n 2024, the U.S. economy could be considered “stable,” especially when compared to more challenging financial times in the prior years, specifically the COVID-19 recession, which lasted roughly from February 2020 until April 2020, according to the National Bureau of Economic Research.
This year, data from the Bureau of Labor Statistics has stated that the unemployment rate in the U.S. is low, with 8.5 million job openings. Nowadays, American workers also earn more, with an hourly rate 22 percent higher than pre-pandemic times. Why is this relevant? Well, it’s known that low unemployment rates usually indicate economic prosperity in a country.
However, even if the U.S. economy is considered “stable” in 2024, that doesn’t mean that there are no issues. For example, the inflation, which closed the month of May with 3.3, is still considered uncertain by some specialists. With that in mind, those in leadership positions at self-storage companies need to have a plan for how they’ll handle their finances if the U.S. economy, or the self-storage market, becomes challenging. It’s better to be prepared, right?
To understand the best ways to raise capital for your self-storage company in a challenging market, MSM spoke with Banks Brown, an acquisition associate at Madison Capital Group, and Shawn Hill, a principal and founding member of The BSC Group.
However, before looking for an investor, it’s important to understand what type of business partner or investor you’re seeking. Is it a long-term business partner, someone you can work with on multiple projects and deals? Or is it a one-time investor? What type of investor would be best for your company? What are your goals with this partnership? It’s necessary to understand what your company can offer to an investor and what you expect in return.
Banks Brown, for example, stated that Madison Capital Group values its close relationships and repeat individual investors. “We are interested in forming strategic partnerships, however, the relationship must be the right fit across the board. We are very lucky that we can be patient and we can make sure we have a partner committed to doing business together long term,” he said.
In challenging financial times, these relationships can be a great way to raise capital and invest in new deals. But where can you find partners and investors who align with your business practices and expectations? Well, we’ve established the importance of understanding the type of investor you’re seeking. When you acknowledge the profile you’re looking for, there are many options to connect with those prospects.
Social media, especially LinkedIn, is a great option. It can be helpful to join groups on LinkedIn related to your niche, follow creators you admire, and interact with posts. Another way of finding possible investors is by attending events and conventions related to the self-storage industry. In addition, it’s helpful to reach out to your connections and current investors to network with their connections, too.
According to Shawn Hill from The BSC Group, it’s important to make sure current and future investors understand your business and feel confident partnering with you. “We have helped create bridge loan programs that strategically align capital sources with REITs or large operators that are also in the third-party management business. This has helped sponsors with lease-up deals obtain bridge loans because the partnerships help the capital to better understand the real estate and gain comfort in the forward-looking economics given the expertise of the management company,” he explained.
In summary, to raise capital, investors are essential. It’s necessary to understand the profile of the investor you’re looking for, connect with them, and build a relationship based on communication and trust. The investors must know that it’s a smart decision for them to partner with and/or invest in your self-storage company. These relationships should be cultivated so that investors can help your self-storage company raise capital in a challenging market.
Investing in marketing tactics and publicizing your company is a good strategy to keep investors confident in continuing their partnership with your business. What’s new about your company? How is it doing? What’s the best way to market your company to showcase financial stability? What are you comfortable sharing? What’s relevant to share? If you can make that information easily accessible to your investors, even better. If they aren’t heavy social media users, make sure they’re signed up for an email newsletter informing them of how your self-storage company is improving and succeeding.
Hill agrees that it’s very important to keep business partners and investors informed and confident about partnering with your company. “First and foremost, cash is king and cash flow is key. If you have a long-standing history of reliable cash flow, that is certainly something to showcase,” he said.
Even if your company is going through a challenging financial time, having knowledge about your business is very relevant. How have your past deals worked out? What positive things do your previous partners and investors have to say about you and your company? There’s always something positive to showcase; make sure your partners and investors are aware of those things.
To showcase your self-storage business’ financial stability, keeping ongoing communication with partners and investors is crucial. Make sure they can ask questions, and be sure to fully answer their questions. Schedule meetings to keep the conversation going and inform them about news/updates on your deal/partnership. The more confident and informed they feel, the more likely your company can have a long-term partnership with them.
Challenging financial situations can be challenging and anxiety-inducing, but it’s possible to raise capital using these tips. Great relationships with business partners and investors are always going to be a phenomenal asset to your self-storage company. Keeping those relationships takes work, but it’s worth it. Even if your company is doing great financially, it’s always great to be prepared and have a plan if the economic situation becomes a bit more difficult.