There’s always going to be a need for self-storage units. Let’s face it, from time to time, people feel like they own too many things than their homes can accommodate. This is why the self-storage sector has been booming and is worth $23 billion.
Self-storage businesses need a sizable initial investment, but once they are up and running, they may generate relatively passive and consistent revenue. Simply receive payments, rent out apartments, and go about your daily business.
However, getting there requires considerable effort and expertise. Fortunately, everything you need to know to launch a profitable self-storage business is laid out in this step-by-step manual.
What Is A Self-Storage Business?
Self-storage business refers to businesses that offer storage or space for the needs of the customer, including the storage of their records as well as limited help with maintaining those records.
This service is considered self-storage as long as the primary goal of the company is to provide self-service storage space and that the service is not branded as serviced records management.
Is A Self-Storage Business Profitable?
Clearly, no business holds a risk-free guarantee. However, your chances are better with self-storage. 50% of new company endeavors fail during the first five years, according to Investopedia . However, an astounding 92% of self-storage firms are profitable.
It is no wonder banks are keen to provide loans to firms that rent storage units.
Even better, according to SpareFoot, tiny warehouse enterprises have an average 11% profit margin. Restaurants, in contrast, only make 3% to 5% profit.
Fast Facts of the Self-Storage Industry
- Investment Range: $301,550 - $604,100
- Time To Build: 1 - 3 months
- Industry Trend: Growing
- Revenue Potential: $168k - $228k p.a.
- Commitment: Flexible
Steps To Starting a Self-Storage Business
Step 1: Decide If the Business Is Right for You
Starting a successful self-storage business requires you to decide if the business is right for you. This can be done by evaluating the pros and cons of operating a self-storage business, analyzing trends, considering costs, and estimating revenue.
This can help with coming to a conclusion about if you think you can thrive in this business.
The pros and cons of owning storage units
Some pros of starting a self-storage business include:
- After tenants bring their belongings in, there is little to do but earn passive income.
- Low Costs: You only need to pay your loan and utilities.
- After tenants bring their belongings in, there is little to do but earn passive income. Low Costs: You only need to pay your loan and utilities. A sizable market of potential clients is in high demand.
Some cons of starting a self-storage business include:
- Investment Necessary: Purchasing or constructing a facility might cost $1 million.
- Investment Necessary: Purchasing or constructing a facility might cost $1 million. Chasing Payments - You must pursue collections from nonpaying customers.
Self-storage industry trends
The following are some self-storage industry trends:
- As an additional feature for self-storage companies, the idea of valet self-storage is growing in popularity. With valet parking, the self-storage firm will come to the customer's house and pick up the goods they want to store before taking them to the facility. Offering this service creates a big possibility for self-storage companies to generate more money.
The cost of starting a self-storage business
There is no exact amount for the cost and budgeting for starting a self-storage business. However, according to step by step business , self-storage startups might cost between $300,000 and $600,000 to launch.
The price ranges shown below, from a screenshot from the Step By Step Business website, are for buying an existing self-storage facility.
A better option would be to buy land and construct the self-storage units, but this would easily cost you well over $1 million.
How much revenue can you generate from a self-storage business?
Step by step business also estimated that a self-storage unit costs an average of $100 per month. After paying your mortgage and administrative expenses, your profit margin will be roughly 40% if your facility has 200 units.
70% of your flats might be continuously rented in the first year or two, earning you $168,000 annually. Using a 40% margin would result in a profit of more than $67,000. You could have 95% of the apartments booked as more customers come in, thanks to your marketing initiatives. You would earn $90,000 with roughly $230,000 in annual income.
Step 2: Sharpen Your Idea
Now that you too are aware of the requirements for launching a self-storage company, it would be a good idea to develop your idea before competing in a saturated market.
Identify an opportunity
Look for local self-storage companies online to compare their offerings, costs, and testimonials. You're trying to find a market hole to plug. For instance, the neighborhood may lack a self-storage facility that provides pick-up or valet service.
