Raising rates is a topic that is often looked at with more questions than answers. Questions that are often asked are “Why”, “How”, “When”, and “How Much”?
Let us start with the question “Why?”. Every year costs increase for businesses. Utilities, insurance, maintenance, and even staffing costs all go up, leaving the budget smaller and smaller for those much-needed repairs, improvements, not to mention profits. This is a basic economic concept.
Over time, paint fades, pavement and driveways crack, and technology becomes outdated. Without the budget to perform repairs or improve your tools, the property would become dated and less polished. Conscious consumers want well lit, clean, updated, and safe places to store their items. So, if you want to attract the desirable customers, you will need to have a budget for updating your property each year.
So now that we have made sense of the “Why”, lets talk about the “How” before we tackle the rest.
First things First: It is vital that you understand the rates of your direct competition. Make it a point to frequently track your competitors features and rates. Knowing your business also means knowing your competition and how they charge. By understanding what others are charging, you can fit the best price to your units. If you offer more, then you can charge more.
Once you understand your market, start your rate increases with setting the “street rate”. Set the vacant unit pricing at the best fitting price for your area. All new customers who come in “off the street” will pay that price. Easy. This will set the bar for the pricing of all occupied units.
When we consider increasing rates on existing customers, think of the “when” as well as “how much”. The best practice to be consistent. Establishing this practice may be a little harder at first, but customers who receive rate increases at the same times year over year are more likely to expect and accept them. Once you have decided on a consistent “when”, begin reviewing the customers history. Things to consider on each account would be:
- How long have they been a customer?
- How desirable is the unit they are in?
- Do they pay on time?
- How much are they paying below street rate?
- How much do you want to keep them as a customer?
Long term customers who pay on time and give you no problems may should be considered for a discounted price, just lower than the street rate. If they are receiving a significant discount, gauge your increase by what sounds fair. Many facilities raise rates 6-8% annually. If you have a unit that has a street rate of $65.00, the customer is renting for $50.00 and you have an abundance of those units, consider a lower increase of $2.50 – $3.00 increase. But if that same size unit is highly desirable, it wouldn’t be unreasonable to increase that customer by $5.00 or 10%. If they move out, and you fill that unit at the $65.00 street rate, then you are working less for more.
The key to the success of raising rates is really a balance of common sense and fair treatment of the customer. If you are raising them on a regular schedule and have set that precedence, customer will be more likely to understand and accept the practice. If they choose to move, consider the benefit you have of renting that unit to the next customer at a higher rate.
As an Affiliate who uses WebSelfStorage, you are in a unique advantage with the Rate Increase feature that is made available to you through the program. You can find several topics in the Help Center with instructions on how to “Manage Street Rates Help Page” (FAQ 1256) or “Manage Occupied Unit Rates” (FAQ 1606). How ever you choose to manage your facility rates, consider the quote from Sun Tzu – Art of War: “Opportunities multiply as they are seized.”