By Victória Oliveira

ith a new year ahead, most self-storage businesses should be planning their capital expenditure, commonly called CapEx, if they haven’t already done so. This budget planning is essential for companies looking to stay ahead of the curve when it comes to allocating money to all the big and expensive projects that require a lot of capital. If not planned properly, a lack of funding for CapEx projects can cause headaches when issues arise.

According to Anne Mari DeCoster, a self-storage consultant with 20 years of experience in the industry, CapEx is something owners and operators should attend to every year in a planned way to make sure you are always keeping your facility up to comparison when it comes to your competition in the area. Plus, it is a great way to plan large improvements, so the capital to get them done doesn’t come out of operating expenses. “[CapEx] is a way to deliver added value to your facility, so you can command higher rent and keep customers longer. Also, these activities can connect to rental rate increases,” she says.

DeCoster also highlights the importance of notifying customers of the improvements being made at the facility by sending them messages about it, so that once you increase the rent, they will be aware of the improvements and benefits. “When doing a CapEx project, it’s always a good idea to share with your customers that it is happening,” she says. “Share with them [announcements like], ‘The parking lot will not be accessible on such day because it’s being resurfaced; this is a CapEx project that we are doing to improve your facility.’ Afterward, send them another note letting them know. ‘We got a brand-new surface now; here it is.’ When you send them a rent increase, you cite these improvements, so that the customers understand they are getting improvements while their rent is increasing.”

A good way to differentiate when money should come out of your capital expenditure (CapEx) budget or from your operational expenditure (OpEx) funds is that the latter is your usual, every day, run-of-the-mill, small fixer-uppers that need urgent attention. The CapEx budget, on the other hand, should be used for larger projects that would be too expensive to fund without preplanning. To put it into simpler terms, here’s an example: If a pipe breaks in your facility, the money to fix it should come from your OpEx budget. However, if you want to upgrade the entire plumbing system, it’s a CapEx.

“CapEx is your big, planned projects, usually thousands or hundreds of thousands of dollars type of upgrades or [something] you must fix at your property. A CapEx is something you are projecting for the future,” says Sue Haviland, owner of Haviland Storage Services. “Your OpEx is your everyday, month-to-month, annual expenses.”

Haviland suggests that operators start planning for next year’s CapEx in early fall. “In early fall, we start planning for CapEx budgets for projects we saw as a need or would like to do around the properties for the next year,” she states. As for dealing with surprise expenses that appear throughout the year, she suggests adding an extra budget planned for “these surprise types of projects.” To properly plan, follow these six steps:

Conduct an in-depth assessment of each of your properties to identify areas that need immediate attention. Include paramount features to the functionality of your business, like roofing, paving, lighting, doors, climate-control systems, and security equipment.

Both Haviland and DeCoster advise listening to customers’ complaints, feedback, and suggestions on this step, as they have “fresh eyes,” meaning they are less used to the space, which makes them better at spotting issues that need attention.

Once you discover the issues you must tackle in the next couple of months, it’s important to create, evaluate, and categorize them in order of urgency, making critical repairs a priority in your budget.

What drives customers to your business is sometimes as simple as a nice storefront. According to Mark Cieri, co-founder and CEO of StorageDefender, a pioneer smart monitoring technology services company from Denton, Texas, this applies to your physical and digital storefront. “You want to improve the curb appeal of your facility, whether it be the physical curb appeal to attract tenants [or] the digital curb appeal, which is your online presence,” he states. “In the physical presence, if a company doesn’t have a clean coat of paint, the doors haven’t been upgraded, the signage on the front or the lighting isn’t up to par … [You need to] increase your curb appeal so that people who drive by are attracted to come into the facility.”

Cieri goes on to say, “Then, we get to the next phase, digital curb appeal, which is what people see when they get to the storefront of the webpage. What features are being advertised is critical for tenants searching for price, location, and security. You can’t change the location of your facility, and pricing is obviously another ladder. But what you can do is position the modernization [of your facility] and differentiate with security-related features.”

Another important improvement that could drive up business to your facility and should be planned in your CapEx budget is security upgrades. As technology becomes more advanced by the day, customers’ expectations increase. So, if you haven’t updated it in a few years, it’s probably time to start planning a budget for it in your CapEx.

“Things like investing in the gate access, the property access equipment, electronic access, so that it has, for example, contactless entry to a property, or increased access hours to make it convenient for small business owners or people who like to go fishing, or other types of reasons that qualify,” Cieri says. “That’s a good investment because it will attract more tenants, especially higher-paying ones.”

Just like security optimizations can lead to a great return on investment, technology solutions like implementing smart access control are great for cutting operational costs. Another update to keep your business ahead of the curve compared to competitors is implementing AI-driven pricing models on your website to enhance the overall customer experience and climate-controlled unit options.

Needless to say, making sure your website and social media presence are running efficiently, allowing customers to do most of the steps from booking to payments online, and ranking on the first page of Google research with the help of SEO, should also be a top priority, as most businesses in the industry come from online advertisement nowadays.

“Smart technology also increases the efficiency of a property. For example, it can profile traffic so that one can reduce labor expenses by adjusting staffing levels, or it could provide extra visibility in terms of what is going on inside storage units or around the property. For example, if a door is left open or if humidity is increasing,” says Cieri.

If you are planning to expand your facility, invest in building a new one, or renovate an existing space in a different location, the expenses should be added to your CapEx budget; you will need capital every step of the way, plus you will likely find a few surprises that will require extra money. So, make sure you are putting aside enough funds for this venture each month, as it can make a big difference in the future.

When working out the numbers for CapEx, Haviland suggests doing your research, getting in touch with trusted professionals for a general estimate, and leaving extra room in the budget for potential price increases. “We do the research and get a general idea of costs if [it was to be] done right now,” she says. “But, depending on the kind of project, you should add a little extra percent to that, because chances are the prices will go up by the time you actually get to do it in the next year.”

While figuring out the right extra percentage to add to your daily budget during the planning stage, Haviland says, “[The extra percentage] depends on how soon in the next year you do it, whether it is in the first quarter, third quarter, or fourth quarter. So, we get an idea of costs, and then that helps us to plan what we might need for it the next year.”