How To Start a Self Storage Business In 6 Steps
Follow these six prep and planning steps to learn how to start a self storage business that’s primed for success from the ground up.
Starting a new business in an unfamiliar industry can be a bit daunting. But you’re not alone; most new self storage facilities are started by folks who are completely new to self storage. You’ve probably had a successful career in another sector, heard tales of the generous returns self storage generates for investors (they’re true!), and are now pretty set on starting this new adventure. We’ve been there, and we’re here to help.
How to start a self storage business?
Before you get caught up in picking a catchy business name and looking at fit outs, there are six prep and planning steps we recommend in order to give your new business the strongest chance of success:
- Decide your investment amount
- Choose the right location
- Plan your storage type + size
- Find your premises
- Decide your operational model
- Research the red tape
Here’s what to do.
1. Decide your investment amount
Work out how much you have to invest, because during this planning phase, your budget will affect:
- where you can afford to get property;
- which types of self storage are feasible; and
- which operational model will be your best option.
Later on, your budget will influence the spec of your fit out, how sophisticated you can get with technology, etc.
Phase your investment?
Starting a self storage business doesn’t have to be an all-at-once proposition. In fact, self storage lends itself particularly well to a phased, modular approach. So when working out your budget, it’s worthwhile breaking out how much you want to invest now, and how much more capital you’re certain you could invest in a year or so to complete your facility if things go well (either from your own funds or with the help of external investors). For example, when our CEO started a self storage business for the first time, he used an initial $130k investment to cover one-off set up costs (taking out a long lease, signage, website and tech costs) and fitted out 1/3rd of the total space, just 49 units initially. Then, a year later, he released a further $120k of home equity to complete the final two fit out stages, taking the facility to 149 units.
2. Choose the right location
Will your facility be in your hometown, the next town over, near where your office is located? Will you spend your days manning the site or will you run it remotely without staff there? Or will you have staff there and you’ll simply check in now and again? Finding the right location for your business makes success more likely.
Every business requires some degree of face-time, so a good starting point is to decide the max you’re willing to commute a few times per week to manage operations, or to commute every day if you plan to work from there. Even if this diminishes over time as you’re able to delegate work, when getting set up (and especially during the fit out phase), you’ll be back and forth a lot.
Starting your search
Use a map like this to work out your search radius (we know it’s not the prettiest tool, but it works!). For example, input your full home address (city, state, zipcode, etc) and the distance you’re willing to travel, then click ‘New Circle’. Make a note of all of the cities/towns in your catchment area.
To decide which locations are viable contenders, list out the towns or cities within your commute area in a table or spreadsheet and work out their populations. This can take a bit of time depending on how many places are on your list and where in the world you’re researching, but here are few links to help you:
- US Census Bureau—Scroll to the ‘Incorporated Places’ section and click on your state. An Excel file will download listing every town’s/city’s population as of 2020 and a 2021 projection.
- Statistics Canada—Scroll midway down the page to use their city/zip code search box.
- United Kingdom—Getting population details on all UK towns and cities still isn’t easy online, but you can use the Scotland Census Area Overview (2011 stats), and try this Area Explorer for Northern Ireland data. In addition, non-government sites like citypopulation.de aggregate publicly-available population data worldwide, and you can search English or Welsh town names to view 2020 population estimates (we just don’t know how accurate their data is).
- Ireland’s Central Statistics Office—Download this spreadsheet of the 2016 census’ total populations for 874 towns in Ireland.
- Australian Bureau of Statistics—Enter your town name in the ‘Search by Area’ field. A search results section will appear a little further down the page. Click its ‘All Persons’ button to quick-view the ‘People’ stats for that location.
Finding unmet demand
With your population table complete, the next step in picking your location is to work out which area presents you with the best business potential.
Start by applying your country’s figure for the average square footage per person. Most Self Storage Associations have this figure available on their website.
In the US, for example, it’s 9.44 sq.ft./head, so you’d multiply the population of each town by this to determine how much self storage the area can support. So a town of 20,000 people could support 188,800 sq.ft. of rental storage space.
The next question: How much self storage space is already on offer in each location on your list? Go online, find out approximately how much space your competitors have built in each town/city and add this to your spreadsheet. Then subtract the two values for each town to see how much space is up for grabs in each area. The more space for the taking, the better your returns should be.
