Growing your self-storage business is this easy!

Growing your self-storage business can be easy, if you focus on the right aspects of your business. Compounded growth enables you to accelerate growth starting by analysing your companies numbers. In the webinar below I will explain how this works in self-storage.

By: Christel Friberg Land

Date: 28-2-2018

Transcript

Welcome to the HiTech webinar on growth! This webinar is one that might get you thinking in a slightly different way about growth, so before we get started, it might be a good idea to have a pen and paper nearby, so that you can write down any ideas of AHA-moments that you have along the way.

Also, this webinar is not only going to consist of me talking, I am going to have a few questions and assignments – quick ones – that I will ask you to do along the way. This is to make sure that you get as much as possible from this half hour we are about to spend together. So make sure you are ready to write stuff down as I walk you thorugh the material.

Who is Hi-Tech and who is Christel?

First of all let me tell you who we are and who I am. HiTech has been a supplier to the European self storage industry for the last 20 years. It started out as a software company, grew to an IT company, and now it's also a consultancy company. Our team consists mainly of people who have a lot of experience from the self storage industry before they joined us, so we actually have over 60 years of combined experience within our company. And that is really how the consultancy part of the business kicked off. We are very much like a one stop shop for IT solutions for the European self storage industry, and we can help with everything from an individual piece of software, to delivering an entire IT environment with email, printing, backups and everything else. And on top of that our team can consult and advise on anything from strategy to marketing, internal auditing and much more. Our existing clients are mainly in Europe, and we service both big chains and smaller operators. We’re a team of 8 and our head office is in the Netherlands, not far from Amsterdam.

So now a few words about myself and why I am talking to you about growth today.

I have been a self storage professional since 2002. I started off working in a store while I was a student, I became a store manager and then once I had finished my studies I continued on as a regional manager in what was then one of the biggest European self storage chains. Eventually, I became responsible for their IT on a group level, they operated in 7 different countries at the time.

As part of my MBA I decided to research how the European recession back in 2007-2008 was affecting the marketing messaging in the self storage market, and look closer at how the recession could be turned in to an opportunity from a marketing point of view. How should a self storage company adjust their marketing in order to make the most of the recession? That was basically the question I researched.

I then spent a few years away from the self storage industry and worked with more general business consultancy. About 3,5 years ago I came back in to the self storage industry when I joined HiTech.

I have worked with over 100 businesses across Europe, and these businesses have been spread across many different sectors. But common for all of this consultancy has been that growth has been at the core of what these companies wanted to achieve. So growth is a topic that I have spent a lot of time working on in a very practical way, and what I will be sharing with you today is the fundamental approach which I think is the most effective when you want to get serious about achieving solid growth.

What is growth?

So where do we start with growth?Well, the first place to start is to get clear on what growth is for you. What is it specifically you are looking to achieve? Is your focus on the top line and more on the revenue side? Or is it bottom line and profits? Or is it that you want more customers? So, before we get started on talking through the anatomy of growth, just take one minute to write down what it is you want to achieve in terms of growth. If you can put numbers to it, then even better! Be as specific as you can.

Five drivers of growth

Just now, I mentioned customers, revenue or profits as being possible desired outcomes for growth. And these are the most common answers when I ask businesses ‘what is the one number you want to grow in your business? The thing is with these 3 – customers, revenue and profits – that these are not drivers of growth in themselves. They are outcomes, or results. So, the first thing we need to do is identify what the drivers of growth for these numbers are. So we start with customers. What drives your number of customers? It is the number of enquiries that you get from potential customers, people who contact you and who are considering buying from you. And then it is the conversion rate, the percentage, or how many of these potential customers actually turn in to customers. These are the two drivers behind your number of customers. In the same way, your revenue is made up to an additional 2 drivers. The customers that you’ve got, they spend money with you a certain number of times across a year, and they spend a certain average amount. So if you take your number of customers and multiply this by how much and how many times they spend with you, then this gives you your revenue. And finally, there is one additional driver of your profits, and that is of course your margins. This is what I like to call the 5 drivers of growth.

