The process of finding, hiring and training quality staff requires dedication. It involves a conscious decision to profile the ideal employee, identify key job characteristics and responsibilities, establish the necessary skill sets, and use creativity to discover pools of qualified candidates. It also takes a commitment to employee training and to providing the benefits and growth opportunities that build team loyalty and empowerment.

Recruiting

When creating your employee profile, be clear and precise. Know the education level, job skills, experience and qualifications you feel are necessary for success in your organization. Once you have established these criteria, you can begin looking for candidates who fit the bill. There are several possibilities:

• Recruit from within. You can often find the ideal employee within your current organization. Internal promotions send a message that the company offers career-advancement opportunities for qualified, hard-working, dedicated individuals.
• Seek personal recommendations. Ask current employees, former employees, vendors and business associates for recommendations.
• Create an internal referral program. Consider offering a bonus for any recommendation that results in a successful hire. The incentive should be contingent upon a minimum length of stay.
• Advertise. This method should yield the broadest response. One of the keys to successfully advertising a position is to write a clear description of the job being offered, including the title, salary, benefits, requirements and qualifications. Next you need to choose the size and placement of the ad. Know how much you are willing to spend, as some resources can be expensive. Just as with any marketing campaign, you want to attract the highest number of hits for the least amount of money.

Evaluating Resumes

Hopefully, your recruitment efforts will attract more candidates than you can handle. The most efficient way to weed through the list is to peruse the resumes looking for key phrases and buzz words that match your employee profile. Separate them into three piles: definite, maybe and no way. Beginning with the definites, read through each resume again, following these simple guidelines:

• Start at the end, where many applicants include their least flattering and relevant information. Be suspicious of functional resumes that focus on tasks and duties without clarifying dates of employment. These candidates may look qualified, but they could be job jumpers.
• Look for worthwhile accomplishments that have benefited employers. This will be a good indication of a candidates profit-mindedness.
• Steer clear of trivial information. Some candidates puff up their resumes with achievements or experience that is unrelated to the work at hand. For example, an excessive list of hobbies may indicate the applicant is more interested in extracurricular activities than a strong work ethic.

Interviewing

Once you have narrowed your list, youll move on to the interviews, the most critical step in the hiring process. Keeping your employee profile in mind, write a series of pointed questions that will help you get the most mileage out of this brief dialogue. Place a number value on each and award candidates scores during the interview. This will help you when it comes time to make a decision, as it can be difficult to remember your impressions after conducting several meetings.

Following are some questions that will help you see through each applicants interview persona and discover the real employee:

• Describe the type of people who most annoy you. (This should identify characteristics the candidate does not see in himself.)
• Describe the types of improvements you would make at your last job if you could. (This will help you gauge the candidates creativity and general sensitivity.)
• Why have you chosen to make a job change at this time? (Be aware of candidates who bad-mouth former supervisors or coworkers.)
• What are your expectations of a new employer in terms of support and assistance? (Equilibrium is important here. Watch out for applicants who seek too little or too much.)
• Can you give me examples of emergencies that required you to reschedule your time? (This is a good way to determine if an employee is willing to go the extra mile.)
• What did you like about the last company you worked for? (A thoughtless answer may indicate the candidate is just going through the motions.)
• How would you describe the best person you have worked for? (This helps identify qualities the candidate admires.)
• What has been the most interesting assignment of your career? (This will help you determine how the candidate responds to challenges.)

Ending an interview can be just as awkward as beginning one, so set strict parameters and time limits. While 16 minutes is usually enough time to determine the qualifications of any candidate, allow 30 to keep it more sociable and leisurely. Announce the time limit at the start and have a clock visible. Give the candidate clear indications when the interview is coming to a close, and end decisively. If the candidate is strong, let him know your interest. Otherwise, simply provide a time frame in which he can expect to hear about your decision.

References

There are only two ways to handle references: thoroughly or not at all. If you decide to be thorough, which is recommended, here are several points to consider:

• References should be checked by the person who will be the candidates supervisor. Only he knows the pertinent questions and responses he is seeking.
• Dont hesitate. Check references as soon as the candidate gives you clearance to do so.
• Do not base your decision solely on letters of recommendation, which could have been written by anyone. Always follow up with a phone call. This will also help you gauge the level of scrutiny provided by the reference.
• Call as many former employers as possible, especially those who were not listed as references. Most candidates only list those who will give them positive reports.

After all the proper procedures and techniques have been followed, your remaining failsafe tool is gut instinct. Ask yourself which candidate came across as the one who could do the best job and fit into your work culture. Which has the most outgoing, personable attitude and customer-service orientation? In the end, what you want is the kind of employee you would want to deal with if you were your customer.

David Blum, an industry consultant, is president of Blum Management Services Inc., based in South Florida. He is also past president and founder of the Florida Self-Storage Association. Mr. Blum has more than 10 years of experience in self-storage and more than 35 years of business experience. For more information, call 954.255.9500; e-mail dblum@blumms.com; visit www.blumms.com.

Complete customer satisfaction is more than a mission statement, its my mantra, says Kirk Nash, CEO and president of On The Move Inc., the nations fourth largest truck-rental company. Nash and Maury Westerdale, partner and chairman, formed the business in 1991 after seeing the difficulty self-storage owners had when attempting to lease trucks for tenant use. Today, Boerne, Texas-based On The Move supplies the industry with trucks and insurance as part of a turnkey program.

