The 44.37 billion dollars self-storage market grows prolifically as the demand for self-storage facilities has grown throughout the country.
With an average occupancy rate of 85-90%, most self-storage businesses in the US enjoy a profit margin of 11-18%. It is indeed a profitable business venture for someone ready to invest and put in some hard work.
Well, if you have made up your mind to venture into the self-storage industry you must be wondering how to start a self-storage business and turn it profitable.
Well, this guide has all your answers. It details all the essential steps that will help you set up a well-planned and legally compliant self-storage business in a hassle-free manner.
So without any further ado, let’s dive right in.
Steps to Start a Self-Storage Business
Let’s uncover this step-by-step guide that will help you set up a legally compliant and financially planned storage business in a proper way.
1. Self-Storage Business Planning and Market Research
As the first step of starting a self-storage facility, evaluate the feasibility of your storage business idea. For this, you must gather a foundational understanding of the market by diving deep into the research.
Analyze your market area by studying its current population and projected population growth. Evaluate the competitive landscape and see if there is room for new self-storage businesses in your chosen locality or region.
Dive further deep, understanding who your ideal customer is. For instance, would you open your self-storage facility for commercial people or residential people?
An answer to this will influence many other decisions like location, size of self-storage units, storage facilities you will be offering, and your startup costs.
Further, decide whether you will operate the self-storage company on your own or hire a third-party company to oversee the management.
Once you have a rough idea of your business concept, take a step further and nail your business planning with a solid plan.
2. Prepare your Self-Storage Business Plan
Proceeding without a business plan is like aiming your shot in the dark hoping it reaches the target. Well, you sure don’t want to take that risk, especially when planning to invest millions in your self-storage business.
A realistic and credible business plan is a worthy document that will drive your business in a specific direction helping you realize your business goals and objectives. Besides, most investors won’t even pay you heed if you don’t have a business plan.
So, better start writing a credible self-storage business plan that resonates with your core objectives, mission values, goals, and business concepts.
Keep in mind that the business plan for getting an existing self-storage facility off the ground will be much different than building a new storage business. However, if we consider the fundamental components of a business plan, you must try to cover the following topics:
- Executive Summary
- Company Overview
- Industry and Market Analysis
- Self-storage products and services
- Management Team
- Self-Storage operations plan
- Marketing and sales plan
- Financial plan
Writing a business plan is taxing. It requires utmost attention to detail and precision and is time-consuming.
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3. Choose Location for your Storage Facility
Location plays a crucial role in determining the success of self-storage businesses. It’s better to start sourcing the ideal location for your storage space business ASAP!
The preliminary market research will help you identify the localities that have surging or unmet demands. For instance, the demand for self-storage facilities is high in commercial regions and densely populated residential areas.
Now, answer whether you will buy land for storage facilities or remodel an existing facility. Besides, do you plan to spread across the facilities on the same level or will you create multi-story facilities? And lastly, will you offer indoor access to the facilities or only drive-up to storage units?
Usually, the self-storage facilities are spread across a 10,000-100,000 sq. ft. area housing nearly 500 storage units. Now, evaluate your needs and start looking for easy-to-access locations near your target market.
Take help from real estate investors to help you find the right business location. While finalizing the contract, ensure that all the legal compliances are met.
4. Register Self-Storage Business
It is essential to legally register your business with the state. While registering, you have to choose between different business entities like sole proprietorship, partnership, LLC (limited liability company), and Corporation.
Businesses in the self-storage industry can benefit greatly from registering LLCs and Corporations as their legal entity.
Further, register your self-storage business for state and federal taxes and acquire your Employer Identification Number (EIN) from the IRS portal.
EIN is a 9-digit security code unique to your self-storage business and is essential for filing taxes, registering a business bank account, applying for business credit cards, and generating payroll. Besides, EIN can be generated for free.
5. Acquire Essential Licenses and Permits
To ensure all-around compliance, identify the permits and licenses essential for your self-storage facilities from SBA.
If you are building a self-storage facility from the ground level up, get a Certificate of occupancy (CO) ensuring that your business meets all the zoning, government, and building code requirements.
However, if you are renting an existing self-storage facility, ensure that the owner has an occupancy certificate essential for your compliant business.
