Management • Section 6
literally be the saving grace for your new store or one in need of a complete rehab. The benefits through costs savings from fewer change orders or better designs that complement how the storage customer uses the property can be enormous. A management company may spend nine to 18 months working hand-in-hand with owners prior to opening. Oversight of the construction or rebuilding of a store may also be included for additional fees.
Lengths Of Terms Many in the industry have annual management agreements that automatically renew annually. Make sure you understand and discuss this important aspect. Shorter term contracts are available as are specialty contracts with a higher monthly fee. Examples would be startup contracts in which the management company will complete all services needed to get the store open, hire and train managers, and implement marketing and promotional plans, and create budgets. Due Diligence contracts assist a prospective client in pur-
chasing an existing facility and are also short term, as are fea- sibility studies. Fees for these services generally range from $5,000 to $15,000, each based on complexity, overall size and age of the site, and other variables.
On-Site Supervision Typically, management company supervisors make monthly visits to facilities to audit, train managers, inspect the site, and review income and expenses for the preceding month. Some companies offer weekly supervision while others offer quarterly onsite inspections. If you prefer more onsite supervision, be pre- pared to pay a higher fee. Companies perform daily audits of income off-site, and they
require managers to make daily deposits for safety and for ad- ministrative reasons. Some companies provide online manager training where managers and home office staff are face to face using existing store hardware such as webcams and speakers. This results in less travel and the ability to be in touch instantly.
Conditions For Termination Since the relationship between owners and management com- panies is like a marriage in commitment to one other; it’s best to be prepared for how you could be divorced. What is the length and term for giving notice and what, if any, are the early termina- tion penalties? In most cases, a 60-day notice from either party is required to terminate the relationship, although some require only 30 days. Some companies require the client to have paid at least 12 months of fees, regardless of notice length. Other con- tracts will state that termination can only occur with cause. Be sure you understand all of these important terms of your
agreement. For easier conversion to a new system if you should someday change management companies, make sure you are given access to your software and that you are the licensed user.
Staying In Agreement A third-party management company should be a true operating
partner and an extension of your business. This relationship can be especially rewarding when management understands the owner’s business goals and provides the experience and sup- porting resources to meet and exceed these goals. It is when owners are explicit and straightforward that management can not only achieve the original goals but surpass them. An example would be if a client wants to develop and oper-
ate a new store and exit in five years by selling to a REIT or other national operator. This provides a clear goal and exit strategy for everyone. Be honest about your management needs; then, they can be formulated and customized to fit your exact scenario. Unfortunately, an owner and a third-party management
company can sometimes find themselves on different pages. Be sure your contract contains language on dealing with disputes. Where the contract will be governed? Are there limits to what management is allowed to spend without the owner’s direct ap- proval? What about emergency situations? All of this should be considered prior to executing these documents.
Avoiding Common Mistakes You can help stay on the same page by starting off on the same page. Following are some examples of things you and your management company should agree on prior to entering into a contract. Flow of Communication: Have an agreed upon flow of com-
munication between the store managers, management com- pany, and the owner. If the site manager feels as if he or she has too many bosses, they can feel overwhelmed and give up—es- pecially if they feel they are getting two different messages. In most cases, store managers are employees of the management company and not the owner’s employees. It can work best to agree that when the owner wants something, he or she will tell management, who will then communicate with the managers and make it happen. Likewise, when the store manager wants something, he or
she can communicate to management, and management will confer with owners and respond. This way, everyone stays on the same page, moving forward as a team, with management being the conduit for everyone. Annual Approved Budgets and Goals: Everyone should have
already reviewed and agreed upon the targets for all income, expenses, and leasing activity with an approved annual budget and sales goals. There should be no need to revamp the budget each month. When owners frequently revise budgets or plans, things can run aground. Of course, this doesn’t mean there won’t be contingencies or emergencies to deal with. Most man- agement companies have a detailed history of operating infor- mation they rely on for budget planning, but the budget should allow for exceptions. Level of Owner Involvement: Owner involvement is always
a plus in yielding the highest incomes and overall performance. When owners and management companies work together for common goals, great things can happen. Owners should discuss and perhaps schedule how frequently they will visit the site. Op- timally, these visits will allow their great managers to simply put
2015 Self-Storage Almanac 79
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