Urbis Storage Index – Best Quarter Since December 2009!

The Urbis Storage Index monitors the performance of the Self Storage industry across three main categories; monthly revenue generated, storage area occupied in each facility, and overall average storage fee rates achieved in each facility.

A snapshot on the December 2013 results highlights the following results:
– The December 2013 quarter of the Urbis Storage Index marked the best quarter recorded since December 2009.

– All seven (7) Zones experienced increases in Area Occupied and Monthly Revenue over the December 2013 quarter. Six (6) of the seven (7) Zones (excluding Melbourne Inner Zone) experienced increases in the average achieved Storage Fee Rate.

– Notwithstanding a marginal decline in the average achieved Storage Fee Rate, the Melbourne Inner Zone was one (1) of two (2) Zones (the other being the Brisbane Outer Zone) to experience positive net absorption in Area Occupied in excess of 3% over the December 2013 quarter.

– The Sydney and Brisbane self storage markets have experienced increases in all three (3) indices over the twelve month period to December 2013.The combination of increases in average achieved Storage Fee Rate and Area Occupied have resulted in Monthly Revenue increases over 4% over the twelve month period to December 2013 for these markets.

The following graph shows the weighted average achieved Storage Fee Rate per square metre, average unit size and Area Occupied for the seven (7) Zones, as well as the East Coast of Australia and combined Australia and New Zealand averages as at 31 December 2013.
Urbis – Graph

If you would like to join the Urbis Storage Index email list, please email Timothy Creighton – tcreighton@urbis.com.au

It’s all about conversion

Many facility operators are focused on obtaining a high-ranking on the front page of Google and pay a pretty penny for the privilege when undertaking a Google Ad-words campaign.

Logically, this explains why one competitor’s facility ranks higher than that of another, even if the web user has searched for a self storage facility in a location that is closer to that of a facility who may have bid less for search result listings under particular ad-words. Darren Vowles, Internet Marketing Guru with Reach Local suggests, that depending on how a facility targets their advertising and who they direct it toward, the owner may actually achieve a greater return on investment (ROI) and lower click-through costs from being positioned on one of Google’s 3500 partner websites (e.g. YouTube, Gumtree and Smartcompany). Darren offers a word of caution prior to deciding where to place an advertisement, when first advocating the need for a facility operator to understand what their customers like, what their buying habits are and, importantly, where they live.

Every time a potential self storage customer searches for a facility on Google, Ad-words runs an auction to determine the ads that show on the search results page and their rank on that page. To be ‘in the game’ and place ads in the auction, a facility operator fist has to decide what type of customer action they would like to pay for.

Bidding options include:
1. The number of times the facility advertisement is displayed, (cost per 1000 impressions). This is a good strategy for facility operators intent on increasing widespread awareness of their brand.

2. The number of times the advertisement receives a ‘click’ (cost per click).
Cost per click (CPC) is often a good initial on-line marketing strategy. Costs accrue based on the number of clicks the facility gets on their ads, allowing for easier management of advertising costs. Many operators will be acutely aware that as words such as ‘self storage’ are bid on, then clicked on, the price goes up. By way of example, ‘asbestos’ is now $42 per click; ‘real estate’ is about the same. Importantly, some software providers have platforms that can work out which keywords get an enquiry or a phone call from a customer, rather than just a click and no follow-up purchase intent. This software can determine, for example, whether paying ‘top dollar’ for terms such as ‘self storage’ actually provide a sufficient conversion rate to warrant a sometimes substantial investment. Inquiry calls to self storage facilities by potential customers can also be recorded and replayed for training purposes.

3. Each time users take a specific action on the facility’s website after clicking on the ad
This is known as cost-per acquisition and is useful for self storage facility operators who are interested in tracking conversions like purchases, phone calls or sign ups. Maximum cost per click limits can be set when users click on ads. If for example, the self storage facility operator sets a maximum of $1 for a cost per click on their ads $1 is the most they would pay when a customer clicks on their ad. Often, much less than this $1 maximum may be paid, remembering that during the ad auction, they would only pay what was required to rank higher than the advertiser below them.

On-line Directories
These directories mimic on-line telephone directories and sell advertising space to generate revenue. In the event this listing is undesired by the self storage facility operator, their use of appropriate search terms enables their website to gain a more prominent position in search results for specific key word searches than that achieved by the on-line directory.

Ask yourself whether the web company controlling your on-line marketing budget can definitely demonstrate which ad words lead to sales conversions and which don’t.

darren-p-vowles
Darren Vowles
Reach Local

Reap the rewards of sponsorship

You don’t need to be a marketing guru to operate a successful business, but local knowledge and having a sense of community issues can be a major advantage with building relationships, alliances, and reaching new audiences.