Ensure that you have all the essential licenses that comply with Occupational Safety and Health Administration requirements.
While it is still a long way before you start offering your storage unit for rent, draft the service agreement contracts highlighting the terms and conditions, payment terms, and rental time to minimize the legal dispute.
Failure to get your business legally compliant can attract fines, penalties, and sometimes permanent closure of the business. Ideally, you should avail a legal help to look after the compliances for your business.
6. Insure the Self-Storage Facilities
Just like licenses, you need insurance to ensure that your storage unit business operates safely and lawfully. Federally, business insurance is mandatory for all businesses.
Now, if there is one insurance you definitely need, it is general liability insurance. This offers general protection against injuries, thefts, and property damage- so it’s a good start for your business.
Now, if you are hiring workers to look after your storage unit business, you also need a worker’s compensation fund to cover employees’ injuries and health expenses.
Also, it is wise to get tenant protection insurance to secure the interest of prospective tenants. This can enhance the credibility of your self-storage business amongst your target audience.
Lastly, get umbrella insurance to secure your business interests on all fronts.
7. Open a Business Bank Account
Setting up a separate bank account for your storage unit business helps you protect your personal assets from business liabilities. Not only that, it also eases the bookkeeping and tax filing for your business.
With that EIN procured earlier, you can apply for a separate business bank account. While you apply for a bank account, also apply for a separate business credit card.
A credit card will build credit history for your business making it easier for you to acquire loans in the future.
8. Calculate your Startup and Operational Costs
If the financial section of your business plan is not worked out yet, it is time to calculate your startup cost and operating expenses now.
Evaluate your startup costs by making projections for different expenses. This includes accounting for land purchase, construction, permits, insurance, and much more.
While you calculate your startup costs, also consider the operating expenses for the first 3-6 months. This is a good enough time for you to reach at least break even.
Talking about self-storage operating expenses, here are a few things you should include in your startup cost calculation:
- Mortgage/ Lease payments
- Payroll expenses
- Utility bills
- Professional services bills
- Insurance payments
- Marketing and advertising
Depending on the concept, size, location, and nature of your self-storage business, you can expect to spend anywhere between $1 million-$2.5 million to start your business.
However, it is possible to start a small business with less than a million dollars if you decide to lease or buy existing storage facilities in the lower borough regions of your town.
Once you have a rough estimate of your initial capital needs, you can start making arrangements for the same.
9. Acquire the Funding
As we discussed, it’s quite expensive to start a self-storage business even on a small scale. Personal savings aren’t adequate especially when you need a million dollars for an upfront investment.
Evaluate your monetary position and determine how much funding you require to turn your idea into a successful self-storage business.
In terms of funding options, you can opt for a variety of loans. This includes SBA (small business administration)-guaranteed loans for small businesses, business loans, acquisition loans, construction loans, working capital loans, etc. Evaluate your credit standing and interest rates before choosing this mode of finance.
Additionally, you can raise capital by seeking funding from angel investors and Venture Capitalists. For a certain stake in your business, these investors will provide you with essential funding.
Apart from this, you can also choose the mode of crowdfunding and lending from friends and families to gather essential capital.
10. Build your Brand and Marketing Plan
A strong self-storage business brand is essential to build a successful and profitable business. Ideally, you should start the branding and marketing activities as the facilities start shaping up together.
Define your brand elements to put together a consistent brand image across all the platforms. Get your self-storage business website ready and create your social media accounts to grow your brand’s presence.
You want your target market to find you easily. So get the banners, freeway hoardings, and billboards ready to guide the customers to your self-storage facility.
Define different marketing strategies you will use to attract potential clients to your business. This includes streamlining your GMB (Google My Business) account, email marketing, setting up your phone system, running paid ads, content marketing, and much more.
Allocate your resources to different marketing activities and track the results to see what type of marketing brings you the most benefit.
By now you must have a thorough understanding regarding how to set up your own self-storage business. Let’s take the first step and translate your business idea into a business plan by referring to online business plan samples.
Also, ease your business planning process by using cutting-edge tools from the Upemtrics business planning app. We have financial forecasting and AI writing assistant tools to strengthen your business planning along with free resources and extensive guides to help small business startups.
So let’s turn your vision for self storage business into a reality.