When self-storage owners/operators hear “revenue management”, they immediately think: how do I price competitively, and how do I adjust my prices for inflation so I increase profits? Thanks to the digital age, it is more convenient than ever for self storage leaders to market themselves and understand their tenants through big data analytics. The new question becomes: what tools are going to help me best achieve revenue optimization?
Important metrics that self storage leaders keep in mind are:
- Gross Income: i.e. Revenue: The total amount of money made before expenses and taxes are considered.
- Occupancy: The total number of units occupied (% occupied = number occupied/total number of units)
- Operating Expenses: Expenses necessary to run a business
- Bad Debt: Amount of unpaid rental income
- Net Operating Income (NOI): Income after all expenses and taxes are taken out
Their goals are to increase NOI through occupancy rates, while decreasing operating expenses and bad debt. Which is why many self storage owners are willing to undervalue their services in order to be competitive and attract the most tenants. But, if you have 100% occupancy, but only 50% of tenants are paying, then there is revenue being lost from these non-paying tenants. So, storage owners will want to focus on diminishing their bad debt.
The fastest way to mitigate the debt burden of your bad debt occupancy is to streamline and automate the lien to auction process. A common practice in the industry is to allow tenants to make late payments yet in doing so a culture of enabling behaviors that impact the bottom line is being made the norm. Typically, this line of thinking stems from a scarcity mentality. The concern for owners/managers is having too much vacancy and not enough demand. Yet, the industry indicates that there is not enough supply. Bad debt occupancy is often tied to a problem with the lead generation strategy: attracting bad tenants. The customer profile that self storage owners want to attract is already known, but they need to execute their strategy to appropriately attract better tenants. In order to do this, you need to first process those delinquent tenants so you can make room for your new and reliable tenants.
Self storage facilities need to think twice about permitting such lax policies when they have to pay operating expenses and have a fiduciary responsibility to themselves as owner and/or investors. When your tenant becomes delinquent, you now have the ability to send right to lien notices and warn them about the impending auction on their property if they do not pay what is due. They focus on the current supply (their tenants), rather than generating new demand. No more leaving money on the table.
The issues surrounding liens are that they are a tedious process, and the regulations around the lien process differ from state to state, which is an obstacle for storage owners with locations in multiple states. Failing to correctly follow through with the process will result in several consequences: you will need to restart the lien process each time you make a mistake with the letters being sent out, or on the newspaper ads that need to go out, and that results in extra expenses; you could be sued for wrongfully auctioning property that is not yours.
The most effective way to decrease your operational expenses around the lien to auction process is by automating it through software. AI Lean takes care of the lien to auction process by handling the letters and newspaper ads for your liens using workflows to manage the process and minimize the liability of doing it incorrectly. And thanks to cloud computing, AI Lean offers user insights on their tenants so they can make informed decisions about how to tailor their marketing to attract better paying tenants and how much to increase their rent by, without compromising the tenant’s loyalty.