As a self storage facility, sponsorship of community groups, government organisations and local events can boost your facility’s; image and brand if you use your resources wisely, to their full potential and cater your message to your audience.

Sponsorship is the financial or in-kind support of an activity, used primarily to reach specified business goals. It promotes your business in association with your sponsee. A sponsee can be a local sporting club, home show event, car club, youth group, charity or wine appreciation society just to name a few.

Community organisations and local events are great marketing opportunities for businesses to develop good local community relations. Participating in or sponsoring a local community group or event can build solid relationships between yourself and your future potential customers. Sponsorship and the positive public relations that follows, will place your brand and what you offer throughout your circle of customers and communicates to them that your business cares and is interested in the same issues they are.

You can find unlimited opportunities to broaden your competitive advantage by increasing your credibility and image in sponsoring events or groups attracting your target market. Set up an event calendar or diary for your business. Note all opportunities for events as the year progresses. Also note when your customers may be having events. Then over the year you’ll be able to refer to your calendar, call your customers in advance, and ask what you can do to help them with their upcoming activity. This pre-emptive approach is very effective, and all it takes is a few notes scribbled on a calendar. Watch your local papers and community bulletins for events you didn’t get to participate in this year but will not want to miss selling to next year.

Sponsoring a team means the opportunity for them to wear your facility logo and name. Their families, friends and supporters will become your biggest fans, and you’ll get to know a lot of people you’d otherwise never be able to reach. Donate your time and talent as well as your products or services when the community could benefit from them. You will be repaid a hundred fold in the long run. Participate in community groups such as Rotary, Lions or RSL groups. Offer to be a speaker at schools, leisure centres or local associations. Consider donating a unit to a local school, police or fire brigade.

So, why should your company be interested in sponsorship? When done well it offers significant opportunities for distinct marketing and competitive advantages, as well as showing support for something that is in common with your local market. A large number of events these days use sponsorship support to offer more exciting programs and help defray rising costs. Sponsorship allows you to reach specifically targeted niche markets without any waste. In addition, it is a powerful complement to other marketing programs (your own advertising, marketing and media releases) and can have a dramatic influence on customer relations.

Sponsorship offers the possibility of achieving several goals at once such as:

Enhancing image/shaping consumer attitudes
Often self storage facilities are looking to improve how, if at all, they are perceived by their target audience. Sponsoring events that appeal to your market is likely to shape buying attitudes and help generate a positive reaction. In turn, this support can place self storage in the minds of your consumers as a real option to them. Although research shows that the majority of people understand what self storage is, they are still filling their garages, spare rooms and relatives places with goods that, in other countries like the U.S., are found in storage. Sponsorship and the message you portray with it, will help keep self storage and your facility, as a ‘front of mind’ option for consumers.

Driving sales
Sponsorship geared to driving sales can be an extremely potent promotional tool. When sponsoring an event, cause or club the results of such a strategy need to be measured over a longer term. Whilst you may reach those customers that are needing your product now, there will be those that because your brand has been brought to their attention through your community involvement, will use your facility when they need to.

Creating positive publicity/heightening visibility
Every sponsor is seeking wide exposure in both electronic and print media. Positive publicity helps create heightened visibility of products/services. Various media covering the event may include sponsors names and/or photos. In addition, the kind of media coverage a sponsor may get is often unaffordable if the company were to think of purchasing it directly. To maximise this objective, it is important for the sponsoring company to have a comprehensive media campaign to back-up the regular media coverage promoted by the organisers. One example of this is Big Box Self Storage in Labrador who have been mentioned on the Special Olympics Australia website.

Differentiating from competitors
The mere act of sponsoring an event, especially an exclusive sponsorship or naming rights, is a significant way to create competitor differentiation. Your company name has the opportunity to stand out head and shoulders above the competition. This is particularly helpful if your company wants to combat a competitor with a larger advertising budget.

Target audiences often perceive sponsorship in a positive way. They see you as making a greater effort to support the event or community group, often allowing more or better activities to take place as a result of your sponsorship. Tankar Self Storage in Mittagong are a sponsor of their local radio station Highland FM and have been listed on Highland FM’s sponsors page with a ‘big thank you’, and regularly mention them during broadcasts.

Helping with the good ‘corporate citizen’ role
Another powerful sponsorship objective allows companies to be viewed as a ‘good community contributor’. To be seen supporting the community and contributing to its economic development is extremely powerful and creates enormous goodwill. Ikin Store-It sponsor a junior development program within the Toyota Cowboys Rugby League Team. The following is only a snippet of what has been published by the teams PR group: “The program is proudly supported by Ikin Store It Storage, one of Queensland’s leading self storage businesses. They are a major sponsor of the Junior Development and Recruitment Programs. It is with the support of generous sponsors like Ikin Store It that the Toyota Cowboys are able to make a significant contribution back to the junior rugby league players and clubs of North Queensland”.

