Gabfocus Episode 25 |

The Bottom Line: Revenue management, leasing up, and cutting expenses

Like any business, managing revenue for your self storage facility is essential and challenging. In this Session, we'll hear from our experts how they go about leasing up, how they handle rate increases, what expenses they look out for, and so much more!

Featured Speakers: Grace Totty & Nick Newcomb
Moderators: Melissa Huff & Tommy Nguyen

Category: Marketing & Operations
Focus: Owners and Managers
Aired: April 15, 2021
Duration: 1:23:18

Overview

If you don't have time to watch the whole Session, here are some of our favorite parts:

At 6:10, Grace starts us off by breaking down the foundational marketing strategies to have in place for leasing up.
At 15:10, Grace talks about prioritizing your marketing focus and budget, and how to weigh the short-term versus the long-term.
At 20:50, Nick talks about setting your marketing budget and how to measure its effectiveness. "It's really impossible to say this is my marketing budget. It depends on the location and how occupied it is."
At 23:10, Nick breaks down the numbers to pay attention to when evaluating your lease-up strategy and how to manage pricing.
At 28:25, Nick tells us how to determine a customer's lifetime value, and Grace reminds us why some lead sources are worth more than others.
At 33:20, our panelists talk about pricing strategy, what works and what doesn't, and why they prefer expiring discounts rather than lowering your monthly rate.
At 36:10, Grace and Nick break down a typical lease-up timeline, and milestone to expect. “You should never be 100% occupied. 92% is our golden number.”
At 43:40, Nick talks about when (and how) to introduce your first rate increase, and Grace talks about why you should always contextualize your rate control.
At 46:45, our panelists break down the different types of occupancy: unit, economic, and square foot.
At 48:55, Nick and Grace discuss how discounts and street rates should factor into your revenue management strategy
At 1:00:10, Grace gives us the baseline goals for expenses: "monitor your reports and have a budget."
At 1:05:50, we have our "rapid fire" Live Q&A.
At 1:19:15, our panelists answer the question of the week!

For an even deeper dive and some of the denser numbers from the Session, click Highlights!

Question of the Week

We asked our experts: In your experience, what has had the greatest impact on your facilities’ profitability?

"Investing in your managers! That's what's going to set you apart from your competition, having a manager that listens and cares. You can do every type of marketing and have the best website, but if your manager is not great, you're not going to get there." - Nick Newcomb

"Lean on the experts. Get a partner with software that can help you with rate management, get a marketing partner. Don't be shy to ask for help. Typically, you can pay $3 to have a vendor in place that can help you make $10. Usually spending some to have an expert partner in place, can help you make even more." - Grace Totty

Gabfocus Takeaway

When talking about the bottom line, we have to talk about "the numbers." Tracking, monitoring, and adjusting is the name of the game. Our panelists reminded us time and time again, that there's almost never a stock answer that applies to all of their stores, their units, their customers, or their leads. The true magic of effective growth and profitability is paying attention and adjusting accordingly. Good revenue management is active and involved.

What are Gabfocus Sessions?

Gabfocus Sessions are virtual workshops for self storage owners, managers, and operators. Brought to you by the team behind Gabfest: StoragePug and Affordable Storage Guys Management.

Each session features hand-picked industry pros who will dive deep into relevant topics surrounding our industry, share best practices, and explore trends in the market. It's our hope that these sessions help you navigate your self storage business better during these uncertain times.

Want to learn more about self storage? Join us on select Thursdays for Gabfocus.

Questions Answered in this Session

What are the best ways to lease-up my facility?
How much should I spend on marketing? What results should I expect?
What data or numbers should I be paying attention to when measuring or adjusting my lease-up strategy?
Are there other costs associated with leasing up?
How do I determine what a lead is worth? Should I pay for leads?
What should my pricing strategy be? What works? What doesn’t?
What is a typical lease-up timeline? What are the milestones?
What is revenue management?
How soon should your first rate increase be?
Should it be the same across all unit types and tenants?
What are the different types of occupancies? Do they all matter?
How do discounts factor into revenue management?
How should I adjust my street rate in relation to my revenue management strategy?
We’re spending money in a lot of different ways. What’s the best way to keep track of it all?
How much should I anticipate spending on taxes?
How do increase my net operating income?
In your experience, what has had the greatest impact on your facilities’ profitability?

nick-newcomb-new-1

Nick Newcomb

StorageMax

Website: https://www.stomax.com/
Email: nick@stomax.com

Grace Totty

Absolute Storage Management

Website: https://www.absolutemgmt.com/
Email: grace.totty@absolutemgmt.com

Resources from this session

Awesome Quotes

“Once your operation is in place, you can become more dynamic with your pricing, but that requires data. You need some method of being able to record the data that you need to know whether your price is in the right place - whether you need to move it up or start giving some concessions.” - Warren Lieberman

“I never want to downplay to what someone else is doing. I'm better than they are, then I'm going to be worth a higher price. That's what value is. If you go out to a restaurant and get really good service, would you go back? Yes! What if it was pricier? You'd still go back because you got better service and a better product.” - Jim Mooney

"It's good to be informed on your competition. I don't want to ignore them, but I don't want to respond too strongly to them either." - Warren Lieberman

"We did a survey of 10,000 facilities on their pricing. We found out that two-thirds of those operators didn't change the price of a single unit of the course of a month." - Warren Lieberman

“Rate increases and value pricing are the number one ways to grow your revenue.” - Jim Mooney

"Tenants in more convenient units tend to be less price sensitive." - Warren Lieberman

"The size of the unit is only one aspect of what people are willing to pay for." - Warren Lieberman

Highlights

Foundational marketing strategies to have in place - whether leasing up or stabilized:

Website
Set up listings (Yelp, Google My Business, Apple Maps)
Social Media
Establish Local Partnerships

Lease up marketing strategies:

Lead Generating Strategies (like digital ads)
Aggregators (Sparefoot, Storagefront, etc.)
Awareness Campaigns (like billboards, flyers, and sponsorships)

Your average customer value
Find the average stay length of all tenants. Next take your economic occupancy and divide by how many units you have. That will tell you what the average customer pays.

Multiply the average length of stay by what the average customer pays, and that's the average value of a customer.

For example, if a customer stays for 12 months and pays $100 per month, then their value is $1,200.

Your average lead value

Figure out your closing rate (or conversion rate) i.e. how many leads do you turn into tenants? Multiply that by your average customer lifetime value to figure out what your leads are worth.

Pro Tip: see which lead sources are converting the best. It may be that certain sources have a higher conversion rate, so those leads are worth more to you than a source that barely converts.

Typical Lease-up timeline

According to our panelists, it's typical to see a 3-4% increase each month, putting your facility at 36% after the first year, and 72% after the second.

Alternately, you can look at your lease up goals through the lens of your units, aiming for 20 units rented per month.

For Nick and StorageMax, they pro forma their economic occupancy at 85% with their sweet spot at 92%.