Storage unit businesses provide people with a place to securely store their belongings. These can be nearly anything, ranging from a container to a secure room or garage.
One of the greatest benefits of a self-storage business is that the costs are minimal while the payments are consistent. Most self-storage businesses are rent-based, so you’ll be getting income every month while the belongings simply sit there.
There are some important considerations, however. While the business model may seem almost too simple, there’s unique risks involved in creating a self-storage facility.
How Does a Self-storage Business Work?
The economics of a self-storage facility is quite simple. All you need is an empty, walled space that’s only accessible to certain individuals. You can either rent something akin to a container, room, garage or anything else or purchase one outright.
Purchasing a place and turning it into a self-storage facility has large upfront costs, which makes it significantly less viable if you have little to no money. Renting will have little upfront costs, but you’ll need a consistent stream of income to outpace the payments.
One of the most important criteria by which a self-storage facility is evaluated are the security features. There’s not a lot more going for the business – as long as a customer has enough storage space for their belongings and the security features are good enough, they’ll consider your offer.
As such, your marketing strategies should involve at least these two criteria. While you can and should include other features of your self-storage business, these two will be the selling points for many people.
How Much Does it Cost to Start a Storage Unit Business?
As there’s many ways to start a storage unit company, there’s no single answer to how much it costs. Usually, there’s three main ways you can get access to a storage space:
- Build your own building from scratch. The most expensive way to get into the storage industry. A single building can cost upwards of several million dollars, making such an option untenable for most. You do, however, get complete control over how your storage units will be implemented.
- Buy a storage space. A common low-cost option to start as it can cost anywhere from several thousand to tens of thousands, depending on what you intend to convert into a storage unit.
- Rent out storage units. There’s plenty of rooms, garages, or other types of rooms you can rent out. As long as you’re allowed to make modifications, you can create storage units, which you then will rent out for a higher margin.
Additionally, you can include many additional services into your self-storage unit business. Some companies within the storage industry provide transportation services, for example.
Finally, the operating expenses of your self-storage business will be closely related to the scale and quality of your operations. If you convert a single garage into a unit and handle everything yourself, the costs can be nearly zero.
If you, however, want to have numerous storage units, you’ll need to hire employees, invest into various storage solutions (such as security, software, and many others), perform maintenance in frequent intervals – all of which can quickly raise costs.
Research and Planning for a Self-storage Unit Business
Like with many ventures, you should always start with a business plan and market research. For a self-storage business, these aspects are even more important as one of the inherent risks of the model is being localized. You can’t move your storage units elsewhere, at least easily.
Your business plan should, therefore, include an in-depth geography and demographics research of any area where you can find storage units. Additionally, it’s also good to evaluate:
- Income levels. Storage unit usage can be greatly affected by income levels. Having lots of belongings is usually tied to income levels. However, a storage business can also be successful in low income areas where people may have a hard time affording rent and need a temporary location for their belongings.
- Population growth. A storage unit business will usually be in place for many years, decades even. Population growth, as such, could be a factor that affects your business in the long run.
- Vehicle traffic. Transportation is somewhat tied to income levels, but a storage unit business can get a lot of inquiries simply from drive-by traffic.
- Competition. Good areas will attract a lot of other storage unit businesses. Evaluating and estimating occupancy rates of existing storage facilities can provide you with a good idea if there’s room for more units.
Another common aspect of a business plan is outlining specific options for your venture. You should scout out specific possibilities for buildings or rooms where you can start a self storage unit business.
Additionally, a self storage unit business plan is no different as for many other business models. You may want to include these aspects into it:
- Mission and vision statement
- Business structure
- Ownership structure
- Employees’ roles and responsibilities
- Revenue streams
- Market analysis
Steps to Take Before Opening Your Self-storage Unit Business
Self-storage facilities have a few unique features, most of which we discussed above. Once you’re ready to take the leap and start your own self-storage company, there’s a few tried and true steps you should take.
Develop a business plan
As mentioned above, starting with a business plan will ease a lot of further steps. Even if you don’t use everything that’s outlined in the business plan to a T, you’ll always have a clear next step to take in your self-storage business.
Additionally, if you ever pursue funding or investment, having a business plan may help you get more attention.
Scout potential locations
A self-storage unit business will have to start somewhere, so it’s best to list all available options to you. Remember that the units shouldn’t be far away from you as, at least at the start, you’ll likely have to handle many things by yourself.
Once you have a list of potential locations for your self-storage unit business, you’ll need to draw up a plan of opportunities. You should evaluate unit sizes, prices, ease of access (by vehicle), and many other features.
Build a website
Few businesses nowadays can survive without having a website. Even if they can, there’s no reason to avoid having one. A website can bring in lots of traffic and inquiries and it’s no different for a self-storage business.
Having a website will also reduce the overhead in handling customer inquiries as you can answer many questions, list pricing, and storage space options in one handy place.
With some additional development, you can even include booking and renting options directly into your self-storage business website. Doing so will decrease the manual work hours even further.
Create business branding
While a self-storage business is usually led by the product itself, having clear branding will significantly improve your marketing efforts. It will also make your company easier to remember for potential customers, which can have various benefits in the long run.
Additionally, branding is usually a lot easier to create at the starting stages of a business. You’ll have clear design guidelines for the entire duration of your self-storage business. If you create branding at a further point in development, you may have to go back and change a lot of things.
Get the funds needed to launch your business
While you can minimize costs of entry into the storage industry by renting, you’ll still need a bit of cash to get things moving. Even if you can start with no money at all, having a rainy day fund can help your self-storage business survive through the initial hurdles.
You can also see if you get support through non-monetary means. Sometimes you may be able to get cheaper units from relatives or friends, or they may be willing to help you set things up for free.
Get the necessary license and permits
Self-storage facilities usually will have some regulation surrounding them. Whether it’s building requirements, business registration or anything else, getting these is important as you may incur hefty penalties for breaking some law.
Any such fine can significantly hamper your efforts of scaling your self-storage business.
Insurance policies for property and liability
Most of the time, you’ll also want to get insurance for your self-storage facilities. After all, these are clear targets for thieves since they obviously store lots of belongings. Additionally, various other disasters may strike, which can negatively affect your self-storage business.
While insurance policies may seem costly, once you have several self-storage facilities, you’ll be glad you got the security from insurance to back you up.
Pros and Cons of Owning a Self-Storage Business
Running a self-storage business can be a great venture that nets you a lot of money for little work. But it also has its own unique drawbacks.
Pros of owning a self-storage business
- Great source of (almost) passive income. Most self-storage facilities, once you have customers, almost run by themselves. You’ll need to do some maintenance work and support, but it’s nothing compared to most other business models.
- High demand for storage units. Self-storage facilities, at least in some areas, are extremely popular. So if you play your cards right, you can get lots of customers with ease.
- Low startup costs. When compared to most other business models, a self-storage business can be relatively cheap to start.
Cons of owning a self-storage business
- Vulnerable to crime. A storage unit company has a lot of valuable belongings with clearly listed addresses, making them huge targets for crime.
- Unclear target market. Anyone can become a customer of a storage business, making the target market incredibly wide. While that’s a boon, it also makes it harder to market your storage business efficiently and cheaply.
- Highly localized. You’re restricted to specific geographical locations. Once you establish a storage business, moving it elsewhere is going to be usually, nearly impossible.
FAQ
What is a storage business?
A self-storage unit business is a company that rents out space, ranging from small lockers to large garages, to tenants on a short-term basis. Renters include individuals and businesses.