Enhancing business, consumer and networking relations
Sponsorship that offers hospitality opportunities is always very attractive to businesses. Perks may include special exclusive networking setting such as receptions, golf tournaments or other sporting events. These are great opportunities for sponsors to meet key customers and solidify business relationship. It is important to evaluate each opportunity and look for ways it could tie into your marketing objectives.

Don’t forget to follow-up on your community participation with your own local marketing and public relations. Le the local media and your customers know of your support and why you are enthusiastic about the group, event or cause. Simply creating a media release showcasing your involvement and distributing it to media contacts can drum up free publicity and get your brand out there to your local market. Community involvement and sponsorship is a great way to build good public relations and gain free publicity of the best kind.

The old saying ‘you have to give to receive’ holds true in business also.

Retaining Key Staff – Can you afford not to?

With low unemployment rates being an Employer of Choice becomes a term heard more often with employers competing for scarce resources. While being an employer of choice might not be your main driving force, it doesn’t make sense to ignore the needs of employees. You don’t want to be the employer to avoid.

There is evidence showing that the labour market is changing globally, and the impact on our future workplaces will be considerable. There’s no reason why a workplace shouldn’t be considered a brand to help attract and retain staff.

Low unemployment rates encourages employees of all ages to reconsider their options. Add to that the restless energy of Generation Y and you have a workforce that no longer finds it inspiring to put in the hard yards at the one business in order to achieve the gold watch at the long service mark. The general lack of opportunities for advancement within the self storage industry further complicates the matter for smaller self storage businesses.

So what can you do to improve your chances of attracting and retaining the best talent in a market that is actively working against it? You can focus on improving your workplace brand and become an employer of choice.

For years, many self storage businesses have spent a lot of money ensuring that their external brand is well polished and that they engage their target customer as strongly as possible, in order to build loyalty to their product over their competitors. Yet few employers maintain the same focus on their internal brand and their internal customary, their employees. Whereas the marketing department spends considerable time and money fine-tuning the external brand in minute detail, the representation of the internal brand isn’t afforded the same time.

Why is a workplace any different? Shouldn’t we as employers want staff to be every bit as involved and engaged as our most loyal customers? The workplace is where many of us spend at least five days every week (often more time than we spend with our partners or children), the place to which our aspirations and ability to progress in life are inextricably linked, and where for many, our self-esteem and sense of self is determined.

If we think about the skills shortage and the inevitable effect this will have on organisational ability to attract and retain the best talent, then it stands to reason that a more engaged and challenged workforce will have a positive effect on turnover levels.

How do you make your business attractive to current and potential employees?
Firstly it would be beneficial to the process if you understand that your business is not offering a job, you are offering an experience; and the best workplace brands reflect that experience. As most of us have been employees at some time it shouldn’t be too hard to work out what people in that position might want. Try rating your workplace against some of the basic needs we’ve listed below.

1. Do your employees know where the business is heading?
People like to be on a winning team, one that is going somewhere. Does your facility have a vision, goals and plans? Have you communicated these to your staff? Help them get excited and feel involved in the challenges. Help them feel it’s worthwhile working with you to take the business to the next level.

2. Do your employees know what is expected of them?
How can they succeed in your eyes if they are not sure what you want? Is this written down with clear measures? How many people would watch football if no one kept the score? Actually I know many that would, bad example but you get the analogy.

3. Do all employees understand what they can and can’t do to comply with the law and your facility policies?
People need to know the guidelines within which the facility operates. They want to be on a professional team that has these – for your protection and theirs.

4. Are you accommodating to needs and flexible on working hours?
Being flexible with your employees working hours is a great retention tool, especially for mothers re-entering the workforce, single parents, people undergoing personal study or older employees with lifestyle commitments.

5. Were all your people selected for what they can bring to the organisation?
They need to know they are on a team that was careful in its selection. Let them know the skills that you want them to bring to the business mix and ask their opinion on decisions that need to be made.

6. Do you provide all the training and development necessary to do the job?
From day one, employees want to be welcomed, made to feel wanted and be given the best chance of success in their job. This does not necessarily mean expensive training courses but a planned program using existing people and information to bring new people up to speed quickly and allow them to grow and develop to take on new challenges.

7. Do they get enough feedback on their performance to know how they are doing and continually improve?
Do they get recognition when they do well? Is immediate action taken when they don’t? Employees need regular reviews and appropriate support and they will respond to it. The lack of it will almost always guarantee below par performance.