Nash and Westerdales first-hand experience as facility owners gave them special insight into the industry. Westerdale, a storage pioneer, built his sites in Michigan in the '70s. Nashs store, which opened in San Antonio four years ago, was full within a year. As purveyors of rental trucks, theyre experiencing phenomenal growth. Our minimum growth was 20 percent in one year, Nash says. As they abhor the hard-sell approach, the majority of their business comes from customer referrals.

The idea of offering trucks for sale or lease with insurance and promotional graphics just took off, Nash says. In 1992, the partners introduced their venture at a Self Storage Association tradeshow and took nearly 30 orders. Now, 5,400 of the companys trucks can be found in facilities throughout Canada and the United States. There are even two in Russia.

Approximately 20 percent of storage facilities in this country offer trucks. Those that offer truck rental have higher occupancy than equal facilities without them, asserts Nash.

On The Moves truck leasing costs $720 per month, plus a monthly insurance premium of $170 to $230, depending on location. The 48-month contract, which includes unlimited mileage, comes with $5 million in rental insurance ($1 million in New York). Also part of the package are a hand truck, furniture pads, storage products, marketing and training materials, rental forms, truck-condition reports, first-aid kits and fire extinguishers.

Access Self Storage in Dallas uses its trucks for self-promotion.

We offer a guarantee that makes us different, Nash says. If an owner needs an early lease cancellation, it only costs him $2,500, which covers the cost of preparing the truck to re-enter the market.

It gets even better: Trucks can be custom painted with a company logo and other graphics to serve as rolling billboards. On The Move can recommend a graphics company to handle the work, or owners can choose their own. Facilities can use the sides of the truck for self-promotion or rent the space to other companies for a fee.

A rental truck is a profit center for a facility, Nash says. If you comp a customer one month of rent, you never recoup that cash. Instead, operators can offer free truck use. When vehicles arent being used by tenants, they can be lent to out to charities for events. As they travel about town, the trucks advertise the facility and position it as a contributor to the community.

Finally, owners build equity with the lease program, Nash says. Depreciation schedules on trucks still favor businesses. We expect our trucks to have approximately 60,000 miles after four years of service and be valued somewhere between $10,000 and $12,000. An owner can sell the vehicle for a profit over the residual value or extend the lease and retain the insurance.

Innovation Time

Nash figures if youve got an idea, you might as well bring it to life. Westerdale used his 30 years of experience as an engineer for Ford Motor Co. to design an aerodynamic body style for one truck model. In October, the company introduced a rear door that descends over the loading ramp and prevents truck theft. Another innovation is an automatic rear door that opens with a remote control. This door helps eliminate injuries that occur with manual doors, Nash says.

Last January, the company introduced its one-way rental program. A license defines a specific market determined by the number of trucks leased and dedicated to On The Move. Licensees receive 50 percent of each local or one-way rental, and sending dealers receive 20 percent. What makes our one-way plan different is receiving dealers get 5 percent of the rental, something no other truck rental company offers, Nash says. Vehicles are supported with Ford roadside assistance and warranty protection. An online reservation system allows dealers to function via the Internet.

As it becomes more sophisticated, the industry could become impersonal, Nash says. The challenge is to find more needs for storage, to offer superior service yet make the storage experience personal for the tenant. By fulfilling its goal of complete customer satisfaction, On The Move provides a product that allows owners to enhance customer service and provide that personal touch. For more information, call 800.645.9949; visit www.onthemovetrucks.com.

News From Around the World

Facility Plan to Save Historic Mill

After standing empty for three years, a historic mill in Manchester, England, is being revived as part of a mixed development that includes self-storage, industrial units and a gym. Mile End Estates is refurbishing Boltons Swan Millonce the biggest spinning mill in the worldin a multimillion-pound project, according to a recent article in The Manchester Evening News. The buildings originally opened in 1904-05, and the development scheme for the 4.75 acre site is extensive and long-term. The company, which was set up to buy and restore the mill, is also planning a project in Liverpool and looking for similar investments.

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Canadian Tire Building Converts to Storage

In Milton, Ontario, a former Canadian Tire building could be turned into a self-storage company, reported The Canadian Champion. At a September meeting, town officials reviewed a proposal that calls for the building to be expanded to 9,295 square meters and divided into 894 interior self-storage units. The units would be individually alarmed and climate-controlled, ranging in size from 2.5 to 18.5 square meters. Balmoral Group Development Corp. applied for a zoning bylaw amendment to change the site from highway commercial to a site-specific employment zone.

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Storage Goes on Stage

An original play called Self-Storage was performed at the Vancouver, British Columbia, Fringe Festival in September, according to Straight.com. The work received fairly good reviews. The main character, who lives in a storage unit, is quoted as saying, Im not afraid of life. I just dont know what to do with it right now.

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Big Yellow Expands

Big Yellow Self Storage has expanded into West Yorkshire, United Kingdom, according to a Sept. 19 report in The Huddersfield Daily Examiner. The company, which has 35 sites across the south of England and Wales, spent £7.5 million on a store at Gelderd Road, Leeds.

This month, I gathered real estate experts to discuss the state of self-storage in the West. Let’s hear what they have to say about their respective cities and regions. Our panel includes: Richard Arnold, Arnold/Forcum & Associates, Portland, Ore.; Roxana Baker, Grubb & Ellis, San Jose, Calif.; Clifford Crowe, Lee & Associates Inc., Carlsbad, Calif.; Larry Hayes, Hayes & Associates, Missoula, Mont.; Larry Kudla, American Realty & Investment, Las Vegas; Joan Lucas, Joan Lucas Real Estate Services, Denver; Michael McVay, Lee & Associates Inc., Carlsbad, Calif.; and Jim Ramsay, Coldwell Banker Commercial, Redding, Calif. My comments are in italics.

