People are on the move, and they need self storage units. They are changing jobs, buying houses, going to college, downsizing and more.
A business may also need a self-storage facility. A business might need to temporarily store a piece of equipment or products while remodeling or moving.
With so many possibilities for profit, it’s no wonder that storage businesses are consistently in high demand. This guide will walk you through how to start a storage business, including a full business startup checklist tailored to this industry.
The Self Storage Industry
The self-storage industry has generally been doing well in the United States. It tends to be relatively recession-resistant, as people often need storage during life changes like moves, divorces, or downsizing, which can happen regardless of economic conditions. However, like any industry, success can depend on various factors like location, management, and market saturation.
What is a Self Storage Business?
There are various types of self storage businesses:
- Traditional Self-Storage: This is the garage-style unit most people think of.
- Climate-Controlled Storage: These units have temperature and humidity control.
- Vehicle Storage: For boats, RVs, and other vehicles.
- Portable Storage: Companies deliver a container to your door, which you fill up, and they take it away for storage.
- Indoor Storage: Units are inside a building and may have more security.
- Outdoor Storage: Mostly for vehicles or large machinery.
- Specialty Storage: For specific items like wine, art, or documents.
Why Self Storage Facilities Are In Demand
People seem to always have a need for a self storage unit, whether it’s short or long term. Businesses also regularly use storage facilities.
- Life Events: People often need storage during significant life changes.
- Downsizing: As people age, they might downsize but want to keep their belongings.
- Business Needs: Companies often need storage for equipment or inventory.
- Seasonal Storage: Storing items like holiday decorations or seasonal gear.
- Student Storage: Students may need storage during breaks.
Steps to Starting Your Successful Self Storage Business
Before you start, take the necessary steps to lay the groundwork for a successful business. The following steps walk you through how to start a business in this field.
Market Analysis for a Profitable Storage Business
A thorough market analysis is a must. In some areas, it may seem that there are self storage businesses everywhere. Does that indicate an ongoing need for the self storage facilities, or is the market saturated?
What are the local demographics? Are there entities nearby, such as colleges/universities or military bases, that generate an ongoing need for self storage businesses? Is the housing market in the area booming or stagnant?
Drafting a Business Plan for Your Own Self Storage Business
A self storage unit business owner should draft a detailed business plan. The plan should describe the business, including its structure (limited liability corporation, partnership, corporation).
Other key elements of the business plan include the financials of the key people involved and plans for marketing strategies. Many businesses start small and grow, and the business plan should include the timeline and strategy for that.
When it’s time to grow, a lender will want to see all the financials and the business plan.
Buying an Existing Self Storage Facility
Pros
- Existing customer base
- Established location
- Immediate cash flow
- Lower risk
Cons
- Potentially high upfront cost
- May inherit issues like outdated equipment
- Limited flexibility for changes
| Aspect | Pros | Cons |
|---|---|---|
| Customer Base | Comes with an existing customer base, potentially ensuring a steady income. | Any existing negative reputation might affect future business. |
| Location | Established location known to the market. | The location may be saturated or have less potential for growth. |
| Cash Flow | Immediate cash flow from day one of the purchase. | Existing contracts might be under market rates. |
| Risk | Generally lower risk due to proven business operations. | Unseen issues might arise post-purchase, adding unexpected costs. |
| Upfront Cost | – | Potentially high upfront purchase cost. |
| Equipment & Infrastructure | Might come with existing infrastructure & equipment. | May inherit outdated, damaged, or inefficient equipment. |
| Flexibility & Customization | Can build upon the existing facility’s strengths. | Limited flexibility for changes; remodeling might be expensive. |
Franchising Opportunities in the Self Storage Industry
Franchises like Extra Space Storage and Public Storage offer storage franchise opportunities, although many storage facilities are independently owned.
Selecting the Right Location for Your Self Storage Business
Of course, zoning is your first concern. Research local zoning ordinances and requirements to be sure such a business can get approval to be located in your area.
Other considerations include ease of access. Many people and businesses moving items will use a truck and trailer, so access roads to and within the facility should be easy to navigate.
