Bottom-Line Boosters

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Increasing Ancillary Income In 2016

When self-storage owners and operators think of their businesses, they may view it as several different entities. First, they think of the units; then they think of everything else that might provide ancillary income or extra income to add to the business.

In the past, this may have consisted mainly of a small retail section of the office with boxes, tape, locks, and other items that complement the main business of storage. Today, it most likely means several different types of goods and services, some of which may not even have anything to do with the self-storage business itself.

If researched and set up correctly, ancillary business can add as much as 45 percent to your profit margin, according to Kathy Winkelman, vice president of operations for StorageMart. “We sell things that serve or solve the needs of our customers,” she says, adding that her company expected to sell approximately $1 million in additional products in 2015.

Of course, not all companies will see that kind of sales or profit. However, storage business experts agree that, if done right, extra goods and services can significantly boost your revenue.

A Five-Step Formula
Nick Nichols, CEO of DalFortMedia.com, developed a five-step formula for adding ancillary items to your products and services at your self-storage facility:

  1. Look at your market. Nichols says this is basically looking for holes and gaps in your area. What products and services do people need that you can provide?
  2. Look outside the market. Nichols suggests looking at complementary businesses as well as competitors. For example, can you provide mail boxes?
  3. Who in your market is providing these services, and how are they doing? Shopping the competition is the best way to see what’s happening in your competitors’ stores.
  4. Analyze the most appealing items in terms of demand, sourcing, profitability, and available resources. Nichols points out that different products and services require different levels of investment. A wine storage service might be a good idea in a high-end facility in wine country, but it requires a significant amount of investment. Something as simple as having a package receiving service might seem like a good idea, but it may not be a good fit if you don’t have a manager on site during regular hours.
  5. Select one to three items and test the market. Rinse and repeat. Nichols suggests investing the minimum amount or buying the minimum amount of inventory at first to see how it goes before spending a lot of money. “Poll your customers; see if they would use a service,” says Nichols. “Lots of services that others are offering may not be right for your facility. If it isn’t, try something else.”

Common Goods
Selling moving-related items, as well as items such as locks, that your customers will need is the most obvious source of ancillary income off of your self-storage business. “Typically, when people need storage services, they are going through a life-changing event, so we want to offer products that will make their life easier,” says Winkelman.

Even smaller self-storage facilities can make anywhere from $5,000 to $10,000 additional profit from selling retail items. Moreover, they most likely have one of the highest ROIs. Typically, setting up a retail area doesn’t require an extra investment aside from retail displays and inventory as most facilities simply allot some space in the office or in an unrented unit close to the office to work.

The key to quickly moving the items is setting up an attractive retail display and training your managers and staff to sell the products. “We mention that we offer these items with each call,” says Stacie Maxwell, vice president of marketing for Universal Storage Group. “We also offer them on our website; and if the customer is in a hurry, they can order the items and we can pull it and have it ready when they come in.”

Maxwell adds that her company bundles packages depending on the size of the home that is being moved. “We never ask ‘Do you need boxes?’ she says. “We ask, “How many do you need?” Maxwell says the key is to get the customer interested if they call in and get them on site to sell some of the other products and services they offer.

Ray McRae, vice president of Storage Solutions, suggests that self-storage operators think out of the box in their retail areas. “Depending on what part of the country, I have even seen some self-storage facilities selling bait and tackle,” says McRae.

Driving Profits
“Truck rentals, if approved by one of the big three do-it-yourself moving companies, such as Penske, Budget, or U-Haul, generally requires no out-of-pocket expense to get the dealership,” says McRae. “It just requires some unused land and some labor to operate the business. From that standpoint, the ROI is very high.” However, McRae states that offering truck rentals may require a special use permit, depending on the municipality.

Of course, if you have your own moving trucks and offer them to customers as a complimentary service to move in our out of your facility, this additional business would not likely work. What’s more, it may not work if there are already other facilities or businesses close to yours offering rental trucks. However, many self-storage operators find that offering moving trucks for rent brings in various amounts of ancillary income. The bonus is that the truck companies provide advertising for your facility by promoting your store as an authorized rental location.

Recreational Sales
If your facility offers RV storage or if you’re in a recreational area where you have a lot of customers storing boats, you have a whole other area of opportunity for sales. Propane tanks are one of the most popular items to have, but McRae cautions that selling propane tanks may take more of an investment.

“When dispensing propane, you generally will have to have it approved and then obtain permits to install explosion proof wiring. There is also special certification that staff must have in order to dispense the liquid fuel,” says McRae.

Another viable option is installing a wash bay to enable customers to wash and vacuum their RVs before returning them to their storage units. Similar to propane stations, wash bays may require drainage permits.

Carol Mixon-Krendl, president of SkilCheck Services says that one of the facilities her company has worked with offers a concierge service where the staff would wash and clean the RVs and put them in the storage unit. A service can also be offered to get the RV or boat ready before the customer picks it up.

Office Services
If you have an office that has a conference room in your facility, offering it as a complimentary service to your customers is a great idea. Now try taking it to the next level: Rent the space to other business people in the area.

According to the Pew Research Center, 44 million Americans, or about 30 percent of the workforce, is self-employed, which gives self-storage operators a unique opportunity to tap into this market. While many of those who are self-employed may have offices at home or shared workspace in an office building, many entrepreneurs don’t have access to a full conference center.

