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ISSUE: August 2008
BEFORE YOU GET IN THE GAME
What You Need to Know About Mobile Self Storage
By Jennifer LeClaire
 Mobile self storage. It’s a segment of the industry that’s growing at a healthy clip, and it’s drawing interest from large companies and entrepreneurs alike. At the upper end of the industry, large conglomerates are snapping up major mobile self storage brands like Mobile Mini and PODS. At the foundation of the industry, trucking companies are expanding their mobile storage lines. And somewhere in the middle, franchisors and franchisees are building awareness with mainstream mobile storage consumers. Of course, just because the industry has made the transition from an add-on business in the moving industry to a publicly recognized, convenient storage service doesn’t mean that every self storage veteran or aspiring entrepreneur is guaranteed success. Mobile self storage is a unique opportunity with a unique business model, but it brings with it unique challenges that demand even the savviest business minds explore all the ins and outs before entering the industry.
Indeed, would-be mobile self storage operators have a laundry list of considerations to think through before deciding whether or not the sheer opportunity could spell attractive profits for them. Issues ranging from market conditions, costs, local and zoning restrictions, transportation regulations, legal and insurance issues, employment considerations, marketing, and, of course, whether to open a franchise or an individual operation, must be addressed with pragmatism and a healthy dose of caution.
“We have seen an increase in interest in mobile self storage from our customers, but with caution,” says Steve Hajewski, product manager, new product development, for Trachte Building Systems, a Sun Prairie, Wisc.-based firm that designs, manufacturers, and erects self storage systems. “Many of our self storage customers see that it’s a great service that their customers are asking for, but realize that mobile storage is a much more ‘hands-on’ business than traditional storage.”
Is The Mobile Self Storage Business Right For Me?
Not everyone is cut out for the mobile self storage business. For traditional self storage operators who are accustomed to the real estate—if we build it they will come—business model, mobile self storage could be a rude awakening. That’s because mobile self storage is much more of a service-oriented business, driven by outside sales. So it’s not as much about location, location, location, as it is about serving the customers where they are.
“Mobile storage is much more of a business of convenience. We bring the product to the customer,” says Josh Wilson, vice president of Mobile Attic, a mobile storage franchisor in Elba, Ala. “If you are going to get involved in mobile storage, you have to get more aggressive in your marketing and advertising. The people who will be successful in mobile storage for the long run are those who stay involved in the business on a day-to-day basis.”
You should also ask yourself questions like: What are the local rates in the area under consideration, and how will competitors react to a new business? What is the demand relative to the supply in the area? Is the area growing? Does my business have built in advantages that reduce cost to enter the market?
“Some of Trachte’s customers are towing companies that have added mobile storage,” Hajewski says. “Towing companies already have the trucks, dispatch, and drivers in place to deliver containers, so adding portable storage is not nearly the undertaking for them that it would be to start from scratch.”
Hajewski is speaking of the capital intensiveness. There is a high barrier to entry for mobile self storage—and most of the assets are depreciating rather than appreciating as with traditional self storage.
There’s the cost of trucks, lifts, warehousing, skilled labor, and other items. However, that investment can also be a benefit for a savvy entrepreneur when it comes to tax time.
“Portable storage involves some intensive capital investment, but also brings with it faster depreciation that you’d see in self storage buildings,” Hajewski says. “Additionally, with properly zoned existing warehouse or land, you can bypass the permit and approval process for traditional storage construction. Another bonus that portable storage offers versus traditional is that the portables are not taxable real estate.” 
The Pros And Cons Of Franchising
If you’ve decided mobile self storage is a good risk for your entrepreneurial tastes, the next step is to determine whether you are better suited to a franchise or an individual operation. Franchising is a method of distributing goods and services to consumers. The franchise system owns the right to the trademark of the business. The franchisee purchases the right to use the trademark and operating system.
While most people associate franchising with fast food restaurants, franchising is not all burgers and fries. There is a myriad of other franchised business, including everything from advertising to automobile repairs, printing services to party supplies, and more.
In fact, there are about 1,500 franchise companies operating in the United States doing business through more than 315,000 retail units, according to the International Franchise Association (IFA).
Experts say the biggest advantage of joining a franchise system is the branding power. Brand names resonate with consumers because they speak of value, consistency, and quality.
“The secret in franchising is that you are supposed to be getting help with running the business so that you can focus on what you were trained for,” says Rhonda Sanderson, president of Sanderson & Associates, a consulting firm in Chicago. “Franchising gives you a brand name anda corporate partner who is going to help promote that brand name.”
In franchising you are in business for yourself, but not by yourself. Experts say there are many advantages to following a system of proven, established procedures for billing, advertising, operations, training, etc. You also reap the benefits from other people’s mistakes, so there is no need to reinvent the wheel. With a network of businesses, information sharing becomes vital to success. Of course, experts say franchising isn’t for everybody. A franchisee has to be willing to embrace the franchisor’s system. Consequently, the franchisee loses some control over the way they run the practice.
“The franchisee that doesn’t embrace the system will struggle,” says Steve Hockett, president of FranChoice Inc., an Eden Prairie, Minn.-based franchise consultancy. “The biggest reason people are not successful in franchising is because they don’t follow the system. If you are going to invest in a franchise and want the benefits of a franchise system, then you need to be willing to compromise your freedom. If you want to reap the benefits of someone else laying down all the systems and just focus on making money, then franchising is a beautiful thing.”