8. Do your people understand how their pay is arrived at and think it is fair?
They don’t have to be the best paid but they need to be paid fairly and want to know that pay decisions are based on some rational criteria.

9. Do you have plans for developing people for future roles?
While some people are prepared to stay in the same job there are others who want to know they have a future and that you will provide opportunities for them. This does not need to be a promotion but can be presented to employees in terms of additional training in computer skills, marketing, sales and the like.

Most employee loyalty belongs to the people they work for, not the business they work for. One of the key aspects that employees are looking for are great leaders and inspiring leadership.

Shorten the distance between the external and internal brand. There’s no point presenting an inspiring external brand but being regarded by your employees as shallow and uncaring to your internal audience. This merely emphasises that they are being thought of as an expendable bottom line cost, whilst external customers are seen as investments. Think of your employees as an investment and see how it changes your perspective.

Force yourself to focus. If you want to attract and retain the best people in the midst of a skills shortage, you have to focus on it as much as you would any other major organisational task. Force yourself to focus on building a more engaging employer brand, or it will never happen. Many owners do some of the above, some of the time. The answer is to have processes in place which provide for your employees needs but are also self-sustaining. To do this means being committed to making it work. Not working towards putting these processes in place is short-changing your employees.

It can be done and there are facilities that do it well – they may be your competition.

7 Top tips on how to increase the value of my facility

OK so you have a facility and you are interested in taking it to the next level? Here are some key things you should do to increase the value.

1. Get your systems down in writing – I often come across business owners that know how to run their facility themselves, but when they head away on holidays the stand-in owner just does not deliver, the sales suffer and the owner has multiple problems to deal with when they get back.

Action Step 1 – Create basic check-lists for opening and closing the facility and use these on a daily basis. This will allow anyone with a bit of training to deliver the exact result for you. Also with a check-list you have immediate accountability and a system that can be checked.

Action Step 2 – Create a detailed customer service system that documents how the phone is to be answered and how to convert an inquiry into a sale. Also write scripts for moving a new person in and moving someone out. Link these scripts to Check-lists that you have created so the entire contact with a customer is seamless.

Action Step 3 – Create Position Descriptions for everyone that works in the business and detail what their roles and responsibilities are so that there are no grey areas. You should link this in with a team member handbook that is given to all staff when they first start with you and this will help maximise their productivity and decrease drama.

If you set up quality operational systems in your business, you will allow yourself more time, less avoidable issues will arise and your team will be happier knowing they have the job under control.

2. Computerise or Die – Yes, you might have gathered that I’m a bit of a computer advocate. I must admit that I have never seen a business these days be super successful without one. Plain and simple if you don’t have a self storage dedicated management program then get on the phone and get one in. From my experience these systems easily integrate into your day-to-day operations and once you get over the fear you will wonder why you did not do it earlier. A well-managed computer system will add a massive amount of value to your business as it will allow you to easily measure the vital figures to make strategic decisions that will add extra money into your bank account. JUST DO IT!!!

3. Create a strong brand and a good web presence – This doesn’t mean just having a pretty website but also being found in on-line searches. You do this by Search Engine Optimisation (SEO) and it means Google likes you. If you type in self storage in a particular area you will see that the big boys like Kennards, Storage King, National and Fort Knox have this sewn up with Pay Per Click advertising but if you spend the money and the time you will be able to compete and drive extra business to your facility.

Action Step 1 – Get on the Internet and type in search engine optimisation and get a few quotes from companies on how they can help you or research how you can improve it yourself. Always remember to watch your costs and measure your returns.

4. Maintain your facility in tip-top condition – Whether you are planning to sell or just want to keep storers then you must present your facility in the best possible light. Plan every week to do a visual audit of the facility. It is often good to produce a check-list that has the facility broken down into sections with individual items to check off so that you know nothing is missed e.g. over locks, light bulbs, gardens, cobwebs etc. This will add real value to the facility and give customers a real sense of cleanliness and security.

5. Regular appointments with your accountant – Once again if you are not watching your numbers then you can’t expect to know how you are going! If you are thinking of expanding or selling then going over your numbers regularly is vital. Always keep up to date financials at hand so that you can easily present them to your bank, broker or prospective buyer.

I look at budgets, cash flows and profit and losses all day and see a lot of trends coming through. It is a good idea to run your figures by an industry professional so they can give you their take on how you are going and opportunities for improvement.

Action Step 1 – Don’t go and get a valuation from your accountant on your business We find this to be one of the most inaccurate forms of advice you can get. The best people to talk with are qualified industry based valuers and industry based brokers. Often when an accountant gives and appraisal to a client they are quite biased depending on the situation. If you are selling, the appraisal is often quite high, however if you took the same figures to the same accountant with your name taken off the top and said you were going to buy the business then the appraisal would often be much lower.

