Is a Third-Party Management Company Right for Your Self Storage Business?
People get into the self storage business for good reasons. Self storage provides a stable, predictable income stream, low maintenance, and low operating costs compared to other types of real estate assets. Additionally, self-storage is a historically safe asset class with long-term growth potential. There are, however, varied approaches to operating this type of business.
Some owners are active operators who enjoy the challenges and tasks associated with running a successful facility. Others are passive investors who may be new to the industry and don’t have the expertise to manage a successful self storage business. Fortunately, there is an option that allows this type of owner to capitalize on the benefits of their investment: a third-party management company.
A third-party management company with proven operational and marketing experience can improve your profitability while minimizing the time you spend on day-to-day operations. As in any industry, however, no two third-party management companies are alike. If you haven’t previously worked with a third-party management company, be sure to do your research and find a company with high-performance standards and a management style that is compatible with your company culture.
Ask The Right Questions
Choosing a third-party management company to operate your self storage facility is one of the most important business decisions you will make. The following questions will help you to evaluate your choices and determine the right company for your business.
As a storage facility owner, will I still be involved in the management of my business?
Find a company that will work with you to be flexible on your participation. Whether you want to be involved in every aspect of your business or you’d rather step away and leave it up to the experts should be a mutual decision.
What makes your company different from other management companies?
What makes a company unique? What is their value proposition? Does their approach demonstrate a concern for spending your dollars in the most efficient way? Look at their website and visit their offices to give you an idea of how well they’ll fit into your organization.
What is your company vision?
Do they have a mission statement, and does it align with your company values? Is their stated mission to protect the interests of the owners? What are their core values and do they operate consistently within those values?
How does training occur for onsite staff?
Ask to see training procedure manuals or any other training documentation. What initial and follow-up training is provided to your management staff? Will the company prepare your facility managers to handle the ever-changing landscape of the self storage industry? Visit several of the management company’s facilities and shop the store managers. Check for professionalism and sales training.
What are your fees and contract terms?
Are contracts customized based on your portfolio and needs? Do different terms apply based on how your finance facility? Is the fee calculated on gross income?
How long does the transition take once the contract is signed?
Most transitions take 45-60 days to allow for accounts to be set up and onsite visits. However, is this flexible depending on your facility’s needs?
What tactics do you use to handle revenue management?
Do they maximize revenue by the implementation of a rate management strategy that predicts customer activity and measures customer reactions? The right revenue management system should take the guesswork of managing potential and actual revenue to maximize return.
What types of reports will I receive?
Monthly and annual financial statements, comparisons of budgeted results to actual results, cost savings initiatives, and a narrative update on the progress of revenue growth programs are some of the reports you should receive regularly. The reports should give you the accurate data and information that you need to be able to make informed decisions that will continue to expand your business.
How often will you perform in-person visits?
Will company supervisors and senior members regularly visit your company and provide practical feedback?
How will you handle my exit strategy?
Do they have an exit strategy? Is the company experienced in marketing and selling self-storage properties, and do they have connections to active buyers?
Your facilities are unique in market, location, and personality. Choosing a third-party management company is one of the most important decisions you’ll make relative to the performance of your business. Look for a company with a passion for self storage, a proven track record, and a management style that fits with your company culture.