Anatomy of growth

Now let’s add some numbers to the formula that I just showed you. So let’s assume that over the course of a year, one storage facility has 1000 enquiries, that’s about 20 a week, and a conversion rate of 30%. That means that over the course of a year, the store will have 300 new customers.

These 300 customers of yours spend money with you 6 times throughout a year. Your average length of stay may be 4 months, and then in the course of that 4 month stay the customer buys retail producst from you twice. So that is 6 transactions in total, and the average value of those 6 transactions is 75 euros per time. So, you’ve got 300 new customers over a year. They buy from you 6 times at an average price of 75 euros, that gives you revenue of 135.000 euros.

Our stores margins are 25%, and that means that the store ends up with a profit off 33.750 euros for the year.

And now this is where the fun starts, because this is now where we are going to talk growth. Let’s say that we are going to aim to increase each of these drivers, each of these factors, by 10% over the course of a year.

Where to start growth?

The question then is where do you start? We have 5 drivers, which one do we start with? Well, the very first question is ‘do you know what these numbers are for your business’? If you don’t know them by heart, or you can’t look them up within a minute, then that is the first place to start.

When we then start looking at these drivers for growth, the most common approach is to start at the top, and in all honesty a lot of companies don’t move past the first line when they are trying to grow. They go and spend money on marketing to get more enquiries and that is one component of growth. But the thing is, that if you start there, the investment in to marketing and sales often end up being an inefficient use of your resources? Why is that? It is because if you have not yet optimised your conversion rate, if you haven’t optimised your number of transactions, your average spend and your margins then you are not optimising the opportunities that are already coming your way. So the most solid approach to growth comes from turning things upside down and starting at the bottom. Start by making the most of the opportunities that are already coming your way, and then once all of these are optimised, then you add more marketing and sales to the mix and get a much bigger return on the money that you’ve invested in these activities.

Driver 1: Margins

So we are going to start with margins. Working on your margins is not only about cutting cost or putting your prices up, although these can be two ways of achieving better margins. Our webinar next month is actually going to be on the topic of pricing, so if this is an area you want to work on, then you should tune in next month. Working on margins in the long term can also include being very strategic in how you choose to add value to your customers, who you decide to target and what kind of a brand you build. Building a brand is a lot about building trust, and if customers trust you then they are likely to be less price sensitive. For example, when is the last time you reviewed the discounts that you offer and evaluated different discount options against each other, and worked out which discount would attract the least price sensitive customers, and also which discount would have the smallest impact on your bottom line? If this is not something that you have reviewed for a while, then it might be a good place to start. And then of course it’s a question of reviewing things like your opening hours, your unavailable units, looking at what you charge for your retail products or your insurances and see if you can charge more in certain areas, maybe less in others, but end up with a final result that increases your margins. Remember, we are only aiming for a 10% increase here.

So what we are talking about is increasing the margins of this store from 25% to 27,5%. So now, I woud like you to take a minute and write down 3 things that you think would be relevant for you to review in the area of margins. And now look at the 3 things you have chosen. If you worked on these 3 things over the course of a year, do you think that you could increase your margins by 10%? It seems pretty realistic and doable, doesn’t it? So, now we’ve looked at margins, it’s time to hop up to the next driver from the bottom, and that is average spend.

Driver 2: Average Spend

Average spend is the amount of money that customers spend with you each time they buy from you. They buy from you each month when they rent their storage, and they also buy from you each time they buy retail or other services from you. So, where do we start if we want to increase our average spend by 10%? Well, first up is the old management saying of ‘what gets measured gets done’. I have seen a number of times that simply measuring the average spend makes it go up, because staff are more focused on this. You can of course look at your pricing and your discounts like we talked about for margins too. There might be extra services or charges that you could be adding to your offering. Maybe you could expand the range of retail products you offer. One of the most simple but effective ways I have seen the average spend being increased is by offering a free moving checklist, where all the retail products are listed and where customers can tick a box for the ones they need. You can even build in little recommendations in the checklist, to make it even easier for customers to buy that little bit extra from you. And then you can look at how you can bundle up products and services to increase that average spend. The storage version of McDonald’s famous phrase ‘do you want fries with that’. So, now again take one minute to write down the first 3 things that spring to mind about how you could increase the average spend in your store or stores.