In your market, have you seen cap rates fall in the last three months? Are they higher than they were at the end of 2004?

Arnold:

I’ve seen cap rates fall in the past 12 months, but not the past three. I believe cap rates have fallen about 1 percent in the past year.

Baker:

Cap rates in Silicon Valley and the San Francisco Bay area have been very low for the last year or so, in the 6 percent to 7 percent range. There’s a lot of money chasing a limited number of viable properties in addition to low interest rates and lack of investment alternatives. Cap rates are still going down into the 5 percent range.

Crowe:

In Southern California, cap rates seem to be lower in the last several months than they were earlier in the year.

Kudla:

I have seen cap rates get lower in the Las Vegas market.

Lucas:

Due to a shortage of supply in my area, demand continues to affect cap rates. In reviewing a list of closed transactions from the last several years, I’ve seen a steady decline in cap rates from a high of 11 percent to a low of 7.5 percent.

McVay:

The cap rates on properties sold by brokers have not changed over the past year. If anything, they’re lower.

Ramsay:

I’ve seen cap rates in California dropping to a new low over the past 12 months. They seem to have stabilized over the past 90 days, with investors realizing how low you can go and still make a reasonable, safe investment. Rates are definitely lower now than they were at the end of 2004.

How low is low? With interest rates rising for the 11th time, cap rates will eventually increase. A 2 percent rise in cap rates will drop the price of a facility by 20 percent and the average equity by about 50 percent. It looks like the risk is greater if cap rates go up than the gain if they go down. (See my recent article “Interest Rates, Cap Rates and Betting the Farm” in the November 2005 issue.)

Are self-storage transactions harder to close? If so, why?

Arnold: I don’t find transactions harder to close, except in cases where the seller is attempting to make a tax-deferred exchange. It’s becoming more difficult to find a suitable exchange property.

Baker:

Lenders on all types of investment properties seem to have more stringent parameters and require larger down payments, slowing down the buyer’s mortgage processing and final close of escrow.

Crowe:

With a tighter market, buyers and sellers are more concerned about the details.

Kudla:

I don’t think transactions are harder to close—just the opposite, since lenders and investors have a better acceptance of the product.

Lucas:

Whenever conduit lenders are involved in a transaction, much more documentation is required during due diligence. For sophisticated sellers and buyers, this is no problem. On the “mom and pop” transactions, we’re typically dealing with local lenders who understand the property and type, and the closings are relatively painless.

Ramsay:

All transactions are harder to close. As investments are more difficult to find, sellers and buyers become more demanding. The risk factors are approaching the same costs as fed and state capital-gains taxes, leaving all parties feeling pressed. Sellers seek to find another 1031 Exchange property that is equally as good (and most can’t). Buyers demand to know their investment dollars are buying “near perfect condition” properties while paying 4 percent to 6 percent cap rates. Sellers are not willing to fix anything that would generally be repaired or replaced under normal market conditions.

McVay:

Transactions are not getting harder to close. Lenders still desire the self-storage sector, and the loan-to-values are still being quoted around 80 percent.

The first indication that a good market is going soft is the deals are more difficult to close. Buyers are a little less convinced and, thus, tougher to deal with on smaller issues. When it becomes a pattern, it’s a sure thing the market will change.

Are you seeing more buyers or sellers in your market? Have you seen an increase in both over the last year? If so, what do you think has caused the influx?

Arnold:

I’m finding lots of buyers and very few sellers. I think the market is at its peak, and though buyers are plentiful, owners are not interested in becoming sellers. This is likely due to the fact they don’t want the tax bite and have trouble finding other real estate that will give them a similar return.

Baker:

There are lots of buyers and “tire kickers.” Not many have switched to self-storage from office, R&D or retail properties just yet. Most get turned off by the high prices relative to achievable cash flow no matter what the product type. It looks like the large self-storage chains are selling portfolios, but not many “moms and pops” are selling.

Crowe:

I haven’t seen much of an increase in sellers, but we continue to have a ton of buyers. A lot of them purchasing at lower cap rates are those coming out of 1031 Exchanges.

Hayes:

There are still a lot of buyers and little inventory in my market. I don’t think there are more buyers than in the past, just frustrated ones who have not found something to meet their criteria.

Lucas:

The situation has not changed in the past decade. There are probably 100 buyers for every good self-storage facility. The reason is everyone hears about the great returns an investor can achieve, pure and simple. Are there more sellers? Definitely. But several years ago, there were many developers looking for sites on which to build. That is the piece of the industry that has diminished, due to overbuilding in so many sectors of the state.

McVay:

There are definitely more buyers in Southern California, but we’re also starting to see more owners thinking about selling.

Ramsay:

There are a lot more buyers looking for investments. It seems to be somewhat of a seller’s market in California, but sellers can’t seem to replace their properties for the same return on investment. The market is settling down, and buyers/investors are realizing they can’t pay current prices with any degree of safety. In areas of heavy residential growth, self-storage can still expand to some extent; however, in stable areas or those with little or no growth, the market may soon be overbuilt. Investors are always looking for alternatives and opportunities. Cash flow with safety seems to be the norm.

