Automating Self-StorageOct 04, 2022
Today we're talking about automating self-storage. Can you really automate a self-storage facility? First, is it possible? (Maybe some pros and cons). The second part is going to be, how to automate. So, the answer to the questions right off the bat are…yes and no.
I know that's a horrible answer and I’m going to explain why. When we say automate there's a lot of confusion in the industry about what this means, and you must be very clear about it. Some people are going around saying there's such thing as man-less storage facilities as in you don't need anybody to do anything on the storage facility. This is not an ATM and there is no such thing as a man-less storage facility. There are things that must be done at a storage facility that will require human presence. It may not require somebody every single day, but it will still require you to do work. You need to clean out units and, believe it or not, but some people don't pay and leave all their junk in a storage facility. Now, we have auctions and then after the auctions happen and after you sell off their stuff (which all take place at the facility), then you need to clean out that unit and get it prepared for your next tenant. None of this stuff can be done on a computer.
Now, when I say none of it can be done on a computer, I’m not saying the act of it as in an auction can be done on a computer. We do all our auctions across five states with over 8,000 doors. Also, to give you some context we were one of the first people in the nation to have a truly keyless facility. This means that no one needs to have a lock or key. It can all be done off your phone. Somebody could rent in California, rent a unit from us in Nevada, they can pay and get their unit, they can rent it, access doors, gates, the entire works without ever interacting with another human being. It is totally possible to automate a storage facility. The key is pros and cons and how you go about it.
Pros and Cons
So, let's talk about where this works and where it doesn't. In storage you have your operational expenses and size of a storage facility. Whether that's 10,000 square feet or 200,000 square feet, a lot of the expenses are pretty much the same, especially when it comes down to labor. So, the smaller you get, those expenses really eat into your margin and that's why I believe that small storage facilities really do need to be automated. You must really lower that labor cost because that labor cost is one of your largest costs that you incur in storage. The smaller it is, the more that cost eats away, making you less profitable. So, the pros are that cost that's taken away.
Now, I have a very large storage facility that is a keyless or an automated storage facility, but we have employees. In fact, we have multiple employees. It's 160,000 square feet. Its rentable square footage is around 120. We make over $120,000 a month and there's no way that this could be done without having personnel on the ground. There are way too many units, way too many people, way too much going on. We must have personnel on the ground. Now, if I had a small unit (and a small facility is where I got started in the industry – I started with small facilities in rural towns). So, if I had 50 units the key would be to automate and make it so it's as passive as possible thereby limiting the time and cost that go into that asset. This is where automation is helpful. The bigger you get, the less that you would consider an unmanned or a true automated facility. One of the major reasons for this is because of the loss of revenue. The loss of revenue that I incur from the upsell where I utilize managers to sell everything from insurance and products, and then also taking care of problems and the efficiency of getting units onto the market extraordinarily quickly and making sure that it's an environment that high paying tenants want to be. That cost incurred for labor doesn't matter at a facility that size compared to the cost that I would lose because that facility would get out of control very quickly.
Different Facilities, Different Challenges
So, not all facilities are treated the same. The cost of labor in a smaller facility will not give you that kind of ROI. If you have 50 units, it's easy to manage as more of a part-time role meaning there are things that you can do. You can use a keyless entry system like we do, called No Key. It's all done off your phone – an app. These are the pros and cons that are made for ease of use. It's hands off.
Big facilities, they maximize our efficiency. They maximize our operations, so we still utilize it. In fact, we access a whole market that needs to rent online at that time and get a unit even when all the other storage facilities are closed.
Now, a lot of people talk about kiosks and before we get into my thoughts on kiosks, I feel I need to address it: are kiosks dead? Because this is your kiosk right here. Everybody has them and online rentals are the future and must be done. So, if I’m renting, if I’m finding the storage facility from my phone, from a computer (which over 80 percent of all your tenants will find you from a cell phone) if that's the case.