By concentrating on a particular facet of your company, such as climate-controlled units for e-commerce enterprises, you may think about aiming for a niche market. This can kick-start your word-of-mouth advertising and bring in customers straight away.
Determine your products or services
You might also provide moving vehicle rentals, packing services, valet services, storage box sales, and many more in addition to renting storage units.
How much should you charge for storage units?
The cost of the units depends on their sizes and if they are climate-controlled. They might cost anything from $40 to $200 a month. The national average cost of a storage unit is around $100.
To make sure you're charging competitively, you should research prices at nearby storage facilities. Your expenses will be your mortgage payment and operating expenses. A profit margin of at least 40% is what you should strive for.
This Step By Step Profit Margin Calculator may help you figure out your markup and final pricing points when you know your costs. Keep in mind that the rates you employ at launch should be flexible if the market calls for them.
Identify your target market
Your target audience will be huge. You need to diversify your marketing efforts by using platforms like Instagram, Facebook, and TikTok. You should advertise on LinkedIn as well, as this is where local e-commerce company owners are most likely to be found.
Step 3: Brainstorm a Business Name
Choose a name for your company that succinctly expresses your goals, offerings, and mission. Your company name serves as your company's identification. Given that a large portion of your business, and especially your beginning business, will originate from recommendations made by friends and family, you definitely want a name that is brief and simple to remember.
Here are some suggestions for your business name brainstorm:
- Short, distinctive, and memorable names frequently stick out.
- Easy to speak and spell names often do better.
- The name should be pertinent to the goods or services you offer.
- Ask your friends, family, coworkers, and acquaintances for recommendations.
- SEO is improved by including keywords like "storage" or "self-storage."
- A name should be able to grow, such as "Lola’s Grill" rather than "Lola’s Chicken."
- Avoid names with geographic references that can prevent future growth.
- Utilize resources available online, such as name generators. With a few keywords and the "create" button, you may instantly access dozens of options.
Once you have a list of suitable names, check the US Patent and Trademark Office webpage to see if they are open for registration and use a Domain Name Search tool to see if any comparable domain names are available.
It's advisable to concentrate on ".com" or ".org" domains because they significantly boost credibility.
Finally, select one of the names that made it past this screening, then register the domain and create your social media accounts. One of the main characteristics that distinguish your company is its name.
It is challenging to modify the company name after you choose it and begin branding. Therefore, it's crucial to give your decision significant thought before beginning a corporate firm.
Step 4: Create a Self-Storage Business Plan
Every company needs a strategy. This will serve as a manual to help your business get through the launch process while staying focused on your major objectives.
Additionally, a business plan is a strategy that helps prospective investors and partners comprehend your organization and its mission. It includes:
- A concise synopsis of the full business strategy should be prepared as the executive summary.
- An overview of the business, including its vision, mission, ownership, and goals.
- Goods and services: Give a thorough description of your services.
- Market Analysis: Conduct a SWOT analysis and evaluate market trends, such as variances in demand and development potential.
- Competitive Analysis: Evaluate your primary rivals' strengths and shortcomings while compiling a list of your services' benefits.
- Sales and marketing: Consider the unique selling propositions (USPs) of your businesses and create sales, marketing, and promotional plans.
- Management Team: A description of the management team's functions and backgrounds, as well as a corporate organizational chart.
- Operations Strategy: The management plan for your business outlines logistics, office location, essential assets, and equipment.
- Three-year financial plan with startup expenses, analysis, profit and loss projections, cash flow, and balance sheet.
- Include any extra financial or commercial documentation in the appendix.
- It might be scary to write a business plan if you've never done it before.
You can think about paying a Fiverr business plan expert to write a leading business plan for you.
Step 5: Register Your Business
The first step to starting a self-storage company is to register it; this is necessary in order to pay taxes, raise money, create a bank account, and accomplish other milestones along the way.