It appears we are approaching some balance between buyers and sellers. Will we overshoot it? Who knows, but it usually works that way.

Do you have any stories to share about overbuilding in your market? Is it becoming a problem?

Arnold:

While discussing overbuilding with one seller, I was told that although his vacancies had slightly increased, he had raised rents to be in-line with those needed by new-facility developers to accommodate higher construction costs. Vacancy increased, but rents improved enough to offset it.

Baker:

Silicon Valley doesn’t have much available land zoned for self-storage. Buyers looking to develop have few infill sites from which to choose, and labor and construction costs are quite high. Therefore, overbuilding hasn’t been a problem in most cities in my market.

Crowe:

I think each pocket within a major market needs to be evaluated individually.

Kudla:

There is no overbuilding is my market. This is a growing area. I would venture to say it’s is not an issue in other Nevada markets either.

Lucas:

Several years ago, an experienced developer got approvals to build a 100,000-square-foot facility in a thriving part of town. The plan was staged development. Unfortunately, due to problems with the city, he was forced to complete the entire project at once. A year and a half later, a second developer came into the market with a similar facility on a less favorable site just two miles away. Does anyone want to guess how long it took the facilities to reach breakeven?

McVay:

There really isn’t an excess of overbuilding in my area because of zoning restrictions. There are a couple of markets in the Los Angeles area that may be overbuilt, which causes facilities to offer numerous discounts, but they aren’t suffering.

Unfortunately, California and Las Vegas are the exceptions in comparison to the rest of the country. I’m hearing more stories like the one Lucas related. It’s time to do a check up on your facility and market.

As you look back at 2005, what are your thoughts on the self storage market in general? What would you like to see in the coming year?

Arnold:

I think self-storage is the best investment available in the real estate market. In the upcoming year, I’d like to see more owners become sellers, but I really don’t expect that to occur—just yet.

Baker:

Lots of additional housing units are being built, replacing some obsolete industrial areas, and there aren’t a lot of new self-storage facilities under construction. This should portend well for existing facilities, which are running at about 90 percent occupancy in the greater San Jose area. Also, quite a number of new retail centers and mixed-use developments are going up. It’s probably a good time to build a limited number of self-storage facilities or expand existing ones in or near the changeover areas, providing the cities will allow the use.

Crowe:

The storage market continues to be a good one. I see more lenders and investors recognizing self-storage as a good property type compared to others.

Lucas:

This is a thriving niche of commercial real estate. There are many sophisticated buyers looking for quality properties. If a facility is priced right, everyone is assured of a successful closing within the shortest amount of time. Our markets are going to be overbuilt for quite some time. I hear from new people in the industry who want to build, build, build. They tell me there are 15,000 new homes going into a given area. What they haven’t taken into account is the time it will take for a community to be fully built out. Couple that with the fact that only 10 percent to 12 percent of the population uses self-storage. We continue to create our own problems.

McVay:

I think a lot of owners who were thinking about selling but didn’t will regret it. It looks like there will be much more product available next year, and it will cause values to slightly decrease.

Ramsay:

As investment opportunities become more competitive, self-storage is more acceptable to lenders at competitive rates. Since the stock market crash in 2000, investors have been looking at more reasonable and steady income streams. Self-storage fulfills these requirements. In my market, I’d like to see sales prices related to cap rates become more realistic—7.5 to 10—and have more sellers selling established sites. Also, where there is economic demand, I’d like to see more property zoned for self-storage and more facilities constructed.

McVay made a very important point. If you’re thinking about selling in the near to intermediate term, now is the time. Waiting is risky business with limited potential rewards. If you plan to hold for five years or longer, it’s still a great opportunity. Just keep an eye on new competitors.

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Michael L. McCune has been actively involved in commercial real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In 1994, he created the Argus Self Storage Real Estate Network, now the nation’s largest network of independent commercial real estate brokers dedicated to buying and selling self-storage facilities. For more information, call 800.55.STORE; visit www.selfstorage.com.

The new Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) went into effect on Oct. 17, and now bankruptcy experts around the country are highlighting the changes and trying to figure out how to apply them in the law. Not only are there sections that are nonsensical or contain gaping holes, but the new act includes many technical errors. And Congress has no intention of making amendments to it any time soon.

While its difficult to predict how many of the BAPCPA changes will affect self-storage operators, I can give you at least a preview of those I expect to have significant impact on the industry. Ill supply updates in future columns.

Chapter 7 Eligibility

When it comes to bankruptcy changes, there are really only a few important things a self-storage operator needs to understand. The first is almost everything you already know about the subject still applies. The new act includes many revisions to the existing law, but general precautions remain the same. For example, you still need to remember an automatic stay goes into effect immediately once a tenant files bankruptcy, and you cannot continue with a foreclosure or lien sale if that occurs.

The largest change is the way in which a debtor is considered eligible to file Chapter 7, which involves a complete discharge of debt, or Chapter 13, which includes some form of repayment to unsecured creditors. Now, a debtor is forced to face a means test, which looks at income and expenses against a national standard, before he can file Chapter 7. If he has income in excess of the average (adjusted by region), he would, in theory, be forced into Chapter 13.

This is a welcome change to any self-storage operator who has had to halt a lien sale, lose use of a unit, or suffer the consequences of a bankrupt tenant who walked away from his debt. But the national average shows that 78 percent of people who have filed Chapter 7 would still be eligible, even with the means test in place.