Also, consider the demographics of the area, which can feed demand. Is the area growing in population? Are there new businesses or housing developments coming to the area?
Creating a Self Storage Business Website
You should hire a professional to ensure your website will pop up during online searches with words such as “Self Storage” or “Storage Unit”. No matter how good your website is, it won’t help you unless it is found on a search.
Your website should include a map/directions feature and a link to do online bookings and registrations. The sizes and locations of the units should be accurately described. You’ll also need a list of items not permitted in the storage units, such as gasoline-powered equipment.
Hours of operation should be noted. State the most desirable features of the business, such as 24-hour video security. Pictures of the units’ interiors are helpful, as well as descriptions of how much square footage is typically needed for household goods.
Choosing a Business Structure
Different business structures are common in the storage unit business. Some common business structures are a limited liability corporation, or LLC, with a sole proprietor.
In other cases, a business structure could be a partnership, with two investors starting the venture. This can be common when one of the partners owns the land or an existing building, such as a warehouse.
The corporation as a business structure may be developed when a self storage business expands and opens one or more additional locations.
| Feature/Structure | LLC (Sole Proprietor) | Partnership | Corporation |
|---|---|---|---|
| Liability | Limited liability for the owner | Limited or joint liability, depending on the type of partnership | Limited liability for shareholders |
| Ownership | Owned by a single individual | Owned by two or more partners | Owned by shareholders |
| Management | Managed by the sole proprietor | Managed by partners or designated managers | Managed by a board of directors |
| Taxation | Pass-through taxation (income taxed at the owner’s personal rate) | Pass-through taxation (income divided among partners and taxed at their personal rates) | Double taxation (corporate level and then at shareholder’s personal level) unless elected as an S-Corp |
| Formation Complexity | Relatively simple and straightforward | Complex with articles of incorporation, bylaws, etc. | |
| Capital Raising | Limited to personal funds or loans | Can attract capital from multiple partners | Can raise capital via stock issuance |
| Continuity of Existence | Ends if the sole proprietor decides or if they pass away | Can end with the withdrawal or death of a partner unless specified otherwise | Perpetual existence unless dissolved |
| Transfer of Ownership | Depends on the partnership agreement; can be restricted | Easier, through the sale of stock | |
| Regulatory Requirements | Fewer regulations compared to corporations | Moderate regulatory requirements | Stringent regulatory requirements, annual meetings, reporting, etc. |
| Ideal For | Small operations, individuals starting a storage business on their own | When two or more people collaborate, especially when one has a significant asset like land or a building | Larger operations, especially when planning for expansions, multiple locations, or going public |
Secure Necessary Permits and Licenses for a Self Storage Company
You’ll need building permits for construction and business licenses to operate. Some facilities may also require small business insurance. Specifics vary by jurisdiction but could include fire safety permits, environmental permits, etc.
Zoning is another concern. Often, neighbors who live nearby are concerned about an increase in traffic and the lighting requirements of a storage business. A self-storage business owner can alleviate these concerns by establishing certain hours for the facility, but good lighting is important for security reasons.
Designing Your Self Storage Units for a Successful Self Storage Business
As you design the facility, make sure the aisles between the units are easy to navigate outdoors and indoors. Clients may use trucks and trailers outdoors and pallet jacks and carts indoors.
Outdoor facilities should be high-fenced, and you’ll need to allow access to the fencing for repairs or weed/snow control.
Areas for outdoor storage of items such as campers or trailers should be large enough to allow for vehicles to be maneuvered and backed up into spaces. The spaces should be clearly defined and numbered.
If the business will be located in a northern climate, be sure to allow room for the removal of snow/ice.
Setting Prices for Units in Your Storage Facility
One great technique used to build a clientele for a self-storage facility is offering significant introductory discounts. For day-to-day operations, there are various factors to consider:
- Location: Urban vs. rural rates differ.
- Unit Sizes: Different sizes command different rates.
- Features: Climate control, security features, etc.
- Competitor Pricing: Know the market rate.
Hiring and Training Staff
Some self-storage businesses operate with on-site staff members. Customers make appointments and are met by a staff member, especially for the initial signing-up process.
