Just because you've done it before, can you do it again in the self storage business?

Third party property management in the self storage business can be a satisfying business. You get to see clients succeed. You get to see entrepreneurs reach goals and grow their businesses. You get to see projects go from dirt, or from an old building, or from an under-managed site to a valuable, busy asset with a core group of loyal customers.

But it can also be a challenge. Unless the project you take on is on the corner of Main Street and Broadway in a busy, growing community with a lack of other storage options, you have to work for every rental you get. You have to work for every bit of progress you make.

Self storage can be a profitable and rewarding business. But it does not have a bottomless well of spendable cash. As in any business, there are creeping expenses that can erode N.O.I. There are any number of unfortunate events that can demand money for repairs, fees, and so on.... that don't always happen when the operating accounts are flush. Managing cash flow projections, protecting reserves, and managing expenses are all as important as cleaning hallways, having a good website, and making sure your parking lot doesn't look trashy.

Local market conditions can change for the better or for the worse. Sometimes as a small business, you don't see a change coming. Some changes happen so gradually, that you don't see them until they are stepping on your toes. One needs to be prepared for things to turn up or down without getting too excited about either direction.

Managing self storage also requires some patience. We are in a low transaction volume business. You may be in a site that rents 30 units a month. That means a bad weekend of weather could knock you down to 25 units for a month. That has potential impacts. It can also mean a weekend of nice weather early in the rental season could bring you 35 rentals for a month. You need patience to handle those months when a bit of bad weather or a week of road construction near your site causes you some indigestion.

Like many pursuits, successful storage management comes down to systems. You need good systems in place to deal with all the good and bad things that happen. Standard operating procedures should be able to make handling 90% of your day-to-day business very painless. There are many good technology and software tools available that make the management and operations pursuits so much easier than they ever have been. A part of having good systems is to also be able to improvise and break rules when needed to accomplish a task, overcome a challenge, or to fix a problem. The tricky think for less experienced groups is to know when it is okay to improvise and break a rule, and when one just needs to stay the course and hold to your system.

Also like many business pursuits, managing a self storage site also comes down to managing the fail points. You know from experience all the things that can go wrong. You also know from experience that new things can go wrong. You get to know the break points, the weak links, the fail spots, and you have a plan in place for them. It is unrealistic to think that good systems can prevent all failures. It is however realistic to learn to manage failures well. Many inexperienced groups spend an inordinate amount of time grinding teeth after a failure, looking for someone to blame for a failure, or over-preparing for failures that are not critical to business operations. The failures will happen, so create systems for the times when your systems fail.

Sometimes managers and operators get too focused on systems and financials and forget that every business is a people business. It can be a challenge to remember to focus on the people while you are focusing on systems and process. People make our business work on both sides of the counter. Our customers are driven by emotional needs and act according to human nature. Our employees and vendors are people too and have their emotional needs, and follow emotional triggers. It is tempting in the age of Big Data, Artificial Intelligence, Learning Machines, Robotic Services, The Internet of All Devices, and Automated Everything to only think about transactions and numbers. Remember it is always about the people side of things, even when technology calls out to you.

Experience really is the thing that makes a difference in many pursuits. For the purposes of this discussion, it is experience that makes the difference in third party self storage management. Anyone can manage a self storage site that is in the magic location at the corner of Main Street and Broadway with 50,000 cars passing by each day in a growing community where the closest competing self storage place is ten miles away. But it takes a lot of experience to manage the typical site that comes with the typical challenges....challenges like market saturation, eroding rental rates, declining occupancy rates, a list of capital expenses and repairs that are needed, a bank note that needs refinancing soon, an investor group with a few members who are nervous about the state of the economy, a municipality that needs more fee and more tax revenue to continue to provide the services the community requires, and so on.

I certainly do not mean to paint any picture of doom and gloom. The self storage management business can be very rewarding, and has been very rewarding on an extremely high percentage of projects. This is part of the challenge. Investors look at self storage and see the high rates of success and the low rates of failure and it makes their heads spin. Self Storage looks like a Golden Child compared to so many other business and compared to all the other real estate classes, except maybe the legacy top end inner city top 5 MSA office towers. But even a Golden Child can stumble and fall if not raised right and supported well.

Managing storage units for clients is very satisfying. You get to see your systems work. You get to see your people do well and grow. You get to see your clients build wealth. I am grateful to be a part of that.

How do your systems help you manage your self storage places? How are you changing your systems to adapt to today's environment? If you've done self storage projects successfully in the past, how are you approaching new projects that might be different than the approaches you've taken in the past? I'd love to find out your perspectives.

About Store Here. Store Here owns and operates sites in 15 states, offers third party management for clients, and offers roll-over telephone sales support for independent storage operators through its Call Here call center service.

About Tron Jordheim. Tron Jordheim is the business development manager for Store Here and has been in the self storage business since the turn of the century.