A self-storage business plan that will help you seal the deal.
Cutting to the chase, one of the first things you’re going to need for your storage business is a business plan. Your business plan will organize every element of your business strategy and provide you and your potential investor a clear map for your storage facility. To achieve success, you must plan for it.
Of course, it isn’t absolutely necessary to have one to close a deal, but it will help you have a clear vision. Which is why I say having a business plan always helps. What follows is a quick summary of what we include in all our business plans. The first page is the executive summary and it's got three parts, the company information company objective and the company summary. A company objective is your mission statement. Company information talks about the type of company you have; is it an S corp, C Corp or an LLC? In most cases, advise my students to structure their companies as an LLC. Then comes the company summary, which talks about the formation of your entity and your intentions. Now, for me, the next page is the most important one - The Loan Request Summary. It’s usually a one page document that conveys to the lender or the investor, what it is you’re offering them. Mind you, I use the term “offering” and not “requesting”. We aren’t requesting anything, despite the fact that it’s called a loan request summary. We are positioning ourselves as folks who are offering the lender or investor an opportunity to invest in our money-making opportunity. And then there’s an area description, where we show a map of the town; where the property is and how it is positioned within the market. How well it is connected with the main highways or thoroughfares? Where is it in relation to places where people frequent like Walmart, Starbucks, malls and retail shops. Moving on, you’ll need to create a competition analysis that talks about how you stack up to the competitors. Are there competitors around? Are they closer to the high density areas of town? Are they easier to get to or harder? This is something you must absolutely explore and mention as it contributes to the overall success of the project. Make an excel spreadsheet and write the name of the competitors, the distance they are from your facility, and the prices they charge for various unit sizes. This helps your potential lenders or investors compare you to your competition, along with testing the assumptions you’re making with regards to how quickly you can ramp up. Even if there are no lenders or investors involved, I still create a full fledged business plan as a way to make sure Q cross all my T’s and dot all my I’s. Now, the property description is going to allow you to take stock of everything you might need and helps you figure a ball-park number in terms of the investment required. What is it? Metal buildings, brick buildings or stick-built buildings? Are there overhead doors or man doors? Does it have concrete slabs or floating slabs? Is it gravel or asphalt? Does it have a fence or does it have a gate? In this section, you are going to form a written narrative and this will give you (and your audience) a clearer, more precise idea of what the property looks like and the amount of work it might need. You;ll also want to insert ample pictures in this section.
In my business plan, I use a management and marketing template. We use the same management and marketing strategies for all our properties, at least initially. And so we just have a summary form. Sometimes we'll need to change a couple of the details here and there, but we outline what our plans are from a management and marketing standpoint. You essentially need to answer the question, “How do you plan to fill the place?”
Then of course the financial data is usually important. This is where you're going to insert your spreadsheets. Usually it's somewhere between three to four years of projections for the property. You will start with how the property is performing today (relative to income and expenses) and then project your performance for each of the next 3-4 years. You’’ also calculate the return on Investment (ROI) that you are projecting for your investors. Or, if dealing with a bank, they will want to see the debt service coverage ratio (DSCR) and how it changes throughout the course of your project.
Lastly, you will want to give your lenders/investors some insight into your experience. You need to show them why you have what it takes to make your deal a success. You are establishing your credibility.If you have partners, include all of them and talk about the team’s experience. If, on the other hand you are going it alone and don’t have experience in storage, brag about your experience in real-estate, whether it’s flipping properties, wholesaling and running rentals. And if you don’t have real-estate experience, you’ll have to get creative and find legitimate skill-sets related to this business. Don’t discount your previous non-real estate experiences; they can serve you well!
I’m going to end this blog on one of the most important best practices. So, when we’ve gone to buy our first house, most of us (I’d say 90%) who ask for a mortgage, hope that it gets approved by the bank. We’ve been conditioned to belief that we are “asking” the bank for a mortgage, like they are doing us a favor. Lending money is where banks (and investors) make money. We are their customers. And they have to earn our business. Which is why, we don't go in asking for a mortgage. We go offering them our business and an opportunity to partner in a deal that we've put together. That stands true, whether it's a bank or a private lender or an equity partner.
I hope this post gave you some insight that will help you define an ideal self storage business plan. If you are looking to invest in Self Storage and haven’t already registered, I’d invite you to join us for a FREE Live Training that’s coming up. We do a live call once every month and you can Click here to claim your FREE 30 Day Trial.