Additionally, registration is thrilling since it gives the procedure formal status. When it's finished, you'll own your own self-storage company!
Choose where to register your company
Since it could have an impact on taxes, legal obligations, and earnings, your business location is crucial. The majority of individuals will establish their business where they currently reside, but if you have any plans to grow, you may want to check into other states as some may provide actual advantages for self-storage firms.
Your business could truly grow if you're willing to relocate. Remember that moving your company to another state is not that difficult.
Choose your business structure
There are several types of business entities, each one with advantages and disadvantages. Make a good choice on the legislation for your self-storage company as it will affect your taxes, personal liabilities, and business registration requirements.
Your primary choices include:
- Sole Proprietorship: The most typical small business form, the sole proprietorship, does not draw a separation between the owner and the business in a legal sense. The owner receives all profits and is responsible for the company's obligations, liabilities, and losses. Taxes on business income are paid by the owner on their personal tax return.
- General Partnership: A two-person or more-person business that is comparable to a single proprietorship. Once more, owners are responsible for losses and retain earnings. On their personal tax returns, the partners report and pay taxes on their respective business income percentages.
- Limited Liability Company (LLC) - Merges the features of partnerships and sole proprietorships. Once more, owners are not held personally responsible for indebtedness.
- C Corp. - In this arrangement, the company is treated as a separate legal entity and its owners are not held personally responsible for its debts. Owners reap earnings in the form of shareholder dividends, rather than in a direct way. Taxation that is paid by both the corporation and the shareholders on their dividends is
- S Corp - An S-Corporation relates to the business's tax status but is not a legal entity in its own right. A corporation or an LLC can choose to be an S-Corp for tax purposes, but either one can be an S-Corp. The proprietors of an S-Corp get income directly and are responsible for paying taxes on their portion of business revenue on their individual tax returns.
We encourage new company owners to pick an LLC because it is less complicated to operate than a corporation and gives legal cover and pass-through taxation. They will send your documents of the organization, make sure your business name is accessible before filing, and respond to any queries you may have.
Step 6: Register For Taxes
Obtaining an Employer Identification Number is the last step before you can start paying taxes. Visit the IRS site for further information on how to apply for your EIN online, via mail, or by fax.
Remember that if you've decided to operate as a sole proprietorship, your EIN might just be your social security number.
You must decide on your tax year after you get your EIN. Your company will function financially over a 12-month period called a fiscal year, which can begin in any month and runs from January to December.
Your corporate structure will dictate which taxes you must pay, and this will establish your tax cycle. A taxpayers' list of requirements and online tax filing are both available on the IRS website. To make sure you're filing your taxes correctly, it's crucial to seek the advice of an expert.
Step 7: Fund your Business
The next step is to get finance, and there are numerous methods to do so:
- Bank loans: The most popular option, but obtaining one demands a good business plan and credit background.
- SBA-guaranteed loans: The Small Business Association can serve as a guarantor, assisting in obtaining that ultimate bank approval through an SBA-guaranteed loan.
- Government grants: A few financial aid schemes assist in funding businesses. Visit “grants.gov” to find out which may be suitable for you.
- Family and friends: Ask your friends and relatives to invest in your idea or lend you money for your business. Legal counsel should be sought since SEC restrictions are in effect.
- Crowdfunding: Contributors fund your idea through websites like Kickstarter and Indiegogo, which are becoming more and more popular low-risk options. Multiple investors can support your firm using entrepreneur-focused crowdfunding platforms like Fundable and WeFunder.
- Personal: Use your funds or the sale of real estate or other assets to self-finance your business.
Other than family and friends, bank and SBA loans are most likely the best alternatives for financing a self-storage business.
Step 8: Apply for Licenses/Permits
The regional, state and federal governments must grant you a variety of licenses and permissions before you open a self-storage facility.
