How Joe Niemczyk Got His Start (01:41)
After college Joe Niemczyk started as an accountant working for a company that had five self-storage units, and rose quickly through the ranks to become president. At age 29 he was fired, and started his own storage company.
Tracking the Money (02:28)
Joe knew nothing about the business before taking an accounting job at a self-storage company. Accounting is a good background for running any business, but is critical in self-storage, because store operators are often lax.
Customers and Managers (01:47)
Self-storage customers range from movie stars to homeless people to drug dealers. They often have reasons for wanting to be anonymous. To succeed in this business, you have to treat your managers well. Let them know they're doing a good job.
Growing Through Leverage (01:58)
Joe started his business with $10,000 borrowed from a friend. His intent initially was to manage other people's properties and then invest in his own. Start with one building, lease out the units, then use your equity to build another building.
Getting the Word Out (02:10)
When he was starting out, trying to get his first contracts, Joe took part-time jobs for income. His biggest challenge was convincing owners that he knew how to manage their properties. He went to conventions and made contacts through friends.
Understanding How the Business Works (02:16)
Good accounting systems are a must with far-flung operations. Most important are good, reliable people. The industry has trade associations, conventions and publications that can help owners be successful. Self-storage isn't like real estate.
Scaling Up (02:04)
Differentiate yourself. Reputation is everything. As you become known as reliable, people will bring business to you. Joe learned this from a mentor, and from observing.
The Tipping Point (02:28)
If you take advantage of the tools the industry has to offer you can be successful in just a few years. There are seminars, publications, conventions and other resources to educate people who want to enter the business.
Still Room for the Little Guy (02:32)
The industry's failure rate is fairly low, but self-storage owners need to be prepared to weather economic downturns. If occupancy rates drop, you still need to make your loan payments. Big operators are more sophisticated and professional.
What We've Learned So Far (02:31)
Host Tom Duening recaps the first part of the program. Joe got into the business as an accountant right out of college. Having a mentor is helpful. Self-storage is a people industry, and it's an easy industry to enter.
Differentiate Your Product (02:29)
In today's climate the competition is stiff. Understand you're selling a product, not just selling space. People's decisions are based on emotion. Differentiate yourself from the competitor down the street. You're not selling a commodity.
Having a Mentor (02:09)
Having a mentor kept Joe anchored and helped him stay focused on what was important. You need to be able to budget and to present a realistic plan to the bank.
In the beginning, Joe spent $10,000 advertising for seminars but had few takers. He went broke. Next he started leveraging his talent into managing and getting part ownership in existing storage businesses. Owners needed his expertise.
Overhead is only 30-40 percent of gross revenues. So once bills are paid, the rest is cash flow. If you have a 10% ownership stake in a store, you receive 10% of the monthly profits. But if rents don't cover the bills, you have to kick in 10%.
Selecting a Location (02:58)
Industry trade associations publish useful data including the cost to build per square foot. The property must cost less per square foot than you can get in rent. Next, check out the nearby competition, their occupancy and rates.
Market Analysis (02:44)
Nationwide, there are 5 to 6 square feet of storage per capita. If a market has more than that, it may or may not be saturated, depending on the demographics. When analyzing your market, the relevant area is within a two mile radius.
Up to 70% of storage unit renters are women. Demographic data can be purchased online. Next, determine how much competitors are getting per square foot monthly. Industry experts will consult with you to help you get started.
Four Reasons People Rent Storage (02:53)
1. Convenience--your facility must be easily accessible. 2. Perceived trust--you need good managers. 3. Security. 4. Price--contrary to belief, this is not reason number one. Managers must be trained to sell over the phone.
Ask an Expert (01:42)
Joe advises consulting an expert before choosing a location. Even if a property looks good on paper, he always drives through the neighborhood to make sure it will work. Self-storage should be referred to as a store, not a facility.
Financing and Design (03:05)
Companies that specialize in financing self-storage can be found at industry conventions. Typically the loans are for 70% of the value. An expert can help you determine the optimal unit mix for the area and the cost to build it. Then you hire the contractor.
Experts Lend Credibility (02:04)
Unit sizes range from 5x5 to 15x40. In a typical store there will be 7-10 different size units. The smaller the unit the higher the square foot rent. It will be easier to obtain financing if you've hired an expert to help you run the store.
Have Cash on Hand to Start (02:21)
In today's market it will take 24-30 months to fill 90% of your units. So you need to borrow enough up front to pay your mortgage for those first couple of years. A typical store is 60-70,000 square feet.
A typical store requires about three acres. If it's all outside storage, only 45% of the land will be covered. If the land is paid for, the construction cost would be $2 to 2.5 million. Make sure you know if your loan has a prepayment penalty.
Zoning and Permits (02:14)
Cities typically don't like self-storage, so make sure you know the zoning laws. Getting permits can be a long process. It helps to get the neighbors on your side. Cities can dictate operating hours and some communities even control design details.
More About Financing (02:02)
If you will own multiple stores, seek out different lenders for each. Going to conventions is a great way to learn about the business. Cap rates determine the value of the property in relation to projected income. These are negotiated with banks.
Exit Strategy (01:24)
There is consolidation going on, but the six biggest companies only own 30-35% of the industry. If your strategy is to eventually sell to one of them, make sure you build according to their specifications.
Hiring Managers (02:11)
Joe goes by gut feel, but he also does background checks. He doesn't place newspaper ads, and advises against trying to lure away competitors' managers. Joe drives by the applicant's home to see its condition. He even hires mystery shoppers.
Managers Need People Skills (02:11)
Most interviewers talk too much. Get the prospective store manager talking instead. Much will be revealed. Managers need to have empathy, because customers are often in crisis situations. But they still need to collect the money.
The Job of Manager (01:50)
Managers will stay long term if treated right. Typically managers are a husband-wife team that live on site and work 40 hours per week. Part of the job is collections calls. Stores must auction off items in unpaid units. The frequency of this varies.
Conflict Resolution (02:43)
People become emotional when their possessions are sold to pay their rent. Managers have to deal with anger and threats. Joe puts mirrors on the back wall so customers can see themselves. He's also trying various methods to deal with collections.
Motivating and Training Managers (03:16)
Joe's managers earn a bonus when they make him happy. The most important skill a manager needs is the ability to answer the phone in a way that gets the customer to come down and take a look. Teaching salesmanship is critical.
Operations and Technology (02:10)
The software used by the industry is antiquated. But the industry is evolving. Most business comes from the Internet now. Collections on delinquent payments are regulated by the state. Managers have a store manual they can consult.
Getting a Start by Managing (01:20)
Managing a store is a good introduction to the industry. Managers typically earn $3000-3500 monthly, plus benefits, housing and utilities. Joe encourages employees who want to become owners.
Marketing and Promotions (02:15)
Joe recommends spending 15% of revenue on marketing. The owner's job is to get the phone to ring. The best way to use the Internet is to partner with a company with a bigger site that will link to you.
Advice to Someone Starting Today (01:36)
Do your homework. Go to conventions, talk to people in the industry, visit stores and talk to resident managers. It's a great industry to be in, but you have to be smart about it, and differentiate yourself from the competition.
Summary of the Entrepreneur's Advice (02:55)
The industry works by leverage, using debt capital to grow. Women are the core customers. They look for a convenient location, trust, security, and price. Competing on price alone won't work.
Summary of the Entrepreneur's Advice, Continued (01:21)
Attend conventions and network with experts. Get to know consultants and lenders. Hire an expert to guide you. Marketing is the owner's responsibility. Leverage the Internet and technology. Hiring good managers is the key to success in the industry.
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