Measuring Market Feasibility
if you choose to go with a franchise, market feasibility will be part of the process. But even if you choose to go it alone, you need to be aware of the opportunities and challenges in your local area. Andy Friedman, vice president and general counsel for 1-800-PACKRAT, a portable storage and moving franchisor headquartered in Washington, D.C., isn’t sure there are many markets where mobile self storage hasn’t penetrated. That means competition is almost a given.
“Because the industry is still new, the consumer still needs to be educated,” Friedman says. “That means your competitor can actually pave the way for you by going first. At the same time, you need to make sure you’re in a market with a large enough population base for you and the competition. The economics of the market are also important, because mobile storage does cater to the middleclass customer rather than a family with a pick up truck that’s going to move everything on their own.”
The possibilities, for mobile self storage of course, are greater in some states than others depending on the migration in and out of the state. States like Florida and Nevada, Friedman says, see a lot of people moving in. So the question is: Are you in a market that’s going to benefit from the long distance moving business? By the same token, being a onestop- shop in a small town can also be a winning formula, Wilson says.
“If you have the opportunity to go into a small tier market and make your presence known with a significant sweep of the area, there’s a lot of benefits to that,” Wilson explains. “Sometimes the big players ignore the small markets, but there’s considerable opportunity there because the need for storage still exists there. There are a lot of short range moves in small markets where folks just need temporary storage with the convenience of delivery to and from their home. Then there are commercial needs in small markets, too. You just have to determine what direction you want to take and make sure your target audience is in the market you are looking at.”
From a pure statistical analysis perspective, you’ll also want to explore the local rates for both self storage and portable storage, and costs of land or warehouse space in which you’ll store your containers. Then there are local zoning laws: Are there restrictions that will make it difficult to place containers at your customers’ homes or businesses?
“Many markets already have at least one operator by now, and if they don’t, there might be a good reason,” said Hajewski. “Consider the overall supply and demand and rental rates more than whether or not an operator is already there.”
Containing Start Up Costs
Anybody interested in getting into mobile storage should focus on three components, according to Michael Bjorn, president of Mi-Box, a mobile storage franchisor based in Joliett, Ill. “The delivery system you use, the containers you use, and the decision whether or not to franchise or go it alone are the three essential factors to being successful in mobile storage,” he says. “You have to determine the value of each of those areas as you move forward. Trying to save money on delivery systems and containers isn’t the right approach. There’s a proper tool for the job—that’s the bottom line.”
Still, there’s nothing wrong with keeping equipment costs as low as possible at start up as you work your way to profitability. The key to containing equipment costs is to plan business realistically from the start. Try to imagine everything that could go wrong. Ask yourself, “What if it takes off slower than you expected? What if competitors lower rates in response to your venture?”
“While the business is small, it could make sense to sub-contract some tasks, such as delivery of the containers. When scheduling deliveries, try to consolidate and schedule so that drivers are picking up or dropping off on the same trip as much as possible,” Hajewski says. Here are some industry truths: Wooden crates are less expensive than steel crates. Some franchises charge higher licensing fees than others. Indoor storage with climate-control costs more to maintain than outdoor storage crates. The range of start up costs, then, can vary widely depending on the elements and business model you choose.
Since mobile self storage is a capital intensive investment even with the bare start-up bones, it’s important to understand the advantages of each of these areas before making your investment. For example, steel crates typically last longer than wooden crates and climate-controlled facilities yield higher rental rates than outdoor storage. No matter what approach you take at start-up, experts recommend growing your business one step at a time. Add more crates, lifts, and trucks as needed rather than making upfront purchases that will go unused.
For all the talk of equipment, Wilson reminds that mobile self storage is also labor intensive. “Succeeding in mobile storage requires a time comment from management as well as skilled drivers and other workers to coordinate the pick up, storage, retrieval, and delivery of mobile storage containers,” he says. “You have to always remember this is a service oriented business. Service takes people.”
The Marketing Mix
Once you’ve gained an understanding of the need and cost for equipment, labor, insurance, tenant agreements and all of the other standard business out of the way, there is yet one more vital factor to consider: marketing costs. Many times, the containers themselves become strong advocates for your company. Branded with your logo and phone number, these containers sit in the yards and parking lots of customers who promote your business by default. But, that’s not enough to succeed.
“Keep in mind the one place where keeping expenses low at the start could really hurt you: marketing,” Hajewski asserts. “A new business might be on a tight budget, but it’s essential to launch with—at minimum—proper signage, Yellow Page ads, and a Web site.” Especially as a new business, you need to differentiate yourself from your competition, if there is any, as well as from traditional self storage. Marketing in the mobile storage arena still demands plenty of consumer education, and many times it’s up to you to pave the way.
You’ll need to be clear about your target audience before you spend a dime so you can market in the right arenas. Beyond the standard Web sites and Yellow Page ads, for example, you may need to advertise in specialty venues. If you are targeting homeowners, that may mean local residential coupons or flyers. If you are targeting contractors, it may mean posting at construction sites.
Remember: One size will not fit every marketing strategy. You’ll need to get creative and spend some money to reach your would-be customers.
“You need the working capital to advertise. It’s not going to be an overnight success. It’s going to take a lot of work, a lot of advertising, a lot of local marketing to start the business,” Wilson says. “It’s not like every other business. It might look simple, but no business I have ever found has proven to be simple in the long run. Be sure to understand the economics of mobile storage before you get into the game.”
Jennifer LeClaire is a freelance writer based in Hallandale Beach, Florida, and a regular contributor to the Mini Storage Messenger and Self Storage Now! Her clients include The Associated Press, The New York Times, and CBS Television/Winstar Communications.
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