Doing business as (DBA), health permits and licenses from the Occupational Safety and Health Administration (OSHA), brand names, copyrights, patent protection, and other intellectual properties, as well as business licenses and permits, are examples of federal regulations and permissions, needed to start your business.
Additionally, you could require licenses and permissions from the state as well as local counties or cities. To find out more about licensing requirements and how to get one, go to the websites of your state, local, and county governments or get in touch with the right person. For your state-specific procedures, you may consult the SBA guidance .
This is not a decision to be made lightly because breaking the law might result in severe punishment. It could be a good idea to employ an expert to assist you to check all the legal boxes if you feel overwhelmed by this phase or are unsure of where to start.
Step 9: Open a Business Bank Account
To save your earnings, before you start receiving them, you'll need to create a bank account.
Even if you operate your self-storage firm as a single proprietorship, storing your business money safe and away from your private account makes it simple to submit taxes and manage your company's profits.
Similar to creating a personal account, creating a business bank account is rather easy. To discover more about the fees and features of the business-specific accounts offered by the majority of large banks, contact your favorite bank.
Banks have different services, so it's a great idea to go through your options and pick the one that suits you the most.
Once you've decided on a bank, create your new account thereby bringing in your EIN (or Social Security Number if you intend to operate as a sole proprietor), incorporation documents, and other legal paperwork.
Step 10: Get Business Insurance
Although it is sometimes disregarded, business insurance can be essential to your success as a business owner. Insurance shields you from unanticipated occurrences that might severely harm your company.
Consider the following forms of insurance:
- General liability: The most extensive sort of insurance, general liability serves as a catch-all for many aspects of the company that needs to be covered. This is the type of insurance you should get if any. Even against property damage and personal harm, it offers protection.
- Business property: this insurance covers your supplies and equipment.
- Equipment breakdown: The expense of replacing or repairing equipment that has broken down due to mechanical problems is covered by equipment breakdown insurance.
- Workers' compensation: Offers benefits to those who sustain workplace injuries.
- Property: This refers to your actual places, such as a cart, a storefront, or an office.
- Commercial auto: Defense for the car owned by your business.
- Professional liability: This insurance shields you from customer claims that a mistake or omission in your work caused them to lose money.
- BOP, or business owner's policy: This insurance coverage combines the aforementioned insurance kinds into one comprehensive insurance policy.
Step 11: Prepare to Launch
As the launch date approaches, analyze and enhance several important aspects of your company.
Develop your website
The creation of a website is essential since it serves as your internet persona and must persuade potential customers of your proficiency and experience.
Nevertheless, unless you use search engine optimization techniques, people are unlikely to locate your website. These actions aid pages to rise in the rankings of leading search engines such as Google.
Using tools like Wix, Squarespace, or WordPress, you can build your own website. This option is incredibly cost-effective, but learning how to create a website might take some time. You may employ a web designer or developer to establish a unique website for your company if you don't have any technical know-how.
Essential software and tools
Being a business owner can be quite challenging since you frequently have to wear multiple hats, including those for marketing, sales, and accounting. Fortunately, there are a ton of websites and online resources accessible to make many business chores easier.
To handle your units, billing, and payments, you might choose to utilize industry-specific software like Booking Ninjas self-storage property management system .
Even while online visitors and casual onlookers may contribute to a portion of your revenue, you should nonetheless engage in digital marketing! Spreading the word is crucial for new companies as it will increase brand and client recognition.
Connect your social media profiles to your website once it is operational and vice versa. Because you can make interesting postings that promote your items on social media, it's a fantastic tool for company promotion:
- Facebook: this is a great tool for paid advertising since it lets you target particular demographics, such as males in the Cleveland region under 50.
- Instagram: This has similar advantages to Facebook but with a different audience.
- Website: SEO will assist in moving your website up in related search results, which is essential for boosting sales. Ensure your website is optimized for calls to action. Try different combinations of size, color, text, and placement for calls to action like "Book Now." This may significantly boost purchases.