If you want to get even more precise about potential vs competitor capacity, go back to your radius map and plot 3 or 5-mile radius circles around each competitor’s address. Most customers won’t drive more than 5 miles from their home for self storage, and this could help you visualise any lucrative unclaimed locations between your competitors’ catchments.
It’s worth noting that the current supply of self storage per head isn’t necessarily the same as the current demand. There’s likely to be significant unmet demand in most markets. The biggest opportunities are often found in smaller towns. They can present a number of benefits including:
less-expensive commercial properties than cities;
lower property taxes;
less or no competition for business;
faster word-of-mouth promotion;
nobody to outbid in online advertising; and
nobody to get into a price war with.
3. Plan your storage type + size
Once you’ve found a good area to base your business in, you need to decide what type of self storage business you want to open. It might surprise you to hear that there are dozens of types of storage businesses to choose from, including climate controlled storage, portable/mobile storage, vehicle storage, student storage, military storage, boat storage, business storage, 24 hour storage and more. But most of these fall into one of three simple categories: indoor storage, outdoor storage and drive-up storage. At this step, your investment size comes back into play.
What $81K–$163K will buy
If you have between CA$81K and CA$163K to invest, outdoor storage or drive-up storage are probably your best options. Both involve buying or leasing some land.
With outdoor storage, you provide a plot where goods are stored unsheltered or semi-sheltered (perhaps with a canopy covering overhead but no walls). A private parking lot is a familiar example of outdoor storage, where cars or large camper vans are stored.
With drive-up storage, on the other hand, you either fill your land with storage containers (usually shipping containers) or rows of units with rollup doors like on your home’s garage. Customers park their vehicles in front of their unit to load and unload, and they store their belongings within these—fully covered and better protected from the elements, their fellow storers using your facility, or passersby. What’s great about the containers approach is you can buy them as you grow. You can limit your risk by buying a few and seeing how long they take to rent out. And if you end up with more than you can fill, they’re easy to sell on to others and relocate.
What $163K+ will buy
If you have $163k or more, then, depending on you can afford to go the indoor route. For this type of self storage business, you buy or lease a warehouse and fit it out with indoor storage units. To keep initial costs down, you can do this fit out across multiple stages, too.
There are a few variables worth mentioning that will push up your initial investment:
Buying instead of leasing—Obviously buying land or a warehouse will cost you more upfront than leasing will.
Extent of construction and repairs—The more work needed, the more money you’ll need. For example, outdoor sites may require you to tarmac the ground for cars and build a high, quality fence and gate for security. Indoor sites might require a mezzanine floor or a new roof.
To help you fine tune your numbers, try our free self storage financial modeller to work out the initial and maximum funding you’ll need for your self storage business in years one through four.
4. Find your premises
When it comes to visibility, footfall, demand, ease of access, your precise property location matters. So when you’ve narrowed down your location(s), start shopping for premises:
Check out every real estate website there is.
Drive around the towns or cities.
Pay attention to where the outdoor advertising billboards are located.
Meet with realtors and let them know what you’re looking for.
It’s impossible to get the perfect site, but look out for (and perhaps score each site against) benefits such as:
Lots of passing traffic with a building visible from the road
Lots of nearby houses and businesses
Ideally new home building going on nearby
Not too much competition in the area
The ability to rent or buy land or a warehouse at prices that work
Finding all of the above is almost impossible, so simply try your best to get a good combination of each, but don’t rule a site out if it’s missing one or more because it could still work.
This is the fun part of the process, but it’s also the bit where a lot of people give up … because finding suitable sites isn’t easy. It takes time, hard work, and luck!
5. Select an operational model
The final step of how to start a self storage business is deciding how you’ll operate. In other words, what way are you going to run this business?
Staffed, semi-manned, or unmanned?
On premise or remotely managed?
Success is possible with any model, if you’re willing to invest the necessary time, money, and manpower in the business. And of course there are perks, drawbacks, and special considerations for each approach—from flexibility, customer experience and company culture to job satisfaction, sales processes, technology costs, and site security.
6. Research the red tape
If you’ve run businesses in the past, you will already be familiar with the local laws and regulations that will impact your build and operations. If not, make sure to carefully familiarise yourself with the following in your location, as failure to comply can result in unwanted fines and penalties:
Legally permitted opening hours for your location
Building control requirements
Fire safety requirements
Self storage insurance
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