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COSTS DOWN, PROFITS UP
Smart Strategies For Operating Expenses
By Jennifer LeClaire
Mobile storage start-up costs are one thing. Ongoing operating expenses are quite another—and they are costs you shouldn’t underestimate. Combined with a continual need to educate the market on the virtues of mobile storage, rising gas prices and escalating labor costs are spurring mobile storage operators to more aggressively pinpoint costs, stop any obvious bleeding, and implement new strategies to keep expenses in check.
“It’s more important than ever to operate as efficiently as possible,” says Josh Wilson, vice president of Mobile Attic, a mobile storage franchisor in Elba, Ala. “As the industry continues to grow, more competition is going to force operators not only to manage rental rates but to keep a closer eye on the expense side as well.”
Double Duty
Mobile storage operators cite labor as the largest ongoing operating expense. Ed Leos, controller for Glendale, Calif.-based Public Storage Pickup and Delivery, for example, says the company typically staffs seven employees at a mobile storage location compared to only two at a self storage location. But it’s not only the number of employees; it’s the types of skills required that drive up labor costs. Mobile storage requires drivers, forklift operators, and more administrative skills to deal with delivery and pickup logistics. “On the self storage side of the business, I can get someone at close to minimum wage to run the facility,” Leos says. “On the mobile side of the business, it’s about twice that rate per hour.”
Flexible employees can also help slash operating expenses. Think about it—mobile storage typically requires one person to schedule the appointment, one person in the warehouse to pull, tarp, clip, and put the unit on the truck, and one person to deliver it. Then, every time a customer needs to access his container, it requires an employee to get involved at some level.
“Some operators try to save money by having employees wear two or even three hats,” Leos says. “An employee could be making sales and confirmation calls. He could also be working in the warehouse pulling containers and putting containers away again. He could also load the trucks. But those people are hard to find and hard to keep. You have to pay them more than average or other companies will steal them away.”
There is an admitted downside, though. Rolling an operations manager and a driver into a one-person package could stymie growth. You could miss out on rentals if the driver is out in the field when customers call. “If the driver gets a call at 4:00 on a Friday afternoon and he’s tired from a day of work, he may not want to pick up that phone to do another delivery,” Wilson says. “An operations manager is not going to turn down the call.”
Maximizing Delivery Routing
With gas costs climbing higher and higher—and higher—fuel is among the chief expenses for mobile storage operators. Pick-ups and deliveries are part and parcel of mobile storage operations, but maximizing delivery routing can save time, gas, and labor costs in one fell swoop.
Mobile storage operators have a schedule that depends on the customers’ needs, but Phil Duvall, president of Space to Go, a mobile storage operator based in Monongahela, Pa., looks for the synergies that come from flexibility. “If your customers are flexible—maybe they can take their units on Thursday instead of Friday evening—then you can drop the container off a day or two early while you are already in the vicinity servicing another customer,” he says.
The customer benefits because they can get started early—without paying extra rental. The scenario also works on the pickup end. If you have several pickups scheduled for a neighborhood within a three-day period, you could ask the customers with earlier pickup dates if they mind keeping the unit for a couple of extra days. That may relieve the stress of having to hurry to pack or unload those last few items before the driver arrives. “You have to ask customers the right questions,” Duvall says. “So long as they aren’t paying extra rent, they usually won’t mind being flexible.”
Defining The Delivery Circle
Defining a delivery circle can save operating expenses on both the fuel and labor side, as well as wear and tear on the delivery trucks. Leos says most operators choose to draw a circle that spans a 30 to 35 mile service radius. That equals a 35 to 40 minute drive in most major cities. “If your service area is 50 or 60 miles and you only have one delivery on the far side of that circle, then getting back to the shop for the next delivery and going back out again gets very expensive,” he explains.
In other words, large service areas are costly. The driver is spending significant time on the road and gas is burned up by the mile. Of course, Leos, adds, you can’t make that circle too narrow, either, or you’ll find yourself with idle drivers and empty units. “One of the biggest challenges for mobile storage operators is determining that delivery circle,” he notes. “With gas running $3 a gallon, it’s an even bigger issue.”
Getting The Word Out
Advertising expenses are not mandatory the way gas, labor, and utilities are. But mobile storage operators who want to compete for the long haul are investing in advertising and marketing initiatives. The goal is to get the word out without breaking the bank. Rick Reynolds, president of The Store Room, a mobile self storage operation in Lexington, Ky., is adjusting his strategies in search of greater returns on his advertising investment.
“It’s up to the owner how much to put into advertising, but you do have to educate the customer because mobile storage is still somewhat new to them,” Reynolds says. “Advertising to educate the market and to market your unique services is expensive.”
The Store Room is a three-year-old spinout of A1 Portable Buildings, which rents large containerized storage, mobile offices, and modular classrooms for industrial and commercial use. Reynolds has discovered that although the containerized storage and mobile storage business are somewhat parallel, they are not quite as parallel as he once thought. It’s a different customer than A1 Portable’s loyal base and it’s also a newer industry. Advertising fees, then, are among his chief operating expenses next to labor.
Most of The Store Room’s ads are in local newspapers. Reynolds has discovered that the best strategy is to use advertising to drive people to his Web site or to the Yellow Pages. His reasoning: The customer may not need The Store Room today, but they will remember the brand name when they do. “We want them to recognize us in a Yellow Pages ad or go online,” Reynolds says. “We’ve invested quite a lot of money developing our Web site.”
During The Store Room’s first year, Reynolds spent almost as much on advertising as the company earned in rental fees. Since then, through trial and error, Reynolds has learned what works and what doesn’t. The company spends less today on advertising than he once did. Specifically, in its third year of operation, The Store Room spends about 66 percent of what it spent in its first year. Once you get enough containers out in the market, Wilson says, the containers start to speak for themselves and may allow operators to reduce other means of advertising. “We spend most of our advertising on the front end of a new location, knowing that we can rely more on the containers themselves for advertising once the location starts to grow,” he explains.
Beyond the transportation aspects of the business, other operating expenses are similar to traditional self storage, i.e., office expenses, phones, electricity, insurance. There’s billing and collections. There’s tax reporting. There are indeed many different expenses, but none that rival labor, gas, and advertising, industry leaders say.
“I don’t think anyone has the perfect formula for keeping operating expenses in check,” Wilson concludes. “We’ve got ideas and strategies, but as we continue to get more information and proceed with the business, I think the industry will find new ways to gain some efficiencies with our fixed costs that will help.”
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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