2020 is going to be a banner cash flow year for many self-storages
By Marc Goodin
Even with COVID 19 grip on the economy, there are three ways to insure 2020 is going be a record cash flow year for your self storage. You do not even have to participate in all of them to exceed last year’s cash flow, any single one of them may be a cash windfall for you in 2020. Of course, I do need to provide a disclaimer upfront. It is going to take work!
One) Back to the Basics:
I have owned three facilities for many years and it is amazing how your manuals, standards, and procedures can get outdated. And even if they are perfect it is easy to fall in the lazy trap of not requiring them to be followed. Things have been going so well we all have a tendency to relax our standards, operations and marketing procedures. It’s time to go back to your first year of operation where you were eager to get every single renter possible.
To get all twelve cylinders working on your race car again it is going to take work by both the owner and manager. There is just enough fear in the air for you and your managers to do the extra work to become self-storage sales and marketing experts (again).
One: Twelve (12) things the Mangers must-do for oversized profits in 2020:
Take every client to see a unit
Memorize and use the 6 main scrips (walk-in, phone, lock, insurance, box & autopay scripts)
Memorize and use the answers to the 7 questions/concerns potential renters ask
Ask for the rental 2 times minimum.
Make insurance and the administration fee Mandatory & use scripts for them.
Call the prospect by name 3 times minimum.
Add every lead into the lead system and call back the next day.
Email owner every time someone calls or stops in and does not rent with the details including why they did not rent. And if the reason they did not rent was because of price note what exactly they said about price and how you tried to overcome this concern.
Set up a strict late payment follow up process and stick to it. Same for auction timing and process.
5 Hours minimum of marketing must be done every week by the manager
Send out auction notices after 30 days late and proceed with auctions (best way to get renters to pay)
Up your marketing plan – Prepare a marketing plan & budget if you do not have one.
And then the manager must send an End of Day Email to the owner reporting on each of the above items.
Two: Owners need to get back in the trenches and be a part of the facility’s success. Here are seven money-making ideas for the owner’s to-do list:
Review the mangers End of Email and follow up as required.
Call everyone who is 30 days late. You will be amazed at how an owner’s reminder that the unit is going to the lien center for auction processing next week will get payments. Do not delay auctions.
Make sure no unadvertised discounts or fee waivers are made by the manager. They should only be made by the owner and for a very small percentage of the time.
Work with the manager on a marketing plan and budget. And be a part of the implementation of the plan.
Call people who visited the site and did not rent. (Call the same day they visited!). Just ask how your manager did and is there anything you can help them with that would help make the decision to rent at your facility.
Confirm managers are using scripts. Practice Roll playing with them. Listen to recorded phone calls, even do secret shopping.
Make sure every aspect of the facility is in tiptop shape.
And the best part of getting back in shape it will provide you better profits and cash flow year after year not to mention a substantial increase in the facility value if you decide to sell.
With a simple call to your lender, you will find many will defer your loan payments for 3 – 6 months due to COVID 19. Some banks will defer the entire payment while others will defer the principle only. Given the deferred amounts are put on the end of the loan which as you know we never reach, the deferred payments literally adds up to free cash flow this year. A 6-month deferment may increase your cash flow by over $30,000+ per million borrowed. And the best thing is in many cases no paperwork is required. You simply give your banker a call and then follow up with an email request and shortly thereafter you get a notice from your bank the deferral will start next month.
Interest rates are at all-time lows. Now maybe the time to refinance your facility. If your loan is several years old chances are there are no prepayment penalties and your facility value will allow you to take out a $200K or even a Million or more free cash and often keep close to the same payments. Often the best rates are from your local hometown bank who understand that how safe self-storage loans. Rates are as low as the 3.5 to 4%. for qualified facilities and borrowers.
COVID 19 Government Freebees
My favorite one is if you have an SBA 7a Loan (up to $ 5 Million) the government is going to make your entire payment of principal and interest for the next six months directly to your bank and you do not have to pay back one red penny. Free Money!! For many, this will be $150,000 to $180,000 found free money. If you have not heard from your SBA lender call them now – there is no paperwork to be done by you!
And it appears the SBA will pay the principal and interest of new 7(a) loans issued prior to September 27, 2020.
There are several Government COVID 19 relief packages. May with low or no interest loans and even with partial forgiveness. While they may not be for the average self-storage owner you should do a simple internet search of “COVID 19 government relief packages” as you may find for a couple of hours of work by you or maybe in conjunction with your accountant or payroll company you will find free cash. In addition to the federal government relief packages, there are also a dozen state and every city relief packages.
It is time to get back to the basics!
Marc Goodin is President of Storage Authority LLC. www.StorageAuthorityFranchise.com He owns 3 self-storages he designed, built and manages. He has been helping others in the self-storage industry for over 25 years. He can be reached at marc@StorageAuthority.com or directly at 860-830-6764 to answerer your self-storage franchise, development, marketing, sales and operational questions.