Further, although more debtors will have to file Chapter 13, many U.S. District Courts approve very low-percentage repayment plans. Some states offer one so low its called a pot plan. In this plan, the amount paid to unsecured lien-holders like self-storage operators is so small its not even identified as a percentageits just whats left in the proverbial pot after payment of all other expenses and secured obligations.

So you might only get 1 or 2 cents on the dollar, and to get it, youll need to submit a Proof of Claim. If you fail to file by a certain date (the bar date), youll be excluded from the repayment, and all the debtors other creditors will get a higher percentage of the payout. The filing of a Proof of Claim is still a reasonably sophisticated, technical process best handled by your legal counsel, even though it may cost you more in legal fees than you get back in settlement.

Once a debtor files Chapter 7, the rest of the process remains largely unchanged. He pays a relatively low filing fee, and an automatic stay immediately goes into effect. This could tie up a storage unit for several months and, in most circumstances, the operator receives no payment on the pre-bankruptcy debt. The only way to get the debtor out of the unit is to spend a considerable amount of money on attorney and filing fees to file a Motion for Relief from Stay. None of this is new information.

Debt Counseling

Another change to BAPCPA is debtors wishing to file Chapter 7 or 13 have to go through some sort of debt counseling. This is a prerequisite, and the debtor must actually present a certificate of completion from a nonprofit debt-relief counselor before he can file.

Although this seems like a positive change, no information is really available about what this debt counseling is going to look like or how it will work. The U.S. Trustees Office of the Department of Justice was supposed to promulgate standards for debt counselors, which still hasnt been released as of September. Although 5,000 certified counseling services were supposed to be in place by Oct. 17, at the end of September I knew of only one claiming to be approved. Therefore, there is some question about the kind of counseling that is actually available and whether this requirement will be suspended or waived for some period of time.

Post-Bankruptcy Action

The change self-storage operators thought they were going to get was one to Section 362 of the Bankruptcy Code, which would clarify the amount of time a tenant who files bankruptcy can hold on to a storage unit before the operator can proceed with eviction or lien sale. A change to the code was made, but self-storage as an industry did not get the same advantages as apartment complexes.

According to Section 362 (B)(20), Any action to enforce any lien against or security interest in real property following entry of an order . . . as to such real property in any prior case under the title, is not stayed. However, your lien is generally not on real property, but on the personal property stored in the real property.

Section 362 (B)(22) discusses permission for the continuation of any eviction, unlawful-detainer action or similar proceeding by a lessor against a debtor that involves residential property in which the debtor resides as a tenant under a lease or rental agreement, and with respect to which the lessor has obtained before the date of the filing of the bankruptcy petition a judgment for possession of such property against debtor. Again, since you are not operating residential property, you dont benefit. There is no acceleration or change in the procedure for removing a tenant from a unit post-bankruptcy.

A Motion for Relief from Stay, with all its trappings and filing fees, still appears to be the only way to get a tenant out of a unit during bankruptcy. Keep in mind the issue is whether he chooses to pay rent after he files. You are generally only entitled to ask him to leave if he doesnt pay regularly and on time post-petition, as the pre-bankruptcy debt will be discharged or funneled into a repayment plan, depending on the Chapter he files. This is why its important to keep tight collection deadlines, so you never lose very much on the pre-filing rent.

Changes in Attorney Title

Another change you may notice is your business attorney may start referring to himself in his letterhead and other communication as a debt relief agency. This does not mean he is providing the aforementioned debt counseling or helping debtors avoid their bills. Its just that any attorney who offers advice even minutely related to bankruptcy is now supposed to put people on notice of that fact. Per the new act, it has to be done, so do not be put off by this statement in your legal counsels correspondence.

Because of the changeand until it is sufficiently interpreted and addressed in the lawI strongly caution all self-storage operators to avoid any substantive discussion about bankruptcy-related issues with tenants. If a tenant informs you he is filing or thinking of filing, you can certainly ask questions such as: Who is your attorney? When do you expect to file? Have you already filed, and if so, what is your case number? But do not go further than that or offer any kind of advice. Believe it or not, it might cause you to have to identify yourself as a debt relief agency also.

What It All Means

You may notice your tenants are not as quick to rush into bankruptcy these days. Theres going to be a learning curve to figure out some of the new procedures, and questions about how to handle the debt counseling and related certificates. You may see some increase in the number of Chapter 13 filings, but Im not certain this will actually benefit you as a facility operator.

Overall, its worth meeting with your legal counsel to make sure you understand how policies and procedures are going to work in your district. When you see your first Chapter 13 is a good time to discuss the value and cost of filing a Proof of Claim vs. what you might get out of the case.

Once the code changes have really taken hold, I will include an update in this column. I expect some of the provisions to be appealed to federal courts rather quickly.

Jeffrey Greenberger practices with the law firm of Katz, Greenberger & Norton LLP in Cincinnati, which primarily represents owners and operators of commercial real estate, including self-storage. This column is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney. Mr. Greenberger is licensed to practice in the states of Ohio and Kentucky, and is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association. He is a regular contributor to Inside Self-Storage magazine and the tradeshows it sponsors. For more information, call 513.721.5151; e-mail jjg@kgnlaw.com.