Setting up a conference center will take some initial investment, including partitioning off a large enough space to accommodate several people and investing in teleconferencing technology and equipment for presentations.

In addition to offering conference and meeting space, some self-storage facilities rent office space, giving self-employed workers a quiet space to work at a lower cost than an office in a traditional business or office complex.

This idea is gaining traction in the U.S. as well as self-storage facilities abroad. In one widely reported expansion, Kent Space in Great Britain is planning an expansion this year that will convert a former office building to a facility with both storage and office space available for rent. When the $8 million investment in the town of Ashford is complete, the complex will have 27 office suites and two high-tech meeting rooms in addition to its self-storage units.  

However, you don’t have to invest in a total new conversion to create office space in your facility. If your facility is not at 100 percent occupancy, you may look into converting some of the space to virtual office space, especially if you have a high amount of business clients who may need a place to spend a few hours making calls or doing paperwork such as pharmaceutical representatives.

Mixon-Krendl recalls a self-storage facility in downtown Honolulu, where any space is at a premium, which offered virtual offices as well as Wi-Fi and copy services. “I’ve found that we have been doing more with clientele that are business customers,” she says.

That particular facility catered to pharmaceutical reps who needed both climate-controlled storage and a home-base, so to speak. Mixon-Krendl says the business services they offered boosted their ancillary income and helped increase their occupancy rate in the storage facility, tripling the number of pharmaceutical reps it had as customers.

An additional business service self-storage operators can offer is shelving for records storage. “I had a store in Reno that had a lot of customers who stored records,” says Mixon-Krendl. “Of course, you only have so much room for inventory, so we worked with a company that had a catalogue and we just ordered the shelving as it was purchased. If you have the staff, you might even charge them to set up the shelving for them.”  

The best part about having customers who are storing records: They will most likely be long-term storage customers. “I have some customers at that facility that have been there over eight years,” says Mixon-Krendl.

Most business customers will appreciate post office boxes and receiving services as well. Personal Mail Boxes, or PMBs, can either be set up in the store or in a bank of boxes outside, says Winkelman. These boxes generally require extra staffing since the storage facility is responsible for sorting the mail and placing it in the appropriate box after the mail is delivered to the store. Shipping and receiving packages for customers will require staff too. “There is a little learning curve and some training specific to the business and staff will need to be trained,” says McRae.

Specialty Storage  
One of the most popular forms of ancillary storage is through vaults of various sizes or safety deposit boxes. One of the facilities Mixon-Krendl managed had 300 safety deposit boxes. “I knew there must be a need for it or they wouldn’t have been there, but only four or five were rented,” she says, adding that she went to all of the banks in town and learned that their safety deposit boxes were all rented. “I told them we had them and they began referring business to us.”  

Gun storage is an even more specialized type of service and likely would only work in areas with a large amount of hunters or gun collectors. In addition to the cost of adding vaults, this type of service requires high-tech security systems.

Wine storage is likely one of the most expensive additions, and it’s not a good fit for many storage facilities. “You really have to study the market and make sure this will work for your facility,” says David Dixon, COO of Universal Storage Group. “We have a facility in Palm Beach that was a great fit because they cannot dig basements in Palm Beach, so enthusiasts needed someplace to store their wine.”

“We have moved up with wine storage at a few of our facilities, but to do it properly it is not cheap,” says Dixon. Wine storage targets a very high clientele who collect wine. Dixon said some of their wine storage customers have $2 to $3 million collections, and all of them expect the storage to be done right. This means that special storage spaces need to be built with high security in place. Cooling systems must run at a constant 55 degrees with 75 percent humidity and there must be back-up power sources in place to keep the storage rooms at that level.

In addition to the necessary rooms and equipment, high-end décor is necessary for these type of clients such as murals and mahogany wood. This part of the business can also have its own retail area selling cork screws, wine bags, aerators, and other wine accessories. Wine storage facilities typically offer wine tasting events as well.

Dixon adds that rent is market based, but on average, at $30 per square foot, even with its own retail sales, wine storage provides more of a service to a type of customer and less of an ROI than other ancillary revenue sources.  

Unique Offerings
When thinking of ancillary income, you don’t have to box yourself in to retail goods or services traditionally associated with self-storage. McRae gave the example of selling bait and tackle at a facility that is close to the water, while Mixon-Krendl knows of a facility in a small town that offered tanning beds in several of their unrented units. “They had them in the smaller units,” she says. “They couldn’t rent some of those spaces, so they figured out another use for them. They advertised the facility as ‘Storage and Tanning’.”

Cell towers have also provided some self-storage facilities some extra income. However, this isn’t typically something you can search out. If one of the cell companies needs a tower, they will typically come to you. If they do, make sure to go over the lease agreement with a qualified real estate attorney.

At the end of the day, boosting your ancillary income comes down to paying special attention to Nichols’ five-step formula. If you follow all of these steps and think outside of the box, boosting your income will be a breeze. 

Kerri Fivecoat-Campbell is a freelance journalist based in the Ozark Mountains. She is a regular contributor to MiniCo’s publications. Her business articles have also appeared in Entrepreneur, Aol.com, MSN.com, and The Kansas City Star.

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