What is entailed in this? The first thing you need to know is everything needs to be done online. Auctions, online rentals, and it'd be preferable to have a keyless entry system so that way you can lock people out of their unit without ever being there. The actual locks and keys on the storage facility adds a whole other layer. If somebody's delinquent, you need to lock them out until they pay. You need to have that stuff ready to get it ready for auction but if I have a keyless entry system, I can automate that if they don't pay, they go past three days boom automatically their door locks and they don't have access into it this is all done through our No Key system and it's all done online, it's hands off. If I don't have that I need to go to the property and I must overlock which is fine, you can do that too.
So, if you don't have a keyless entry system how do you get people in and how do you get people out? The key to that is still having online rental, but what you can do is after somebody moves out you clean out the unit and get it all ready. You set the lock inside, you give them a free lock (once again that's a loss of revenue), you give them a free lock, you shut the door. The online rental – they come to get their unit, they open their unit, they overlock it. You're charging them right then so if they don't pay, you just need to go back to the unit and overlock it.
So, you also need to be making sure that you have someone to do, I would say weekly drive buys. You don't want people abusing you. You don't want your asset to look bad. It's all about presentation. You need to make sure you're doing online ads because that's how you're going to get all your customers. You can also make it even more passive by tying in a third-party service. For example, a call center. Now, they will manage all the calls that come in and they can even sell units. They can take care of billing problems. They can take care of a lot of that for you. So, if I have a call center, a keyless entry system that I’m utilizing, online auctions – I’ve taken a lot of that work off the site and if you have a smaller facility that's great! Of course, there's a cost to these things, but it's a fraction of labor cost so it works. The key is you need someone to go on site to check for repairs, maintenance, abuse, people. If storage facilities just sit up there and nobody's looking at it there are problems. You need to clear out the units. You need to make sure it's clean. You have snow removal. There are lots of things in maintenance and operations that need to be done. So, you've got to figure out how you're going to do that. Is that going to be you? Are you going to contract out someone to do it? I've done that. I contracted out and I actually called a towing company in the city that I worked for, and I said, “listen, if we call you and we need you to come clean out a unit or overlock somebody and get it ready for an auction?” Then they charge us for that. So, we contracted out that part-time work. We didn't have a manager on site – that can be done. So, there's ways to do it. You automate a facility to make it, so you don't need a full-time manager.
Really, all we're talking about is streamlining operations online. Paying third-party services to do it so you don't have to have a full-time employee eating away at your expense when they're not doing anything all day.
The larger the facility you get, now you're leaving money on the table. If I'm doing a hundred and fifty thousand dollars a month and I have a three-thousand-dollar payroll, it's insignificant compared to taking care of problems, always working on the facility, upselling locks and insurance (which the upsell and insurance sells will take care of that). Now, if you have an automated facility, maybe you mandate that they must take insurance – you must be careful with that. I'm not an attorney. Some states may not allow you to do that. Talk to your attorney about that. The point being is how you automate a facility you contract out or you do the work that needs to be done. Getting units ready, overlocking, maintenance, you get a call center, and you create an online rental system. If you can add in a keyless entry system to utilize, that's great. If not, your vacant units after they're cleared ready have what the tenant needs to rent the unit. Get their key and lock shut the door, then when they rent online, they will get emails and that will give them gate access and give them their unit number. They can drive in and they can utilize the unit. When they don't pay you need someone to show up and overlock and then you can proceed with the auction. That is dependent on your state. How those auctions are held is based upon time frames.
Another great reason to have a call center is they can help you manage all these things. At the end of the day, yes, it is possible, but is it a fully automated facility? No, it's not. It's not an ATM. This is a real estate asset and a business and there are things that need to be done on site. It is my belief that smaller storage facilities are almost not economical with staff. So, the way of the automation is not just the future, but I believe that it was a long time ago when we had small storage facilities. We figured out how to do that 15 years ago and had a contract do a lot of things online. We changed the way expenses were done. The way online rentals were, I didn't want the market that didn't do online payments and online rentals. So, if they wanted to come in and meet with somebody, we just didn't do it. For everything that needed to be done on site, we contracted out and that's beneficial. When we didn't leave because these were hours, nine hours away from us. They weren't close. If you're living close to your facility, you can do all of that, but to make it profitable and worth your while, smaller storage facilities need to be automated, larger storage facilities need to be automated, but they need to be manned too. This is great technology and innovation is changing all the time!