- Google and Yelp: Listing on Google My Business and Yelp might be essential to attracting consumers for companies that depend on local clients.
Focus on USPs
A business's unique selling points (USPs), are the qualities that make it stand out from the competitors. Modern customers have several purchasing alternatives, so being able to rapidly convey how your self-storage company satisfies their demands or aspirations will give you a distinct advantage.
Make every effort to make your USPs shine out on your site and also in your promotional and marketing materials to pique the interest of potential customers.
Utilize your website, social media networks, and offline engagements to spread the word about your products and develop your brand. Several recommendations are:
- Display noticeable signs in your shop and on your website.
- Distribute fliers throughout your area and at professional events.
- Create a blog section on your website, and post consistently on your new blog. Share your stuff on other websites while changing it up.
- Encourage consumer recommendations of new clients by providing incentives.
- Paid social media advertisements should be placed on different social media platforms that will allow you to reach your target audience.
- To rank higher in searches, you may use Google AdWords to do some pay-per-click advertising, after doing some keyword research.
- Customer comments known as testimonials about how your storage services benefited them should be shared.
You might not enjoy networking or using personal relationships for professional advantage. But there is probably a lot of untapped commercial potential in your professional and personal networks.
Perhaps a LinkedIn acquaintance of yours is connected to hundreds of potential customers, or perhaps a Facebook buddy you made in college is now managing a self-storage company. Perhaps your relative or next-door neighbor has years of experience working in self-storage and can provide priceless knowledge and contacts in the field.
Evaluate your professional and personal networks and get in touch with people who may have connections to or are interested in self-storage since the possibilities are unlimited. You'll probably attract new clients or come across businesses with whom you may collaborate.
You may wish to engage an expert if you don't know much about basic accounting, especially at the beginning of your self-storage business.
Accuracy is essential since submitting inaccurate tax forms can have serious implications.
Smaller firms frequently use the web-based accounting tools Quickbooks, Freshbooks, and Xero.
Step 12: Build Your Team
You could choose to operate alone, or you might require employees to perform a variety of tasks. The following are possible job openings for a self-storage company:
- Facility Manager - they handle leasing, client relations, and accounting.
- Movers - they pick up things for valet storage.
- Marketing Lead - Social Media and SEO Techniques.
In the future, depending on the growth and requirements of your company, you could need to fill all of these jobs or just a handful. Depending on demand, you could also employ numerous employees for a single position or a single employee for several positions.
Advertisements may be placed for free on well-known websites like LinkedIn, Jobs.com, or Facebook. You may also think about a high-end hiring alternative like posting an ad on ZipRecruiter, Glassdoor, or Indeed.
Additionally, if you have the funds, you may think about engaging a recruiting firm to assist you in finding talent.
Step 13: Start Generating Revenue!
Since people frequently have too many belongings for their houses, the self-storage market is valued at $23 billion. Although establishing your own self-storage company requires a sizable investment, it may generate a sizable amount of long-term passive income.
Using Property Management Software For Your Self-Storage Business
When operating a self-storage business, you may find yourself laying in bed and wondering if all of the people utilizing your self-storage units are paying on time or if they are receiving free extensions on their leases.
Has the latest rent increase been distributed to all eligible tenants? Do staff steal money from the register? Does the unit mix require modification? Which advertising strategies are attracting the most tenants? Effective self-storage property management software like Booking Ninjas may provide the answers to these and other questions.
In essence, there are industrial software packages that can effectively handle most, if not all, key facets of a facility, saving up a manager's time in the process.
Since there is always a need for storage units, you shouldn't have any difficulty keeping your units occupied.
It is already established that self-storage property management tools like Booking Ninjas PMS can be very effective for operating a successful self-storage business, therefore it shouldn’t be overlooked.
Now that you've become familiar with the business aspect, you should start your own self-storage company!