6. Automate your facility to higher levels of profitability – I have always viewed self storage as high security jail and I don’t want to let anyone in or out unless I give the say so. The technology these days is amazing and gate security links with individual shed security which integrates into management software to deliver a cohesive automated business. Whilst this all comes at a cost, you can pick and choose the technology that will deliver you the most amount of freedom while also giving you the most amount of profit.

Action Step 1 – Go to the SSAA website and check out the suppliers in the security category and ring them for a demo and quote. It can’t hurt to see what’s out there.

7. Expand, Expand, Expand – Obviously only do this if there is demand! However if your occupancy is consistently rising steadily each month then you should consider expanding when you hit the 85% occupancy mark. It will often take you quite some time to get quotes, obtain funding and start construction. By the time you reach capacity you will hopefully be ready to fill your new extension. A strategic approach to expansion will bring massive amounts of value to your business as rental income and profitability increases.

Action Step 1 – Go to the SSAA website and check out the suppliers in this category and ring them for a quote. The lead times are often months away so don’t leave it to the last-minute.

Your job now is to combine all the action items above and implement a strategic business plan. Good luck!

Iain Horne
Iain Horne

Ian Horne is a multi-award winning business broker and a business management guru who specialises in the sale of self storage facilities across Australia.

The views expressed in this article are the opinions of its Author, Iain Horne, and do not necessarily reflect the views of the Self Storage Association of Australasia. This advice is intended to be of a general nature. SSAA Members should have regard to their personal circumstances, including seeking professional advice where deemed necessary, prior to making business decisions.

Pest Control – Part 2

Ants and Termites
The common theme of ants is that they DO NOT GO AWAY! Even if the outside source of the ants is located and thoroughly treated. This is a dilemma for amateurs and professionals alike. Even if you managed to kill all the ants outside, you still have to deal with the ones inside.

Most chemicals pest control professionals use to control ants are an effective pesticide, but they also act as a repellent. Since ants live outdoors, what you’ve done when you use the repellent outside is block their exit. When you spray the ants inside, all you are doing is killing the ones you can see. You end up chasing ants around your building for days on end, killing a few at a time and contaminating your environment.

Baits are the preferred method of treatment by professionals when dealing with ants close to a structure. Baiting gives the ants no reason to go inside in the first place, and while a little slower acting than pesticides, it is more efficient. If you decide to have a pest control professional handle the situation (which we recommend) choose one that uses bait as their main weapon of choice against insects.

Note: Just because you are dealing with buildings mad of steel and concrete, doesn’t mean wood destroying insects or organisms (like termites) are not an issue. While your structure may be impervious to such things, the contents aren’t. A termite doesn’t care if it’s eating a 2-by-4, a cardboard box full of financial documents or an antique dresser. Your liability for the condition of the contents introduced to and stored in your facility is likely quite limited, but your reputation is at risk.

Aviary Aggravation
A lot of you may have a bird problem as they love to roost at places like storage facilities, which see relatively little human traffic. Visual repellent devices like plastic birds of prey (owls), foil streamers etc. that many people will try offer brief relief. Unfortunately it doesn’t take pigeons long to figure out whatever you are trying to scare them off with won’t actually eat them. Sometimes, after a day or so, the plastic bird is just another thing to sit on.

As with many pests, the best way to keep birds away is to eliminate any nesting places and roosting spots. Eaves and gables can be relatively easily covered with some sort of netting. Anti-roosting devices come in several forms, the most popular being a spike strip that can be attached to any surface a bird might sit on. Spike strips can be easily installed and usually cost per metre.

Finally, controlling birds with chemicals should only be done as a last resort and needs to be executed by someone who is a professional and licensed. In many places it is illegal for an unlicensed person to use chemicals in the control of irritant birds.

Choosing a pest-control company
Selecting a professional pest controller that will provide an appropriate ‘value for money’, safe and effective service can be a daunting task. Your enquiries should focus on whether the business is a solid company in case problems arise in the future, the level of expertise, insurance cover, any warranties applicable and the safety aspects employed.

You should obtain several quotes and check out each of the companies. Enquire as to how long the business has been established. Do they have a good reputation in the market place? Are they a member of a recognised Pest Control Association (IPCA, APCA)? Ask questions about the different treatment options the company employs, the chemicals used, their toxicity and safety aspects. Compare notes on the methods of each company. Which company seems more professional?

Make sure the business caries professional indemnity and public liability insurance, for control services and inspection reports. Be present during all inspections and enquire as to the qualifications and experience of the inspector. Do they have a current pest controller’s licence? You should sight their State Government issued pest controllers license noting name, number and expiry date.