Now again, we are only looking for a 10% increase over the course of a year so from 75 euros to 82,50. Just with the 3 things your have written down, if you really worked on those for a year, how realistic is it that you could increase that average spend by 10%? It is pretty realistic, isn’t it? Ok, so continuing our bottom up approach, next on our list is number of transactions.

Driver 3: Number of Transactions

Again, measuring it is a great place to start because the focus alone will bring up the number. Movers are often the bread and butter customers of self storage sites but the downside is they often don’t stay for very long. So if you review your marketing, how big a proportion of it is actually targeting customer segments that will stay longer with you? What are you doing to educate your movers about the many different ways that self storage can be used? Are you tying your discounts to the number of transactions and rewarding the customers that stay with you a bit longer? And how much are you doing to stay in touch with customers who have moved out, but who might need either space or storage some time in the future? There are lots of things that can be done to increase the number of times people will buy from you during a year, and we don’t have time to go in to all of them here. But if you missed our webinar last month on customer loyalty, then that is a good place to start. Now, take a minute to write down your first 3 ideas about what you can do to increase your number of transactions.

So, a 10% increase of the number of transactions takes us from 6 to 6,6 over the course of an entire year. Now again, this is something that seems really quite doable, right? Ok, moving up our list the next one is conversion rate!

Driver 4: Conversion Rate

Conversion rate is definitely one of those that increases once you start measuring it. It is amazing what focus alone can achieve. And then there’s sales training: at HiTech all of our sales training is based on a simple model for identifying different personality types. Just imagine what a difference it would make to conversion rates if everyone who was in contact with customers in your business would be able to identify someone’s personality type in less than a minute, and know how to adapt their style of selling to fit that type? I’ve seen some amazing results when this type of approach is taken to sales. And actually in the next few months we will be launching our sales training as online training, so that anyone can get the benefit of this kind of sales training. Apart from being able to sell to all different personality types, increasing your conversion rate is about reducing the barriers or risks related to buying from you. One way of doing that is to offer a guarantee. It can be a price guarantee, a satisfaction guarantee, a size guarantee….there are lots of ways to put together a powerful guarantee and we don’t have time to go in to the specifics of that on this short webinar today, but the principle of a guarantee is a powerful one because it reduces the risk that customer perceive from doing business with you. If there is a satisfaction-money back guarantee, then what have they got to lose from choosing you? Some businesses are sceptical of guarantees because they are worried that customers will take advantage of it, but there are ways of structuring that so it doesn’t happen. You can also display testimonials from current or past customers, where they describe in their own words why they have been happy to rent from you. You can put these on your website, in your sales office or around the site itself. You can also review your sales process and see where it can be improved. For example, if you don’t have a separate sales process for business customers versus private customers, then it is definitely a good idea to review this. So, once again take one minute to write down the first 3 things you think you should work on to increase your conversion rates.

In our example that means increasing the conversion rate from 30% to 33%. Again, a pretty small and doable increase and to be honest, it is not unusual for conversion rates to double once you start working on some of the stuff I just talked about. But in this example we are keeping it small and doable, so another 10% increase in the conversion rate. And that brings us to the top! Enquiries! Finally we get to spend some time and money on marketing!

