If you’re thinking that a big sale could be on the horizon for your storage facility, you’re probably starting to wonder how you can make that process go as smoothly as possible. Perhaps you’re not quite ready to make that commitment yet and you want to compare your options before you sell.
Wherever you find yourself, working to raise your facility value is one way to ensure that, whenever the time is right to sell, you’ll get top dollar for your property.
There are several factors that drive operators’ decisions to sell. Perhaps your local market has a consistent, high demand for self storage, and now you’re thinking about selling in order to take advantage of the market. Or maybe your reasons for selling are more personal: You’ve been in the business for years and you’re ready to retire, your family is thinking of moving out of state, or you’re simply ready to dive into a new industry.
Depending on what your reasons look like, there are a variety of options that could be right for you as opposed to (or in addition to) selling:
Look at the unit sizes that are most commonly occupied. For example, say your facility has always had a fairly even distribution of unit sizes, with ranges from 5’x5’ to 10’x30’. Over the years, you learned that the market’s needs weren’t as balanced as the product you provide. Your vehicle storage spaces are always in extremely high demand and your largest spaces are always full. Meanwhile, you always have a promotion running on your 5’x5’s to keep them occupied.
This sort of situation may be a clear indication that some adjustments to your unit sizes could be a good move. In this circumstance you could take the majority of your 5’x5’s and convert them into larger units. You could also look at your lot and see how difficult it would be to add more vehicle spaces. Adjusting to the needs of the market, especially if they’ve mostly been consistent for a long period of time, will likely lead to more rentals, which affects your bottom line today and improves your facility value long-term.
Self storage hit its construction boom before the 1980s, with 1978 widely considered as one of the biggest years of growth for the industry. When the market needs were met and the economy took a turn, construction slowed down and nearly halted in 2009. But what didn’t halt was the country’s growing population, which may mean we’re on the verge of another big boom.
Study your area. It’s very possible that the population has been expanding, especially if you’re located in a city that has recently attracted new residents due to its thriving job market or appealing culture. If there are more people than there is space, now could be the perfect time to add facilities to the area, growing your business and meeting the needs of the market before your competition can.
Think about the reasons that you want to sell your property. Is it because you’re ready to see a big payoff for all your hard work? Is it because it seems like a strategic move that will springboard you into your next career goal? Conversely, is it because you’re ready to retire? Some facility operators know that they don’t want to run the day-to-day aspects of their property anymore, but they aren’t quite ready to part ways with the company they’ve invested so much time and money into.
Management companies like Absolute Storage bring their expertise in managing the operational aspects of storage, usually charging 4 to 6 percent of your gross revenue while often generating up to 20 to 30 percent more income. Think of it like owning personal property: If you own a home you could either sell it for a big sum now, or you could pay a small fee to a property management company and make a profit each month from renting it out.
It’s also worth noting that outsourcing your management could be a good move even if you do choose to sell. When your facility is managed by a professional company that specializes in this line of work, it could make your company more appealing to a buyer.
If you’ve weighed all your options and it seems that selling is your best bet, there are a few major components of your business that you’ll want to review and tweak, many of which are good to keep in mind even when you’re not ready to sell:
We’ve talked pretty thoroughly about rate and revenue management on the storEDGE blog. If you haven’t already, learn about the various kinds of occupancy rates and what they mean for you. Then take an in-depth look at revenue management, which helps you navigate whether or not rate changes are right for you as well as how to handle customer feedback on rate increases.
Revenue management is an integral part of keeping your profits as high as they can be. Mara Rodriguez, pricing analyst at The William Warren Group empathizes with operators who have a resistance to revenue management. After all, it can be hard to balance the desire for increased profits with the relational side of business. But Rodriguez warns, “A lot of operators don’t understand that having high occupancy levels actually hurts your revenue growth. If you have no one moving in and out, your revenue is stagnant. Rate increases generate some churn and allow you to replace old customers with new customers at higher rates.”
This is one key element companies will look at when considering buying your facility. If you don’t have a good revenue management system in place, that’s one of the first things that they’ll implement, which will likely lead them to pay less for your property. Why would you earn less for your facility when many self storage software programs can provide an automatic, customizable revenue management strategy for you?
It’s hard to not compare selling your storage facility to selling your home. And in personal real estate, one of the most common problems you see is sellers setting unrealistic expectations, both in terms of price and how quickly they can sell. This misstep completely makes sense. After all, they’ve lived in the home, invested their money into it each month, and have established years’ worth of memories in the space. It’s hard to give that up, especially when they’re told that their home isn’t actually worth as much as they thought or when they need to start removing personal pictures from the walls.
Self storage isn’t entirely different. Whether you’ve owned your property for a few years or it’s been in the family for decades, it’s hard not to feel protective of it and to question why anyone wouldn’t see in it what you do. The problem with this approach is that you may not understand where buyers are coming from, and very real concerns that they have may seem unreasonable to you, leading to a prolonged process or less money on the sale.
If you want to be successful as a seller, start thinking like your buyer. For instance, anyone who thinks about buying your facility will want the following:
Immaculate business records, including the day-to-day traffic of leads and reservations as well as the financial and operational trends of your property over a long period of time.
A revenue management strategy that’s tailored to your market and your facility, as well as a plan that works. They want to see that you’re concerned about the bottom line, doing everything you can to keep your facility’s value strong and steady.
Well-maintained grounds and property amenities that your customers love. Consider taking surveys and asking where you can improve. You can then use that research to show your buyer that you know your stuff.
Bonus: A beautiful self storage website design that integrates with your cloud-based storage unit software. Much like revenue management, if this piece of the puzzle is missing when you sell, it’s one of the first things the buyer will take care of. Is your website (and your software, for that matter) something you would proudly show off to a potential buyer? If not, you’re likely knocking money off your sale price.
Of course, many of these tips can be applicable even if you aren’t quite ready to sell. If you’re reading through this article and seeing several areas for improvement, or if you’re curious how much your facility value could rise if you were focusing on that in addition to the bottom line you’ve always been concerned with, remember that you don’t need to sell as soon as possible.
If you rush into the process of selling, you could miss pretty simple steps for dramatically increasing your facility’s value. Some of these steps are fairly easy to undertake, but time is often the determining factor in whether or not they succeed (and just how much they succeed). When possible, take your sweet time making this big decision so that you can make the right decision rather than be the desperate one in a selling situation.
Technology, particularly your mini storage software, is designed to take over the aspects of your business that don’t need your personal touch. Programs will automatically calculate smart ways to raise prices on vacant and occupied units, and programs that are accessible anytime and anywhere allow you to take your business with you everywhere you go.
Technology is precisely what allows you to make sure you’re doing everything you can to increase your facility’s value. It allows you or your managers to spend time on marketing efforts and customer service, working together to keep your customers happy and your facility value rising.