Being Fiscally Fit in the New Year
- StoragePRO Management
The start of a new year signifies a time of reflection and an opportunity to plan for the future. It is an ideal time to assess what went well and determine how to achieve business goals in the new year.
Expected Challenges in 2024
The commercial real estate market in 2024 will undoubtedly face ongoing challenges. Political unrest will be a recurring concern that is expected to carry into 2024. Accompanied by a chaotic global economy, commercial real estate owners will continue to feel the impact. Further, business owners will be confronted with finding reliable, skilled workers as the labor shortage continues. Interest rates and inflation will afflict owners, investors, and developers across the country producing a standoff between buyers and sellers. To add to this, the US will again be facing a housing shortage. The shortages, now reaching over 5 million units, have increased the cost of living resulting in more labor shortages and migration. Individuals will be forced to move away from urban markets into smaller, more affordable sub-markets.
Capitalizing on the Challenges
All is not lost if capitalized upon, some of the challenges could benefit storage owners.
Leveraging the opportunities will require owners to assess their property based on the predicted trends for 2024, and the ability to respond to them. Little can be done to control political unrest or the global economy, but utilizing a well-planned approach to what can be controlled will increase the owner’s likelihood of success. This is best achieved by looking at the total property performance and identifying systems to become fiscally fit.
Using intentional and targeted planning to address each trend will allow owners to recognize and regulate their response to business planning in 2024.
Developing a Staffing Plan
Staffing is an ongoing responsibility of all business owners. The task of finding and retaining dependable employees is a major concern. It can be overwhelming for a small business owner to respond to staffing changes. This is why developing a staffing plan to offset the ongoing labor shortage is a necessary part of the planning process. Designing a plan can be broken down into two main concepts: the business goals and the staff needed to achieve them.
When considering the goals of the business, ask the following questions:
What work needs to be done to attain the business goals?
How many people are needed to achieve the business goals?
What are the skills necessary to fulfill the business goals?
When considering the current staff, ask the following questions:
Can the current staff support the work that needs to be done?
Does the current staff have the skills to accomplish the business goals?
Can the current staff able to support the business goals and still provide customers with a positive experience?
Start with determining what are the goals of the business:
Is there a plan to develop, acquire, or expand?
Of the current staff, who can help the business meet the goals?
How many additional staff members would be required to meet the goals?
What staffing changes could occur in 2024 that would impact the goals?
When assessing the current staff, pay attention to low performers and those who may incur a life change, as both can impact turnover rates and leave owners with a staffing deficit.
Once the business goals have been identified and consideration is given to the current staff, the two are combined to develop a staffing plan. Successfully planning for staffing changes requires the collection of trend analysis data. This can be overwhelming for business owners specifically when sourcing and interpreting the data. Many storage owners have turned to management companies to collect and analyze the data and manage staffing for the business. Management companies specialize in understanding the trends and developing a proactive approach versus reacting after the fact. They can track hiring/retiring patterns, turnover, and market demographics thereby taking the burden off of the owners.
Understanding the Financials
Growth of any business requires stability, sales, and profits. Completing a careful analysis of finances will reveal areas of inefficiencies and the potential for growth. Assessing performance over the past 12 months is a reliable place to start.
While reviewing the financials from the previous year, ask the following questions:
Was the business profitable?
What can be improved?
Are there any outliers in the financial reports?
If the business was profitable, continue the analysis to include operational efficiency. This occurs when individual line items are evaluated for return on investment. Consider this, if sales can be maintained or increased with fewer overhead costs profits will rise. Owners should critically look at each expense to determine its overall impact on revenue. Further, they should distinguish where money should be allocated for the highest return on investment.
This process is referred to as revenue management. Budgeting, rate increases, promotions, payroll, and all other line items are studied to make the best fiscal decision and manage revenue. The process can be complex, especially after a turbulent fiscal year, and with the continued unrest in both the macro and micro economy, forecasting can be difficult. Owners who choose to work with a management company can take advantage of “business intelligence”.
Business intelligence uses data from multiple properties and then compares the results to a larger portfolio. It utilizes trend identification technology and proactively adjusts to the market. When choosing a management company look for one with a large enough portfolio to identify trends, yet small enough to directly work with owners. This allows owners to enjoy the benefits of business intelligence without being just another number.
Strong Digital Presence
Each year we become a more digital society and business owners need to respond by using technology to advertise to new customers. For example, when considering predicated migration, having a strong digital presence is more important than ever.
Secondary and tertiary markets are expected to welcome new residents who are trying to avoid the higher expenses seen in urban markets. These newcomers will rely on the internet to guide their move and make financial decisions. Over 90% of people currently use the internet to perform research on how to spend their money. Close to 80% of people will follow through with their purchase. This alone makes the case for having a strong digital presence. No business owner can afford to miss out on 80% of their customers.
Some owners have opted to pool resources to develop a less expensive web presence. Although cost-effective, the drawback is seen during internet searches. Some digital presence is indeed better than no digital presence, but value is realized in the generation of new business. Using a management company that provides brand recognition, online advertising, and a strong digital presence lets owners compete against large national brands. Simply put, the customer needs to know the business exists before they can rent a unit, therefore the more visible the business is online, the greater the likelihood of obtaining new customers.
Planning for Success in 2024
By prioritizing the process of setting business goals, developing a staffing plan, reviewing financials, and increasing digital presence, the opportunity for success in the new year increases substantially. Part of the process should include investigating the cost and opportunity for return if business management was outsourced to a professional. Management companies should be able to provide owners with a detailed plan and outline the financial advantages for the associated cost. Whether the plan is to grow or generate more revenue, it is worth the research to see what options are available.
Now is the time to plan for success in 2024. Capitalize on the predicted trends for the new year, explore the advantages of working with a management company, and find ways to attract new customers.