if your water bill suddenly goes up and you don’t know why? It is a sign that you must investigate. Maybe you have a broken water valve that’s been leaking for months!
Tracking your spending every month is essential. You need to have a feel for your cash flow, what is coming in and going out. You’d be surprised to learn how many self-storage operators don’t care where all the money is going! Take an inventory of all your business accounts, including your checking account and credit cards. You may find that you are paying for a service that you no longer use or that costs significantly more than in previous years. It might be time to cancel or change providers.
It’s always worth taking the time to keep tabs on your spending. Monitoring will help you understand what is really going on in your business. Knowing what you spend weekly, monthly, and annually — and on what — will help you manage your operation better.
To save money
So, now you know it’s important to have and stick to your budget, but honestly, it’s not enough. You should also set goals for yourself to save money where possible and make progress towards them. In which areas do you need to improve the most? How does your self-storage facility compare to others that are similar?
On average, facility expenses will represent 30-36% of revenue. Industry statistics show a range of $ 5.40 to $ 7.50 per square foot. While some annual increases are to be expected, many operators are experiencing larger-than-normal shocks associated with the pandemic. I have a site where insurance premiums have increased 25% this year!
So take a look at your costs. Know what they are and constantly make sure to minimize them. For example, what can you do to reduce your energy bill? Are your office lighting and equipment energy efficient? What about your heating and air conditioning system? Consider options like window films and solar panels that could reduce your utilities. Perform preventive maintenance to increase the life of your systems and equipment.
Payroll is one of the highest expenses of any self-storage facility, consuming up to 25%. TTake a prudent approach through all stages of the hiring process, from recruiting to onboarding, as this is one of the most useful cost control measures. Bad hires are expensive, and an employee who can’t meet the demands of their job weighs more heavily on a company than you might think.
Other major expense items include property taxes, insurance, repairs and maintenance, and marketing. Some we can control, some we can’t; but they are all part of business. You should review them and shop for them when possible. Don’t sign up for an annual renewal without making sure you get the best deal! In fact, your contracts with third-party vendors are a great place to cut back. Multi-year contracts usually favor the vendor, so if you can reopen them to annual tenders, you may be able to lower your costs.
Don’t throw dollars in the wind! Audit every aspect of your self-storage operation’s expenses and do all you can to keep them as low as possible.
It’s a team effort
Regardless of the size and structure of your self-storage business, you need someone you can trust to review financials and keep the business on track. It is a team effort, from the day-to-day property manager to the person paying the bills. If it is the same person, are their interests aligned with those of the company?
Regularly tracking your spending can give you a clear idea of where your money is going (and where you’d like it to go instead). Challenge all employees to identify ways to save time and money. Almost anyone can report inefficiencies or activities that have a low return on investment. Your external partners, suppliers, and vendors can also come up with ideas on how your business can cut expenses, or how they can work with you more cheaply by changing payment terms or ordering templates. Consider rewarding employees and partners whose suggestions are implemented.
I challenge you to go find savings in your self-storage operation today! They might not come from where you would expect. However, until you start checking and tracking regularly, you might be leaving money on the table.
Susan Haviland is the owner of Haviland storage services, specializing in auditing, manager training, market studies and operational reviews. She has over 32 years of industry experience ranging from Site Manager to Vice President of Operations at Extra Space Storage Inc. and Price Self Storage. She is a frequent speaker at conferences and trade shows. For more information call 760.401.0297.