It’s probably safe to say that there isn’t a single self-storage owner in the world who isn’t interested in making more money from their investment. Likewise, it’s doubtful that any self-storage operator wants to lose money at a property he or she manages. While there are plenty of ways to increase income at your facility, such as offering ancillary services and selling retail goods, there are methods to turn a larger profit with minimal effort.
Line It Up
Before you can increase your income, you need to figure out where you make a profit and where you spend money. “Take the time to really understand your operating income statement. It’s really plain and simple,” says Jerry Jones, owner of The Self Storage CPA and a certified personal accountant who has been serving the self-storage industry for more than 25 years as a tax and business advisor. “As long as you understand line items you can control everything related to your financials.”
Jones suggests hiring someone to evaluate your income and separate everything into individual line items. For example, boxes, locks, late fees, truck rentals, tenant insurance premiums, and unit rentals would each be listed as a separate line item. The same example would apply to your self-storage facility’s expenses. Additionally, when it comes to your marketing expenses Jones says to split it up by each individual marketing campaign or media outlet to figure out which gives you the most bang for your buck. If you keep good records, you can compare your leads to your marketing line items to determine which marketing campaigns are—or are not—worth the money.
“When your all of your income is consolidated you don’t know exactly where your income is coming from,” he says. “Line items enable you to know where you are spending too much money, where you can cut costs, and where to raise fees. Having your gross income and costs broken down into line items can help you increase your profits and reduce expenses.”
Although the tax season is a time that many people typically dread, Jones says that doing your taxes is a good time to plan for the future. “Doing the actual tax return is the easy part,” says Jones. “While you are preparing your tax returns you should really be planning for next year. Doing your taxes can help you figure out how to cut expenses to make more money in the future.”
Moreover, by hiring a certified public accountant or tax professional to prepare your taxes you can take full advantage of available tax deductions that you may not have known existed. “Some people don’t know this,” says Jones, “but you can deduct items like seminar costs and educational workshop fees.” In addition, don’t forget about the federal, state, and local tax breaks for environmentally-friendly initiatives such as solar panels. These “green” tax deductions and the Section 179 provision, which allows taxpayers to deduct the cost of certain types of property and equipment as an expense, can enable self-storage facilities to significantly cut costs. And the good news is that the Section 179 provision, which was set to drop to a cap of $25,000 in 2013, has been extended. The $500,000 limit will not drop to $25,000 until 2014.
Do The Math
One of the most logical ways to make sure your self-storage facility isn’t losing money is to keep close tabs on the retail items sold on site. This is easily achieved by conducting a monthly inventory of every item the facility sells. Then compare your item counts to the amounts originally purchased and the amounts sold to ensure that items haven’t been lost or stolen. However, Jones says that it isn’t necessary to count boxes by each individual size. “You can count boxes as one item to save time. The totals for every box size you sell aren’t as important as the overall quantity of boxes.” On the other hand, counting the boxes by size can help you figure out which sizes are your best sellers when it comes time to place a supply order.
In addition to conducting routine inventory, it is essential to perform regular audits of your facility’s financials. Storage audits can increase your site’s operational efficiency and detect employee theft. Although Jones recommends hiring someone to conduct your self-storage facility’s audits, it is possible to do it yourself. There are several storage-specific tools available that can effectively guide you through the auditing process, such as the late Tom Litton’s book Auditing Self-Storage: Preventing Employee Theft & Embezzlement and an online video presented by Ann Parham and MiniCo about the subject. There are even audit checklists and forms that you can download to help keep you on the right track.
Speaking of employee embezzlement, Jones offers some good advice about how to spot possible theft. “Be sure to go out and count the empty doors,” Jones says. “Check your units and compare the numbers in your accounting software to what’s listed in the site management software. Look for inconsistencies and review the gate access report to ensure that your managers aren’t ‘renting’ units under the table.” He also suggests varying the days and times that you conduct your monthly checks to keep your managers honest. “You have to look at every single way they can steal to make sure they don’t. And be wary of managers who don’t want to take time off; they may have something to hide. Keep an eye on the details.”
A few other red flags include storage managers who live beyond their means, managers who are experiencing financial hardship, managers who have gambling addictions, managers who claim to be the facility’s owner, managers who maintain particularly close relationships with vendors, and managers who exhibit excessive control issues. Here is some additional food for thought: Although conducting background checks and credit checks can thwart some criminals from becoming employees at your self-storage properties, according to the 2012 Marquet Report on Embezzlement, less than five percent of major embezzlers have a prior criminal history. Moreover, the report states that 62.7 percent of embezzlement incidents were committed by women and 63.4 percent of major embezzlers are employees with bookkeeping or finance positions.
Erica Shatzer is a freelance editor and writer based in Hollidaysburg, Pennsylvania.