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Gabfocus Session | Managing Your Finances

Managing Your Finances

Learn about accounting and revenue management in self storage, how to prepare for a recession, and a little bit about tax time.

Finances. They make a lot of people go cross-eyed, and yet they're the lifeblood of any business. Without proper financial management, you can easily find yourself digging your business into a hole. See what our expert panelists have to say about keeping track of and even improving your self storage business's finances.

Featured Speakers: Magen SmithAlex Erbs
Moderators: Tommy Nguyen & Melissa Huff

Category: Finances
Focus: Owners & Operators
Aired: June 23, 2022
Duration: 1:14:21

Overview

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

  • At 4:45, our panelists discuss the most important metrics to monitor at your self storage facility, including economic occupancy, revenue per square foot, and closing rates.
  • At 7:55, Magen and Alex tell us how often they view their reports. Hint: It's daily, but there's more.
  • At 11:00, Alex urges owners to look at their data. He tells us that this data is what drives and informs our businesses.
  • At 13:20, Tommy tells us something he heard from Alyssa Quill of Storage Asset Management: It's about identifying the outliers. You won't know what's an outlier if you're not consistently looking at the data.
  • At 14:30, our guests discuss tracking and evaluating expenses and spending.
  • At 19:15, they answer a viewer's question about specific revenue management techniques.
  • At 22:50, panelists talk about the major expenses at self storage facilities. Then, at 26:00, they reveal the typical surprise expenses that catch owners off-guard.
  • At 31:10, Magen and Alex explain how they measure the health and profitability of a self storage business. Magen explains that, ultimately, it's cash collected.
  • At 42:15, our panelists explore growth opportunities, how to recognize them, and the idea that there is more to growth than physical expansion.
  • At 46:30, we get some great tips on raising rates and dealing with the backlash!
  • At 50:25, Magen and Alex give their advice on how to be prepared for a recession.
  • At 54:25, we hear about how a coming recession might impact self storage.
  • At 1:01:00, we enter our lightning round of questions including how to handle accounting, common accounting mistakes, and preparing for tax season.
  • At 1:06:10, our experts answer the Question of the Week!

Resources


Question of the Week

We asked our experts: What are the biggest blindspots operators have when evaluating their finances?

"Thinking that net income on the P&L equals cash in the bank, especially if you have a mortgage. There are depreciation expenses that reduce income, and there’s principle on loan payments that reduce cash but not income. So just understand that income on your income statement is not cash in the bank." - Magen Smith
"Making sure you understand your income versus your expense versus what you’re actually paying for debt service versus what you’re paying for all these different things, here." - Alex Erbs

Gabfocus Takeaway

You need to keep a good read on your operations so that you can optimize your finances. If you're an owner that manages your own property, this might mean taking a step back and looking at your finances from a new perspective once in a while. If you have managers, it might mean keeping track of their opinions on the state of the facility and customer demand. It also means pulling up your financial data and understanding it, even if you have to ask for help. And if there's one final thing to keep in mind, it's to always have a reserve of cash on hand for the unexpected.

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.

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Questions Answered in this Session

  1. What are the most important metrics to monitor at your facility?
  2. How often do you look at your reports?
  3. How do you keep track of and evaluate your expenses and spending?
  4. What are your specific revenue management techniques?
  5. What are the major expenses facilities have to deal with?
  6. Are there any typical surprise expenses?
  7. How do you prepare for surprise expenses?
  8. How do you measure the health and profitability of your business?
  9. Do you keep raising rates even if you’re higher than competitors?
  10. How do you identify growth opportunities in your business?
  11. Is there anything you need to do to be prepared for a recession?
  12. How might a recession impact us?
  13. Are there any big accounting mistakes operators make?
  14. How do you make sure you’re ready for tax season?
  15. Do you have any tax advice for operators?
  16. What are the biggest blindspots operators have when evaluating their finances?

Live Poll Results: What tools are most important to provide to your employees?

poll-manager-skills

 

 

Meet your speakers

magen-smith

Magen Smith

Atomic Storage Group

Website: https://www.atomicstoragegroup.com/
Email: info@atomicstoragegroup.com
Alex Erbs - square

Alex Erbs

Erbs Management Group

Website: https://www.erbsmg.com/
Email: alex@erbsmg.com

Got questions or comments for the panelists?

Our panelists will be happy to answer any questions you have. We hope you enjoyed this Gabfest Session. Talk soon!

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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%.

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