More often, bookings are done online or through a customer service representative. That person must, of course, be courteous and informed, and also be able to advise on the unit size that will be needed.
For example, here is key information staff members should know:
Approximate Storage Unit Sizes
- 5×5 (25 sq ft): Suitable for boxes, small furniture, or seasonal items. Probably too small for an 800-square-foot apartment move.
- 5×10 (50 sq ft): Can hold some furniture and boxes. Might work if you only have a minimal amount of furniture and are good at packing.
- 10×10 (100 sq ft): Often recommended for a one-bedroom or studio apartment. Could be tight for an 800-square-foot apartment, depending on how much stuff you have.
- 10×15 (150 sq ft): More appropriate for a two-bedroom apartment. This would likely give you enough space for an 800-square-foot apartment, especially if you have several pieces of large furniture or appliances.
- 10×20 (200 sq ft): Suitable for a multi-bedroom house and would provide ample space for an 800-square-foot apartment.
Questions staff members should ask:
- Furniture Size: Do you have bulky furniture like sofas, beds, or dining tables?
- Appliances: Will you be storing a fridge, washer, or other large appliances?
- Boxes: The number and size of boxes can add up quickly.
- Vertical Space: Remember, you can stack items to take advantage of vertical space.
Marketing Your Self Storage Business
You may wonder, “what is marketing for a self storage business, anyway?” Your strategy should include building an online presence, with at least a website and Facebook page. Our website startup guide can walk you through how to create one and what to include.
You can do lots of marketing offline. Definitely join your local Chamber of Commerce, where you can network with other business owners. If there’s a military base or educational institution in the area, see if you can post information about your facility with those entities.
Embracing Technology: Online Bookings and Security
There are software solutions specifically for self-storage management that help with online bookings, payment processing, and security monitoring.
For example, a new client can book entirely online. The new client is given an access code to use on a keypad which will open a gate into the facility. An online map of the business gets the client to the storage unit. A combination lock is on the unit, and a keyed lock is inside the unit for the customer to use. The customer drops the combination lock in a dropbox.
Security monitoring can be done remotely using cameras and live feeds. Also, a camera or cameras are positioned so that the license plate of each vehicle entering/leaving the facility is recorded.
Customers will choose one self-storage business over another based on the ease of booking and security monitoring.
How to Start a Storage Unit Business with No Money
It’s challenging to start with no money due to the costs of land, construction, and operation, but leasing existing structures for conversion might be an option. Some also start small with just a few units.
It may be possible to start a facility by partnering with a property owner, such as the owner of a vacant warehouse or fenced lot. If a space is unused, the property owner may be willing to lease the property to gain some income from it.
Container-based storage units could be an option for that type of arrangement. The container is dropped at the client’s residence or business to be filled. When full it is picked up and brought to the storage facility. It can be delivered to a new location when the customer is ready for it.
Navigating the Challenges of a Self Storage Business
Though there are many benefits of running a storage business, there are also challenges. Here are some of the most common:
- Nonpayment: Customers not paying fees.
- Vacancies: Keeping units filled.
- Security: Theft or vandalism.
- Maintenance: Regular upkeep is essential.
FAQs: How to Start a Self Storage Business
How profitable are self storage businesses?
The self-storage business has the potential to be profitable, especially when well-located and well-managed. Profit margins can be decent due to the low overhead after initial setup.
Earnings can vary widely based on size, location, and other factors. Some estimates suggest profit margins between 11% and 20%, but this can fluctuate.
What security measures are needed for a self storage facility?
24-hour video surveillance is a must. Also, the facility should be physically checked, especially its fenced perimeter, at a minimum of two times daily.
If the owner of the facility is going to be away on business or vacation, be sure to ask the local law enforcement entity to make patrols in the area.
What is the best location to start a self storage unit business?
The best location for starting a self-storage business is one where the area isn’t saturated with similar entities.
The self-storage unit business should be positioned in a growing area, and be situated along a road system which provides easy access to customers driving a truck and trailer, or large cargo vans and vehicles.
Image: Envato Elements
This article, “How to Start a Storage Business” was first published on Small Business Trends
This content was originally published here.