Enquire as to whether the business uses employees or sub-contractors. Problems can occur with sub-contractors if they are obliged to pay for the supply of chemicals and other costs but do not assume responsibility if the service proves inadequate at a later date. Ask about any back up service period. For example, a business may provide you with a 12 month ‘free service period’ for a chemical soil barrier treatment, where the controller is confident a complete barrier is in place around the entire footprint or perimeter of the building.

Be wary of 10 or 20 year warranty periods, as this commits you to them for that period, so you have to obtain and pay for regular inspections and other work whether or not you want it.

It also helps to remember that pest control is an expertise, not an exact science, so each pest control firm will have its own way of doing the job and of course a different price. Research, compare, seek recommendations from other businesses and go with the pest controller that best suits you and your facility.

Planning to Succeed

Over the next few years over 67.7% of Australia’s family business CEOs will retire. Yet 67% have not identified their successor and 34% have no succession plan in place. Grant Burgess Partner Strategic Growth Markets, Ernst & Young examines the risky business of extracting yourself from your enterprise, and discusses the importance of planning your exit now.

When the partners of a small company organised the finance to expand their business, the future looked bright. With both of them in their early fifties, they knew they had a good decade to grow the business, move themselves out of its day-to-day running, and sell it for a small fortune. They had a plan and business was booming. They thought they were on track for a well-earned and extremely comfortable retirement.

Unfortunately the unthinkable happened: the senior partner suffered a heart attack and died. It was an appalling tragedy. But it wasn’t just a human tragedy; it was also an economic disaster. Left without instructions and wanting a fast resolution, the grieving widow understandably opted for a quick sale. Already highly leveraged, the other partner couldn’t raise the cash to buy her out. The resulting fire sale delivered a fraction of the company’s worth. If, as seems likely, the business now collapses, it will leave employees without jobs and the supply chain out-of-pocket.

These business partners believed that because they had an exit plan, their business was safe. However, as this true story shows, adequate succession planning is more complex and far reaching than most business owners imagine.

Managing the Risks
Succession planning requires you to consider three major areas of risk. That you will not be able to:
1. Leave when you want to;
2. Realise the maximum value of the business when you do; or
3. Keep the business running without you.

However, how you manage these risks depends entirely on your personal objectives. There is no ‘one size fits all’ succession plan. Some owners are happy to stay involved in their business well into their 70s; others want to be able to sail their yacht to the Caribbean the day they turn 60. Some desperately want their business to remain in the family; others want to reward their loyal staff with equity. Some need to retain ownership; others are happy to hand over responsibility and walk away free with a bag of money. It doesn’t matter what you want; what matters is that you have the choice.

Establishing a Suitable Structure
Whether your eventual goal is ownership succession (selling the business), or management succession (finding a new CEO but retaining ownership and some level of income), you will need to structure the company so that it can function without you. As a minimum, that means: formal governance systems; protected IP; well-documented systems and processes; and formal contracts to lock in key staff, customers and suppliers.

In a management succession, you will also need to bear in mind that it can take as long as five years to find, train and mentor the new CEO. Even if that person is already within the business, they may only know their part of it, and it can take three to five years to get them across the whole entity. In any case, setting aside this time provides you with the necessary space to ensure your successor is right for the job. Making the wrong choice is only a disaster if you don’t have time to correct it.

In an ownership succession it will take a similar length of time to prepare the business to stand up to due diligence. Purchasers are all too aware that in small business, most of the goodwill sits with the owner. Unless your business can run without you, a new buyer may only pay what the business is worth if you agree to stay on for a defined period of time – perhaps up to three years. This isn’t a big deal if you’re 45, but at 55 it is irritating and at 65 it’s a catastrophe. You should also bear in mind that, to get the best sale price, you may have to wait out the market. Business sales are like real estate: you don’t want to have to sell at the bottom of the market.

Creating an Ongoing Legacy
Good succession planning takes care of you, your family, and the community that relies on your enterprise. It is about laying the foundations for the longevity of the business after you’ve gone, and about securing an exit deal that’s good for you and the people you care about. Good succession planning caters for both the expected and the unexpected; is done early, reviewed regularly and is based on sound, independent and expert advice. Good succession planning starts now.

Your Business is at Risk if…
1. Your customers have a relationship with you, not your company
2. Your supply chain is held together with handshakes and ‘gentlemen’s agreements’
3. You are the only person who knows how every bit of the business works
4. Your key staff only stay out of loyalty to you
5. Your intellectual property is in your head
6. You are using your personal assets as security for your business
7. You don’t have contingency plans (or a disaster recovery plan)

Food for Thought
1. What are the ten largest risks to your business?
2. How are you managing the aspirations of your staff?
3. What sort of management information do you generate every month?
4. Do you know how to structure your business to get the best tax outcome from its sale?
5. Have you discussed your succession plans with your spouse?
6. Does your spouse share your vision for the future?

