Are you wondering how to start a self-storage business with no money? Well, launching this kind of company will not be easy. Fortunately for you, we have some tips to help you get started.
Ideally, storage units are used by individuals to store their belongings. A self-storage unit can be anything from containers, boxes, lockers, or empty rooms. This business saw its beginnings in 1958 and has thrived since then.
It shouldn’t come as a surprise that opening a self-storage unit business is an excellent way to earn a steady and decent income. However, just like any venture, you must research the idea before venturing into it. This way, you’ll know more about the industry, such as competitors and how to run the business. Another reason you should perform due diligence is to evaluate whether your business will succeed in a particular location. If your units are in a strategic place, profits will follow. Otherwise, things will look rather bleak.
How Profitable Are Self-Storage Unit Businesses?
As an entrepreneur, it’s essential to consider the profitability and risks associated with a new enterprise before investing in it. The same applies to a self-storage unit business venture. To make money as an entrepreneur, you should go for something that’s all season. Fortunately, the self-storage unit business is one area that escaped unscathed and unaffected by the recession. The sector doesn’t experience the general business cycle. There may be dips and peaks now and then, but it’s a stable sector.
If you prepare well, you can make healthy profits from this venture. Now, the question is, how profitable is it?
In general, the storage unit business can be lucrative. The industry has a high average profit of at least 41%. One feature that makes for elevated returns is that it doesn’t require a lot of maintenance or moving parts. The amount you make depends on various factors, such as the size of the facility, location, rent rate, as well as your operating efficiency. As mentioned above, research is essential for your storage unit business to excel. But what information do you need? Let’s find out.
What Kind of Research and Planning Should You Do Before Starting a Self-Storage Business?
Have you decided to venture into the self-storage business? If so, it’s time to do research. All the analysis you do will go into a feasibility study, which will help determine if investing in your idea is worth it. The first question to ask yourself is, will customers come if you implement your project? Simply put, if you invest your money in a storage facility, can it generate enough revenue to cater to operating expenses and make a profit?
Doing market research is critical. It will assist you in knowing the demographics of your potential customers within a 1-5 mile radius of your base, which is the ideal market size for this kind of business. You should also put into consideration the median income of your target market. Usually, self-storage unit renters are in the middle-income brackets with a median age of 20-50. Furthermore, you should review some aspects of your target market, such as:
- Projected Population Growth: More people means more business.
- Current Population: If it’s in a rural setting, go for at least 20,000 people, and in an urban environment, 100,000.
- Daily Vehicle Traffic: Many storage unit businesses depend on drive-by traffic to attract customers.
- Competition: Are there any storage facilities in the area? What are their occupancy rates? Are there any upcoming businesses within your area?
Another research necessary involves an overview of the storage unit business. So, explore projected rental rates, expenses, income, property value, etc.
A business plan is one of the essential documents for every business. A solid plan can propel your self-storage business toward success. Also, it helps you accomplish your goals and manage risks. Many investors would want to see a business plan before funding your venture. Fortunately, there are many free templates online that you can use to create yours. Generally, a business plan for an existing storage unit business will be very different from a plan for a proposed business. Therefore, tailor your document according to your business needs. Your self-storage business plan should feature items such as:
- Mission and vision statement
- Business structure
- Ownership structure
- Employees’ roles and responsibilities
- Revenue streams
- SWOT analysis
- Market analysis
Common Steps to Starting a Self-Storage Unit Business
Starting a self-storage business is a great idea since the industry is well-established and has potential growth. Also, it only requires a little work. If you are trying to find a way to make a passive income without too much effort, consider venturing into it. To profit, ensure you find a good location and market your business wisely. Here are some crucial steps you should follow if you wish to build a successful and profitable self-storage unit business:
- Find a suitable location
The physical location of your storage business is among the key factors determining your success. If possible, open your business in a high-traffic area with a mix of residential and commercial enterprises. One near a major intersection is a good idea. Before launching your company, consider the competition in the area. In case there are already several established self-storage firms, change your location. Otherwise, you’ll need to work hard to make your company stand out.
Also, consider the demographics of the area. The target customers’ age group and median income will give you a reasonable estimate of whether opening your business there is worth it.
Consider starting your business in residential areas with more young people living in rental properties rather than upscale neighborhoods. This is because people in lower-income brackets live in smaller rental apartments. Thus, they are likelier to need more space for all their stuff. Furthermore, make sure your signage is visible and the location has ample parking and is near roads for easy and quick access.
- Develop a business plan
As mentioned, having a business plan is critical. So, ensure your self-storage unit business plan outlines essential info about your potential clients and how you plan to reach them. Also, state how you intend to run your business and stay afloat (and profit) in the first few years. A solid business plan is critical for acquiring funds and attracting investors. In fact, financial institutions require one before they can approve a loan. A good outline can become a powerful catalyst for your business growth since it will help you reach your goals.
- Get the funds needed to launch your business
Technically, a storage unit company requires more start-up capital compared to other businesses. Aside from rental, there are other expenses to consider. What if you have no money at all? Don’t worry. Be a gig worker. Drive an Uber or check out Pawns.app. You’ll earn passively by completing some tasks.
If you don’t have any start-up capital, consider applying for a small loan. With the loan, find a storage facility that you can modify into units or lockers without too much effort. Then, start converting the facility the way you want. Ensure you install locks on all units and that there is a secure locking system.
- Get the necessary license and permits
Don’t start your self-storage unit company without first getting the proper permit and licenses. Neglecting the right documentation can lead to a possible closure of your company or financial penalties. So, ensure you research the prerequisites you need to open a self-storage company in your local area, such as permits, licenses, and registrations. You will likely need a certificate of occupancy, a small business permit, service contracts, and other legal paperwork. Prepare them before opening the business.
Pros and Cons of Owning a Self-Storage Business
Like any other business, starting a self-storage business has pros and cons. Let’s discuss some of them.
Pros:
- It’s a great source of passive income. This means there aren’t many operational tasks necessary to run the business.
- There is high demand for self-storage units. Therefore, you’ll be making profits with little effort.
Cons:
- Starting a self-storage business requires a significant initial investment in land, building construction, and security features.
- Self-storage facilities are vulnerable to theft and vandalism, and you may need to invest in advanced security measures to protect your customers’ belongings.
FAQ
What is a storage unit business?
A self-storage unit business is a company that rents out storage space, ranging from small lockers to large garages, to tenants on a short-term basis. Renters include individuals and businesses.
