What do you see as the most important strategy for controlling costs for 2016?
Chief Operating Officer
Storage Investment Management, Inc.
The best strategies for controlling costs during 2016 are good planning, regular evaluation, diligence, and negotiation.
It is important to plan ahead for purchases and services. Consider the amount of supplies you need for the year, then shop around for better pricing. If there is a significant savings, consider buying in advance. If you have multiple properties, think about consolidating those purchases to save even more. The same applies to services in addition to considering off-peak timing. Servicing furnaces for heat during slow periods for the contractor may result in savings.
Anyone in charge of purchasing should frequently evaluate both cost and quality from existing sources. Often it’s possible to find a lower priced quote (be sure it’s an apples-to-apples comparison); then go back to your existing vendor, asking them to match or beat the price. Keep a close eye on “add-on charges” appearing on your bill. Is your trash contractor still charging a “fuel surcharge” when fuel is at the lowest cost in years? Are you paying for a six-yard dumpster with weekly service when an eight-yard with twice a month service may be less expensive?
Are you keeping track of services performed? A simple vendor log in the office can be used for vendors to sign in. This provides a record of the dates and who was on site for service. You may want to also require them to show the time in and sign out when they leave. This can help ensure you’re getting the monthly exterminator services your account has agreed to rather than once every five or six weeks. If the time is included, you have an idea if you are receiving true service or a “drive by”. A property with 20 bait stations surely cannot have them all inspected and freshly baited in 15 minutes.
Never fear negotiating rates, charges, and especially increases. The worst that can happen is the vendor refuses to budge, which is really not likely. Think of increased charges the same as many customers see a rent increase: They are unwelcome. Just like the customer, call the vendor and ask them to eliminate the increase or threaten to find another vendor. You may be surprised by how successful this can be.
Vice President of Third-Party Management
We all should spend much time and energy focusing on our two largest annual operational expenses: real estate taxes and personnel costs.
Today I would like to focus on “service vendor management”. Too often we become comfortable and complacent regarding our service vendors.
Landscapers, snow removal providers, electricians, elevator maintenance companies, plumbers, door repair vendors, and heating/air conditioning technicians are examples of service providers that we use on a frequent basis.
We should review pricing and service levels once each year to ensure we are receiving fair and market pricing and acceptable service. We should request discounts for dollar volume or for the number of stores we own/manage. We should always bid out larger repairs or projects to multiple vendors.
Don’t be surprised to find that you have been paying too much!
We have a tendency to find service vendors that we personally like, ones that provide timely service, those that we have worked with in the past and have had good experiences with, or ones that are the most well-known providers in our market. These are all good reasons to use a vendor and should factor into our decision. Additionally, we must review pricing as part of every decision that we make. There are plenty of vendors out there that would love to have our business. Let’s make sure we are not over-paying our current vendors. An annual review and bid process keeps everyone honest!
In my almost 30 years in the self-storage industry, I cannot remember a more robust market. High occupancies combined with low construction activity equals unprecedented pricing power. If you are not doing well now, you are doing something wrong. With business flying so high, it’s easy to become complacent and lose focus. While revenue growth is important, your most important metric is how much falls to the bottom line. It is easy for expenses to creep up slowly and without notice. Without taking control of your expenses, revenue growth is wasted.
In order to make sure this doesn’t happen to you, give your business monthly checkups. Make sure you are controlling your expenses and they are not controlling you. The place to start is your annual budget, working with your entire team to analyze what works and what does not.
- Look at every expense and determine if it is truly necessary.
- Pick up an industry study and compare your expenses against those of your peers.
- Look at each expense category over the past three years and see if there is unaccounted for expense growth; If something stands out, research why it happened and put in place procedures to be sure it does not happen again.
- Budget your expenses based on reasonable expectations and past history.
- Review your results monthly against budget and seek explanation for unexpected increases.
- Communicate your concerns to your entire team, including the store manager, to eliminate wasted time and duplication of efforts.
- Lastly, don’t be afraid to sit down and renegotiate all your annual contracts. You will be surprised what you can save just because you took the time to ask.
Keeping expenses in line with budgeted expectations is the surest way to maintain focus on what is most important: how much goes into your pocket.
Director of Internet Marketing Strategy
The Storage Group
One of the best things you can do for your facility is to look for ways to control your costs. One of the most important ways to do that is to make sure your marketing efforts are targeted to your specific location. This will ensure you are reaching the potential renters within your geographic area. For many industries, it doesn’t matter where customers are located. That is not the case in the self-storage industry. Local targeting is the key to cost-effective marketing strategies.
The first way to target locally is to claim your free local listings. These are the business listings you see below a map of your geographic area in Google, Yelp, Bing, and Yahoo searches. These listings show potential renters exactly where your facility is located. Ranking well in your local listings can generate a great deal of traffic to your website for free.
The second way to target locally is with your search engine optimization efforts. Be sure the copy on your website mentions your city or town. For example, your website copy may mention that you have “climate-controlled storage units in Dallas”. That will help the search engines and website visitors to determine if your facility matches their search criteria.
The third way to cut costs by targeting locally is through pay-per-click advertising. Google, Bing, Yahoo, Linkedin, and Facebook ads have all gotten much better with their local targeting capabilities in the last few years. Most can target locally by facility address, radius, city, ZIP code, or state. The great thing about pay-per-click advertising is that you only pay for those searchers who click on your ad and visit your website.