This year will go down as one of major transition for the electronic-payment industry. Several related issues have had an effect on the self-storage business and the way facilities operate:

• Compliance
• Cost
• Alternative payments

Compliance

In the credit-card arena, compliance has been a buzzword for the last five years. In the past, merchants had to deal with competing requirements from Visa, MasterCard, American Express and Discover. In January 2005, however, a set of uniform requirements was released. These 12 basic requisites, known as the PCI Data Security Standard, outline security requisites for members, merchants and service providers that store, process or transmit cardholder data.

In addition, compliance now affects all merchants. Most self-storage operators fall into the Level 4 category, which comprises any merchant that processes fewer than 20,000 Visa e-commerce transactions or up to 6 million standard Visa transactions per year. The recommended observance is an annual self-assessment questionnaire and penetration scan.

Cost

When it comes to whether a business will accept plastic, cost is always an issue; and several important meetings occurred during 2005 that will have a major impact on charges. The most significant was held during the summer by the Kansas City Federal Reserve. It addressed Interchange, the amount an issuing institution receives every time a cardholder uses his card.

Participants asked the question: Should the government regulate Interchange, and is the current methodology justified? System-wide prices changes were put into effect, including a reduction in the cost of debit acceptance and an increase in the cost of reward points. Finally, a number of new Interchange levels were introduced, as were some new categories. Categories supersede traditional levels, of which there are currently more than 100.

Alternative Payments

Alternative payment methods such as debit cards and electronic checks are gaining significant momentum. During 2005, debit transactions exceeded traditional credit-card transactions, which is important because the cost to the merchant for debit vs. credit is significantly less.

The use of electronic checks through the Automated Clearing House (ACH) continues to increase. The cost of receiving ACH payments is also significantly less than the cost of accepting credit cards. This year, we saw the long-reaching effects of the Check Clearing for the 21st Century Act (Check 21), which went into effect in October 2004. This act allows an electronic image of a paper check to be substituted for the original at a bank or in a court of law. There have been regulatory conflicts related to this, but they are being resolved.

Ross Federgreen is a co-founder of CSRSI, which provides an integrated approach to the analysis, design, implementation, deployment and management of electronic transaction services and systems. Since 1999, the company has helped more than 350 public and private institutions reduce the cost of acquiring money and minimize the liability exposure related to payment transactions and customer data. Its products include the Credit Card Analysis System. For more information, call 866.462.7774, ext. 1; e-mail rfedergreen@ccas-payment.com; visit www.csrsi.com.

Unlike other commercial real estate, self-storage does not require long leases from tenants and, therefore, experiences more turnover. Because of the nature of the business, storage operators and their employees need to excel in the areas of sales and customer service. This involves training and ongoing maintenance of learned practices.

More often than not, the training of new employees in self-storage is left to the person currently running the property, whether its the owner, a management company, a manager or a person on the way out. For good or bad, the new staff learns that persons biases and behavior. Furthermore, training often lacks instruction in sales and service, leaving new team members positioned for failure.

To ensure desired sales results at your facility, analyze your training program. Who handles your training? Have you set realistic goals and objectives for employees? How is performance evaluated and reinforced?

It Begins With a Good Hire

As a general rule, I suggest hiring people who are friendly and personable. These valuable characteristics cannot be taught, and usually the employee can learn the rest. But the position of self-storage manager demands a variety of skills and personality traits, so be diligent in your hiring process. Check references, and conduct background and credit checks as well as drug testing. Your new hire should be:

• Friendly
• Enthusiastic
• Sales-oriented
• Patient
• Polite
• Organized
• Knowledgeable
• Persuasive
• Diligent

In the end, youll be left with a cream-of-the-crop employee who is completely trainable as well as capable of handling sales and customer-service tasks.

The Training Game

Whoever conducts training for your storage operation should have a written guide to follow and a list of material to cover. Just remember you cant teach all dogs all tricks.

Training that produces substantial sales results begins by changing behavior and, ultimately, the employees attitudes. Unfortunately, most trainers get this backward, attempting to build awareness first and expecting the desired behavior to follow naturally. Such is rarely the case.

Other training programs commit errors on the opposite side of the equation, presuming a change in attitude toward sales will come by simply giving employees a crash course in accounting. But understanding the numbers is only a small portion of the jobs requirements, and it has very little effect on the bottom line when compared to skills. A solid training program must encompass a facilitys entire operating system and all aspects of an employees position, not just a single component or task.

Too often, employee training is reactive rather than proactive, focusing on the symptoms of failure rather than the root cause and how to prevent it in the future. If a property is not performing to par, owners rarely investigate before terminating one employee and hiring another. The result? He hires another person with the same weaknesses, i.e., a lack of skills or knowledge. An employee can be a good caretaker and still not posses the sales savvy to increase the facilitys profitability.

Evaluation and Behavior Maintenance

So how does an owner or supervisor get to the heart of the problem? By conducting periodic staff evaluations and reviewing the people, procedures and training that ensure the propertys success. If sales deficiencies are identified, he develops strategies that will address and resolve them.

The best way to improve or maintain learned behavior is to check employees skill level on an ongoing basis. One of the most common ways to do this is through mystery shopping, an anonymous means of evaluating how well and consistently personnel follow standards, policies and procedures.

A mystery-shopping service provides self-storage owners with unbiased information on how well their employees handle sales presentations to prospective customers, whether on the phone or in person. Its purpose is to help improve customer service and increase sales. It relieves owners from having to personally critique staff and provides an objective tool for gauging performance, such as an evaluation form with predetermined scoring methods.

