In today’s dynamic self-storage business environment, many independent owners are forced to compete with larger, better capitalized and more sophisticated self-storage operators. Most owners consider the REITs to be the largest competitors in their markets, but we are now seeing the regional players and third-party management companies grow to a level that leaves the local independent operator with more skilled competitors than ever before. So, the question has become how can an independent self-storage operator take on the giant corporations and large third-party management companies and not only survive but make increased profits? Quite simply, operators need to change their attitudes and become more proactive! Following are four strategies that you can employ to compete and thrive in your local market.
If you try to take on the large operators head-to-head on everything you do to operate a self-storage business, the chances are you will lose. For example, you can’t possibly spend the money on marketing that they do, but you can market where they do not market and be smarter about the marketing dollars you spend, specifically in your neighborhood. Most of you have the opportunity to join a local Chamber of Commerce and local business groups. You should also consider advertising in neighborhood newsletters, church newsletters, school newsletters or sponsoring a local youth sports team. These local advertising options can bring you a number of small businesses, employees, their families and friends and people in the community who think and act like you. It’s all about potential customers thinking of you first when they make the decision to rent a self-storage unit. Use this as a marketing strategy whenever possible. Instead of marketing your property on a total market basis, like the big operators do, go after your localized area and utilize your resources and efforts in ways that are most beneficial to your business. Chances are the big operators will not be as effective as you because their decision makers are not privy to the same local information that you have. Your local knowledge, direct contact with your customer base and the quality of your Site Manager will give you an advantage!
Change up your street awareness and get a fresh look. Most large operators want all of their stores to look the same, but you have the ability to come up with a NEW workable design and make the change in the matter of days, not weeks or months. For example, say you have your curbs painted white along the street and your office shell is cream colored with blue trim around your windows. Change it – make your office shell blue, paint your curbs yellow, and paint your trim white. You will be surprised how many people will stop and notice your store even if they have been driving past it every day for years. Have multiple flags/banners with different color schemes and move them around and swap them out regularly. This will lead to new customers! The advantage you have as an independent operator is you can change the look of your store and make street awareness an important part of your marketing campaign. Remember, independent operators don’t want all of the stores to look the same, this allows you to differentiate your store from the rest of the market.
Can you reduce your operational costs so that your profit margin is greater, even without an increase in occupancy or rates? You better believe it! Not only will you increase profits, but this will also make your property more valuable. Shop around with local vendors for needed goods and services. Local vendors are more likely to give a local business owner a better deal on goods and services as compared to a large corporation. Networking with the people you meet by being a member of the local Chamber of Commerce and local business groups might also create an opportunity to offer some business to many of those new connections.
It will also be worth your time to analyze all of your operational expenses. For example, you may be able to negotiate a better rate for your waste/trash removal if you find that you do not need as large a dumpster as you have, or need the frequency of pickups. Shop your vendors regularly and make sure you are getting the best price. Keep an eye on your itemized bills for phone, internet and other utilities. They are infamous for adding additional fees such as fuel surcharges and for increasing rates when your current contract expires without informing you. Just by calling and saying something you can often get these reduced. The point is that operators can save money if you simply take the time to look at each and every detail of your business expenses and not just focus on the revenue.
Instead of having the attitude that you’re at odds with the large operators, join them. Many of the REITs and large operators actively adjust pricing on units daily and weekly. While you may not have the resources to be as effective as they are in doing this, take the time to identify your 3-5 main competitors and get in the habit of checking their rental rates often (onsite and website rates) and adjust your rates accordingly. It doesn’t take long and should become a part of your daily or weekly routine. We have found that operators who are proactively adjusting rental rates to be competitive, and if necessary, meaningfully lower than the market can operate at a very high occupancy and drive revenue higher from the in-place tenant base. Also, be prepared to reduce and increase street rates based on seasonality, which will vary depending on where your facility is located. Remember, you can’t raise rates on a vacant unit!
Actively managing your Existing Customer Rate Increases (ECRIs) in light of the COVID disruption is proving to be very challenging for small operators. The industry took the approach of suspending rate increase during the onset of the COVID pandemic in order to “do the right thing” and comply with all state and local guidelines and restrictions. However, staring in July most local and state restrictions had been lifted and industry leaders starting to roll out rate increase to their existing customers. Due to the suspension of rate increases for 90-120 days many small operators are struggling to get caught up on ECRIs. Self-storage operators need to be aggressive on rolling out ECRIs and in order to get caught up you will need to roll out a larger than normal amount for a 60 to 90-day period. We have found that due to the extended leasing season this year and surge in demand, most of our ECRIs have been effective in increasing revenue and we have had very little push back.
With the amount of new development in the self-storage space today and recent disruption of COVID we are recommending to our clients that we take a very aggressive approach to rental rate management and ECRIs. We have found that highly occupied stores can produce much higher revenue growth with aggressive rental rate management and ECRIs. They are also in a better position to compete with new supply because most new properties have projected very aggressive rental rates in order to justify the high cost of development and are less likely to drop rates until it is too late.
These tips can help any operator, large or small, stay competitive in an increasingly tight market. Being proactive, rather than reactive, will help your facility achieve greater revenue and ultimately a higher valuation.
Korey Hanson is the President of Argus Professional Storage Management, one of the largest independent third-party management companies in the U.S. He can be reached at 520-320-9135 or korey@ proselfstorage.com.
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