Not just for the Baby Boomers
A 35-year old owner of a successful construction business has a five-year exit strategy; he’s going to make his money and have a sea change at 40. Because he has a good succession plan, while he’s surfing his business will still be running, paying him a dividend and continue to employ his staff.

Grant Burgess
Partner at Ernst & Young Australia

Non-Price Based Self Storage Industry Strategy Development

Over the past month the SSAA Board and administration team have discussed the development of a strategy to provide clarity and purpose around non-price based marketing activities that assist self storage operators to promote their businesses to new and existing customers. Specifically, the strategy acknowledges that many SSAA members look to their Association to aid them to grow awareness and use of self storage by individuals and business customers. The framework for the intended strategy was developed by Dr Marcus Powe, Entrepreneur in Residence at Melbourne’s RMIT University.

The need for such a strategy is underpinned by the SSAA’s own research, in the form of the 2013 SSAA Demand Study, that reflects that awareness and use of self storage facilities was low for the general population of 3500 people surveyed, with 70.3% of respondents exhibiting limited knowledge of their product/service offer and 32% either currently using (5%) or having used in the past (27%).

In considering such strategy development, self storage industry critical success factors, defined as things that operators need to meet (or exceed) to effectively operate in the industry were discussed (e.g. building code approvals). Importantly, the SSAA Board and administration team also expanded their discussions to not just consider the organisational level of a self storage business (people, products and internal processes), but also the wider environment in which self storage businesses operate.

Working Parties
Two working parties were formed. One to consider the current state of play, in terms of the competitive behaviours self storage operators currently exhibit in running their businesses and what the very ‘essence’ of the self storage product and service offer to customers is. The second to consider aforesaid environmental challenges that operators must contend with or use to their advantage.

Current ‘State of Play’
In determining competitors for a given self storage facility discussions centred around facilities that were within an 8-10 minute drive from a given business. It was agreed that price based competition is localised and that prices charged outside of a facility’s catchment area are largely irrelevant. Facility density in the location and socio-economic factors of the area were deemed to also play a role in setting unit pricing. Other key factors driving competitive behaviour by operators include:

1) Excellent customer service (often the cheapest and easiest way to compete)
2) Process Innovation – how easy is it for a customer to engage with a self storage business?
3) Tweaks of the self storage product/service offer. Often the most complex component, but where many operators chose to start!

Essence of the Self Storage Product/Service Offer
The intrinsic nature or indispensible quality (the essence) of the self storage product/service offer was deemed to be trust which leads to consumer peace of mind.

The SSAA Board agreed that consumers place a high level of trust in the facility operator and experience peace of mind, in the knowledge that they will keep their valuable possessions safe and secure.

Discussions raised a number of alternatives to the use of a self storage unit by a customer, including:
• Granny’s, a mate’s or Mum and Dad’s garage
• Selling the goods
• Disposal of unwanted goods
• Spare room – cupboards or attics
• Use of a removalist service that enables storage and collection of storage crates

Compelling reasons for a customer to use a self storage facility to store their valued possessions over some of the alternatives listed above included:
1) Location convenience – extension of the storer’s own home
2) Security features – access control, alarms and CCTVs
3) Removes time pressure. Provides time for individuals and families to consider their options with possessions during emotionally challenging times
4) Own space – clean, dry, secure, pest free
5) Resultant reduction in spoilage likely e.g. unlikely to get knocked or broken
6) Removal of emotional burden – feeling reliant on, or unable to refuse the request of a family member to utilise their spare storage space

Environmental Forces
Stepping back from the operational level of a self storage business, the SSAA Board and administration then assessed the ‘big picture,’ or business environmental factors that all operators, regardless of industry, must consider in an attempt to build a stronger business. Such factors (e.g. laws, technology and economic factors) were considered, both in terms of opportunities and threats they pose for self storage business operators. They are described based on the following parameters – Political, Economic, Societal, Technology, Mega Trends (things society at large are doing) and Globalisation (business crossing traditional boundaries).

The table below provides a summary of issues discussed:
Driving forces table

Where to from here?
A strategy discussion, when completed in such detail, can sometimes incite confusion for the business operator over which aspect to address first. The SSAA’s approach is to encourage self storage facility operators to address easily achievable items first. This is certainly the process that will be taken in continuing such a discussion at SSAA Board level.