Mystery shopping evaluates and monitors sales while providing constructive feedback. A good service provider should be able to tell an owner how well each employee scored as well as provide suggestions on how staff can improve the sales presentation. The shopping reports can be used as a powerful tool to measure current and ongoing performance. When used as the basis for training sessions, they help create accountability within the organization.

If you want (or desperately need) your property to perform better, your employees must improve their sales skills. At the end of the day, what you evaluate is what they will strive to accomplish. What gets measured gets done.

Carol Krendl, owner of SkilCheck Services, specializes in consulting, training, management and mystery shopping. She has been involved with self-storage since 1984, having participated in the management and development of more than 130 properties nationwide and internationally. In addition to writing many industry manuals and articles, she served on Self Storage Associations national board of directors for nine years and is the vice president of the California Self Storage Association. For more information, call 209.333.4555; visit www.skilcheck.com.

When I built my first self-storage facility 17 years ago, I didnt have to worry about constructs like employee goal-setting, bonuses or incentives programs. But things are different in todays competitive environment.

These days, operators seek to hire talented individuals with charisma. Employees must be able to connect with customers and have the ability to sell them on the unique advantages of the product. We need staff members who will take ownership of a store and be driven by incentives. They must have a passion for customer service and a desire to enhance a facilitys success. If they meet these criteria, they will maximize a sites profitability.

Measure, Then Set Goals

To develop an effective incentive program, you must constantly track and measure your sales and marketing activity. Most storage operators shoot from the hip when it comes to setting goals for their staff, but its difficult to set challenging and realistic objectives if you dont know what to expect. You might set aims that fall short of whats truly possible or aspirations that are too far-reaching.

To avoid being counterproductive, build discipline and consistency into your operation. Continually measure and track the performance indicators that are most critical to your success, for example, monthly move-ins and move-outs, the conversion of callers to visitors, mystery-shop performance, merchandise sales, customer appointments, etc.

Once you have made a habit of monitoring key areas of your business, design a comprehensive incentive plan that will motivate staff members to maximize performance. They should be rewarded every time they achieve goals. Driven individuals will rise to the challenge of realistic but demanding expectations. Performance-based bonuses will also give employees a sense of ownership and create greater morale within the organization.

Frequency and Consistency

Your incentive plan can operate on a weekly, monthly or annual basis. The important thing is to adhere to the plan consistently and tie it directly to the performance of each team member. If you base monetary rewards on an employees annual review, make it contingent upon an accumulation of monthly points to encourage year-round excellence. For every month he reaches his goals, he accrues performance points.

This can help make the yearly evaluation process much more objective, easing tension and anxiety. It also gives each staff member a very clear indication of how well he is performing throughout the year. If an employee understands the law of the scoreboard, he feels much more in control of his accomplishments and aware of his potential to impact store revenue.

When team members know an owners expectations and what it takes to be successful, they have a much better chance of having a positive impact on the business. They feel empowered to direct their own achievement as well as that of the facility. In addition to a sense of ownership, they have the tools to improve profitability and to grow and develop as professionals.

In self-storage, a facilitys employees are its greatest asset. They contribute the most to the success of the operation, so they must understand each aspect of the business and take responsibility for improving performance. A properly implemented incentive program creates an atmosphere for higher productivity and encourages people to excel. It also provides a clear context for achievement, alleviating confusion and inconsistencies within the team and the operation as a whole.

Brad North is the founder of Advantage Business Consulting, which specializes in onsite sales, marketing, feasibility and operational training for the self-storage industry. He has produced two live videos and a workbook titled Maximizing Your Sales and Marketing Program, which can help managers improve their sales and marketing efforts. Mr. North also launched A TelePro, a mystery-shopping service that assists in educating, evaluating and improving the phone-sales performance of self-storage professionals. For more information, call 513.229.0400; visit www.advantagebusinessconsulting.com.

The wheel turns, and we find ourselves on the cusp of a new year. During this season, people tend to reflect on their journey and consider relations with others. They are more inclined to express good will toward fellow creatures, to be charitable and forthcoming.

This is well and good, though it shouldnt require a holiday to rouse these sentiments, especially for those in business. If you own or supervise a self-storage operation, the regular expression of appreciation is part of your formal duty. Am I referring to interaction with customers? Not in this instance. Im talking about your staff.

Good employees are hard to find and, in a competitive market, even harder to keep. For an industry like self-storage in which service is intimately connected to profitability, the role of manager and support staff is vital. Companies expend a great deal of time and effort in locating promising hires, but to what extent are they willing to ensure personnels ongoing happiness? What is the sound of one hand slamming the door on the way out? Ill give you a hint: Its loud.

Think about real estate. Sometimes, its a buyers market. Other times, the ball is in the sellers court. The employer/employee relationship is similar in that one party often wields the power. In an ideal world, there would be parity, but this isnt always so. If the job market is tight, staff may work harder to retain favor. If jobs are plentiful or an employee especially gifted, its the company that must bear the brunt of the effort.

Do you recognize the value of your human resources? Are you the sort of boss who appreciates employees and seeks to retain them, or do you suffer from a my way or the highway attitude? Some storage operators underestimate the importance and complexity of site management. They fail to pay enough to attract quality managers or assume they can do more with less. But as a famous Zen maxim tells us, The tighter you squeeze the less you have.

Another proverb says, Its better to struggle with a sick jackass than carry the wood by yourself. But is this true? Is a substandard employee better than none at all? Consult your bottom line, and then answer that question. If youre uncertain how to judge, this issue will give you pointers on evaluating employees performance. If youre enlightened, these pages also provide ideas for incentives, bonuses and benefits.