Driver 5: Enquiries

Measuring your number of enquiries will not increase it, but it is a really important number to know in your business, so that you can know whether the marketing that you are doing is actually having the desired effect. A lot of purchase decisions are made online these days, so to work on your enquiries, you can’t ignore your website. Make sure it’s optimised for website conversion in to enquiries, look at what you are doing with search engine optimisation and adword campaigns. We have a whole separate webinar on online marketing that you’ll find on our YouTube channel, so if you want inspiration there is plenty to get there. Get really active on referrals, getting your current customers to do your selling for you. Remember, the most effective type of referral campaigns are the ones where both sides get a benefit from referring. So both your existing customer and the new customer needs to get some kind of reward or benefit for buying from you. And then it’s about marketing and making yourself visible. Start with low cost marketing initiatives and then measure the results. Try something different, or try something that you haven’t done for a while. Chances are, you will reach potential customers that haven’t heard from you in a while and you’ll start seeing increase in enquiries pretty quickly. So take one minute and again write down 3 things you can do to increase your number of enquiries.

In our example here we are going from 1000 enquiries in a year, to 1100. So that is roughly 2 extra enquiries a week. Again, that seems pretty doable right?

Realised growth

Ok, so now we have worked our way from the bottom to the top, we have worked on it for a year and we have growth each of the 5 growth drivers by 10%. So the question is, how much has the business grown?

Our enquiries times our conversion rate gives us our number of customers. Now, even though we have only increased each of these by 10%, you’ll see that the increase in the number of customers is higher than that right? In fact, it’s 21% because there is a compounding effect of these individual growth factors. So, our number of customers has increased by 21% over the course of a year. That is a good start.

Our number of customers is multiplied by the number of transactions and the average spent and that gives us a revenue figure that is now just under 198.000 euros. Again, there is a compounding effect of these changes working in conjunction with each other... So our revenue has actually been increased by 46%!!!

Our revenue is multiplied by our margins and that leaves us with a profit of just over 54.000 euros. That’s a 61% increase in profits!

And THAT is the anatomy of growth.

THAT is how solid but powerful growth is achieved.

It is not a question of finding one new revolutionising idea that in itself will grow the business in a completely new way. That is often the way many people think about growth of this magnitude. No, it’s the exact opposite to that. It is a question of knowing your numbers, and breaking them down in to key drivers. Then, it’s about working each of those drivers by a little bit and working on them simultaneously. And then it’s about letting all those factors work together to grow the business in a really powerful way.

It is what some people call the law of compounding effects. Or the way I prefer to say it: break it down to build it up.

How HiTech can help with YOUR growth

Before I open up the floor for questions, I will just quickly tell you how HiTech can help, if this is something that you think you would like to work on a bit more.

Growth Workshop

In 2 weeks we will be running a 3 hour workshop about growth and it is basically running you through the same structure as we have today, but instead of me saying think of the top 3 ideas in each area, we give you a sheet of between 30 and 50 ideas that you can review an choose from it. It is like an inspirational overload! From there, you work through to a detailed action plan of all of this so that when you finish the 3 hours you have a plan for what you are doing when and that you are ready to go and take action on. Often the most difficult thing in business is finding the time to work on these longer term questions which are really important, but that often get pushed down the priority list because more urgent things come along. So this workshop is really about creating the time and the space for you to spend 3 hours only working on your growth plan, and giving you lots of tools and ideas along the way to help you in that process. Because we are delivering this online, we can keep the price down to only 129 euros per person so there should be no reason for anyone not to join in on this.

Online sales training

There is the sales training that I mentioned earlier, where we use a really simple but very effective model for personality profiling and combine it with sales training. We can come to your business and deliver it but in a few months it will also be available as an online training program. So if you are interested in this the online training, just let us know and we will put you on the email list for when it is launched.

Website review

And then I also mentioned websites as being a key driver to enquiries. One of our in-house consultants is very experienced in online marketing and so we offer a sort of website audit, where we go through your website from A to Z and pinpoint where we recommend improvements.

With that, the only thing remaining is for me to thank you all for joining us!

If you have questions relating to anything in this webinar, then feel free to get in touch with us anytime, and we’ll be happy to answer your questions.

Thank you, Christel Land.