Business Analysis

Primary business analysis consists of inputting and manipulating data in a financial model, built specifically for projecting revenue streams and changes in expenses for self storage facilities (could be used for other businesses as well). Before all data is inputted, it must be verified to insure that projections are realistic in all aspects of the model. Key components are the projected expenses, rent up (percent of total units rented per month), occupancy, cost of the business/facility, and financing terms. Projected expenses are formulated by looking at past expenses as well as other facilities that StorageMart owns in nearby markets (if applicable). One expense that is typically always different is insurance, as StorageMart has an extremely low insurance cost. This is due to one of their connections through a primary partner that has many other insured assets. It is important to determine actual expenses—as they are typically fixed—no matter how high or low the occupancy may be. Rent up can be determined by past occupancy trends, with increases due to improved management. This is taken into account if a property is mismanaged, which is often the case. Occupancy is looked at in both the physical sense and economical sense. Often a facility may be 85-90% full physically, based on square footage, but the owner may have neglected to raise rents for storage units rented years ago. This implies that there is often a discrepancy in rental rate; rates for some units could be increased to be brought up to market price. Prices can be raised sometimes as much as 10-20% without dropping occupancy if units are under priced. The demand for self storage is very inelastic, meaning that the customers often have little response to increases in price. The cost of the business or facility being acquired is obviously the main sticking point of any deal. No matter how good a business may appear, there is always a point where it may be too expensive to acquire and still meet an acceptable return to the investors. Financing terms may be flexible to some degree, but lenders also have investors to please. StorageMart benefits greatly from their excellent track record and past relationships in the financing realm.

Written by Brice Bernskoetter

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Disclamer: This entry is intended to promote our partner StorageMart and some or all participants received compensation.

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