The art of hiring, training and hanging on to quality people is one of finesse and skill, and it may change from market to market and over time. So in the words of Japanese poet Matsuo Basho, Do not seek to follow in the footsteps of the wise. Seek what they sought. In the case of self-storage, that would be a talented, dependable team of personable, sales-oriented individuals who are happy to show up for work and do their best to benefit of the entire operation.

Your task as supervisor is to do what you can to elevate employees level of job satisfaction. Sometimes, you can sit quietly and do nothing, and grass grows by itself. Sometimes, you must chop wood and carry water. In either case, remember: No snowflake ever falls in the wrong place. When you land a good hire, be grateful for that precious resource, and be the master of your own profitable path.

Happy holidays,
 
Teri L. Lanza
Editorial Director
tlanza@vpico.com

Although the Yellow Pages (YP) is not the most effective means of marketing, self-storage operators spend more on this method of advertising than any other. I suspect there are two reasons for this: the follow the leader marketing psychology most operators have adopted, and the fact that YP is simple and easy.

YPis a good place to start, but you should dig deeper to find out how much business this method really gets you. In many cases, your ad rep will convince you to buy more space than you need, design an ad that barely works, then sip mint juleps on the yacht he purchased with your hard-earned money. Yes, YP ads are effective, which simply means they bring in more money than they cost. But they are far less successful on a per-cost basis than many other marketing methods.

You need to consider your ROMD (return on marketing dollars). For example, if you spend $1 and make $10, thats a 10:1 ROMD. Measure the effectiveness of each tactic, and invest in the ones that generate the highest yield. Keep in mind some customers will only respond to certain methods, so one technique will not reach all prospects. You need a few to reach the widest target market.

For the record, I dont recommend you abandon YP advertising entirely. Just dont rely on it exclusively. There are other opportunities to explore, and some will be essential to your overall profitability. When you do purchase a YP ad, make sure it includes the following five items.

A Great Headline

Dont use your facility name as the headline of your ad, which is what 90 percent of owners do. It makes no sense. People dont rent from you because of your name, they rent based on location, convenience, price, amenities, etc.

What should you use as a headline? Consider your USPs (unique selling positions). Youve got a number of options, depending on what makes your facility different from others. For example, you could use Individual Unit Alarms or Climate-Controlled Space. If youre strictly after the low-price shoppers, consider Units Starting as Low as (insert cheapest unit cost here).

A List of Features and Benefits

Most storage owners only include the features of their facility in their YP ad without also listing the corresponding benefits. While the advantages of things like different unit sizes and climate control may seem obvious, you need to help customers connect the dots. They may not have considered these things before. For example, when you say you have 12 different unit sizes, explain, So you only pay for the amount of space you need. Every feature you list in your ad should have a benefit attached to it.

Hotline Number

Theres only so much space in a YP ad, and most customers will want to know more than what they see there. They can call for information, but what if its after hours or they dont want to deal with a sales pitch on the phone? Enter the 24-hour free recorded message, also known as the self-storage hotline. Simply provide a phone number that goes to a voicemail or answering machine. The message can tell them everything they need to know about your facility as well as provide general information such as storage tips.

In addition to identifying the message as a free recording, which makes it non-threatening and accessible at all hours, consider giving it an intriguing title, such as Seven Things You Need to Know Before Renting Storage Space. Then prepare a script that lists these items, particularly highlighting the features and benefits of your own facility.

For example, if you offer individual unit alarms, point No. 3 might be, Never rent a unit that doesnt have a door alarm. Without one, criminals can break into your unit undetected. This is a subtle way to steer customers toward a feature you offer, cleverly disguised as friendly advice. If the hotline appears as a public service, people are more likely to call.

Web Address

These days, after finding your YP ad, most customers will seek you out on the Internet for more information. For that reason, a website is not optional, its a must. Always include your web address in your ad, and keep your domain simple as well as easy to spell and remember.

Once customers get to your website, it should be clear what you want them to do. Do you want them to call you? Visit you? Contact you via e-mail? Rent a unit online? At the very least, capture their e-mail addresses so you can send them e-mail marketing pieces in the future. With the help of your webmaster, theres other information you can gather through your site too, such as how many new visitors land on the site each month and how many sign up to be on your mailing list. To know how effective the site is, you have to measure its results.

Graphics

Your YP ad should always include a map that makes it easy for customers to find you. Stick to main cross streets as a general reference. The map doesnt need to consume half the ad space, it just has to tell people quickly whether you are convenient for them.

Dont waste your money on things like color, as research shows it doesnt significantly affect the response rate. All it does is help your YP rep make more money.

Finally, while you may have spent a lot of money on your logo design, it wont get people to rent from you. If it takes up selling space, leave it out. You can also forget about facility images. Keep your ad copy intensive.

If you must use YP to advertise, do it right. Include these five key elements, and your ad will be more effective.

Fred Gleeck is a self-storage coach and consultant who helps owners and operators maximize profit. He is an expert in the field of information and seminar marketing and the author of more than 10 books. To learn more about new marketing ideas revealed only in his live events, visit www.storageseminar.com. For more information, call 800.345.3325; e-mail fredgleeck@mac.com; visit www.selfstoragesuccess.com. To subscribe to Mr. Gleecks e-zine, send an e-mail to tips@selfstoragesuccess.com.