1) Low hanging fruit
– Reconsider what the provision of excellent customer service looks like. Does your facility provide it? How is it measured? Is it consistent?
Process Innovation – getting the mix right e.g. balancing making the storer sign up process easier and quicker vs. ensuring all paperwork is completed and contractual terms and consequences of breaches are fully explained.
Improvement of Product/Service Offer – how does it compare against that of competitors? What can be improved immediately? What enhancements can be scheduled over an extended time? What would your customers change, if given the chance to have a say?

2) Business Environmental Factors
It is universally appreciated that Political forces are the most critical for a business owner to be conversant with, given various levels of Government set the ‘rules of the game’ in which all businesses operate. Put simply, if rules change, this can positively or negatively impact costs of doing business. Unexpected events like fires and floods may, for example, give cause to Governments to reconsider building compliance codes and planning permission consents. Accordingly, as stated above, it is critical for the Association to develop a closer bond with policy and law makers in order that such ‘rules of the game’ can be developed in unison vs. being in a situation where members have to respond to perhaps unintended consequences of changes.

As positive consumer sentiment (perhaps encouraged by increasing political stability) and discretionary expenditure grow, such economic indicators will provide opportunities for self storage operators to support the aspirational lifestyles of their customers, as (for example) they look to store recreational equipment.

Prevailing societal trends could be addressed to demonstrate the benefits of new customers using self storage. Indeed self storage could be the perfect solution to address the conflicting aims of Mum and Dad ‘empty nesters’ looking to downsize to a smaller home and their children instead looking to store their possessions with them as they travel overseas.

Paperless technology could be used to significantly reduce time taken to complete necessary documentation for new storer induction (process improvement), yet being mindful of the need to not discount the importance of the security of the storer’s personal information.

What is clear is that each of the six factors listed provides at least six opportunities for the savvy self storage operator to exploit and grow their business. Some have been detailed in the table and narrative above. Others will be explored in greater detail in subsequent SSAA Board Meetings. Do you want to join this important discussion and have your say? The SSAA welcomes your contribution. To express your interest please e-mail myself at dhollis@selfstorage.com.au or call +61 3 9466 9699.

dhollis
Dougal Hollis SSAA CEO

Protecting your Business

It’s generally understood that if you buy a car you insure it, because you rely on it to get you from A to B. If you buy a new home you insure it, because you rely on it to securely house your family and possessions. But if you own or manage a business, are you adequately insured to protect the key people and resources that generate your business income?

Successful businesses rely on tow important assets for success: staff and resources. It’s essential, therefore that these assets are protected adequately and appropriate insurances are included as part of your business plan. There are a variety of insurances that will ensure your business can continue to thrive, even when unexpected events threaten the day-to-day operations.

1. Identify and insure key staff
A key person may be the pastry chef in a bakery, a computer programmer in an IT firm, the chief financial officer of the owner operator of a business. All of these individuals generate significant income for a business, thus if anything were to happen to these people, the business would need money to hire and train new staff, pay creditors, and entice another expert to join the business. This money can be provided via Term Insurance, Total and Permanent Disability Insurance, and Trauma (critical illness) Insurance.

Life Insurance becomes a means of providing additional resources to the business in the event of a key person within the business becoming sick, injured or unfortunately dying. In order for a business to continue to operate, a smart business owner needs to protect their investment.

2. Insure employers and managers
Successful business owners and sole traders realise that if anything were to unexpectedly happen to them (i.e. sickness or injury), the bills and expenses would continue to pile up. It’s important to protect your business with Business Expense Insurance. This type of insurance provides a regular monthly income to the business to pay for fixed operating expenses like rent, electricity, motor vehicle leases, business loans and wages. This insurance ensures that expenses and creditors are paid, so that if you experience a trauma, you still have a business to come back to!

3. Protect your assets
Many businesses would find it difficult to survive if the physical assets belonging to the business were damaged, destroyed or stolen. Commercial Insurance can protect these assets and should be considered an essential part of any successful business plan. Commercial Insurance can cover items such as inventory, tools of trade (including power tools for tradesmen), buildings, fittings, and cash, as well as providing protection to the business in the area of public liability. By providing cash to people when they need it most, Commercial Insurance makes it possible for essential items to the business to be replaced or repaired quickly, and allowing the business to continue trading and generating an income. Let’s face it, a carpenter without a hammer would have a difficult time earning an income!

If you are a business owner or manager, take the time to protect your key staff and the assets you have created with appropriate insurance.

The information contained in this article contains only factual information. The information isn’t financial product advice, as such, you shouldn’t consider it as a recommendation or statement of opinion intended to influence you in making a decision in respect of a product or class of product. You should consider obtaining financial product advice before making any financial decisions.

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