by John Stevens
November 12, 2010 12:22 PM
Put quite simply, people have too much stuff and the storage business is booming. Opening up a storage facility and joining the wave might be a profitable move to make.
Despite the floundering of the real estate market, the self storage industry has been showing steady and considerable profits throughout the past five years. It’s somewhat of a sign of the country’s non-stop consumerism. People need a place to store their old stuff once their new decorative suit of armor and china doll collection comes parading through the door. But it’s also a signal to the keen businessman that opening a storage facility could be a lucrative endeavor.
Storage businesses are going to be in greater demand as people’s needs for storage grow. For some, jumping in on the action and starting a new self storage business is the way to go. But knowing all there is to know about the industry and what is required to start a business is essential to success.
There is certainly room for newcomers in the self storage industry. And the financial requirements to enter the industry recently improved just this month as the U.S. Small Business Administration (SBA) decided to include the self storage industry as eligible for loans for the first time ever. The new guidelines pave the way for those looking to refinance, and especially acquire or build self storage.
There are certain things to consider and focus on when beginning a new storage business. The first step might be to look into operational and investment costs. According to the Self Storage Association, average operational costs can be 25 to 40 percent of the total income. Average operational costs can be an average of 25-40 percent of your total income on average. And land costs are an average of 25 to 30 percent of the total development cost. That translates to a facility around 60,000 to 80,000 sq. ft. costing $45 to $65 per sq. ft., excluding land costs.
Insurance also needs to be investigated. Research what type works best for the business, which can depend on city laws. There is the option of providing company insurance or giving renters the choice of paying extra for it.
Location. Location. Location. As any savvy real estate agent would say, location is crucial when opening a storage business. Best would be to head toward the middle of a dense urban area that also has the potential for high growth. Or locating along a major thoroughfare that runs through a large neighborhood is an option. A densely populated neighborhood has families who likely will need storage units for overflow items or seasonal wares. Also, find out where your competition is located as this will greatly affect where a space is chosen.
It might be helpful to visit the website of MiniCo, Inc. . It gives an overview of the industry and explains what is involved in owning a storage business, including market analysis, investment strategies and construction costs. Another helpful website to visit is StorageStudy.com where the risks and rewards can be measured through a feasibility study.
It is important to conduct a market survey or feasibility study from a major industry vendor. A well put together feasibility study should include extensive demographic information, an average of local rental prices, a plot of competitors on a map, as well as information about their business activities. Information from the feasibility study will be used in the business plan.
Other steps include presenting a polished business plan to a bank, purchasing land or renovating an existing building, get necessary licenses, choose a business name, and install inside and outside video surveillance with motion detection security alarm systems.
Sources Used:
Summers, Brian. “You Too Can Cash in on Self Storage.” Iarticle.org. Nov. 12, 2010.
“How to Open a Self Storage.” EHow. Nov. 8, 2010.