Maximizing KPIs Through Data-Driven Insights
Every business measures success by comparing target and actual KPIs. Data analysis can provide valuable insight into the performance of a self-storage facility and help management set realistic goals and strategies. At the same time, we often hear from executives that, even today, they still make strategic decisions based on incomplete pictures and gut feeling. As good as an intuition might be, it can never be as detailed and funded as data analysis. We have compiled a list of must-have self-storage KPIs, including how to analyze them, interpret the results, and improve them.
Occupancy Rate
This is probably the most fundamental KPI in self-storage. The occupancy rate measures the number of occupied units in percent. A high occupancy rate (over 95%) is regarded as a sign of high demand and good facility management. A more detailed occupancy rate looks at different unit sizes and can showcase inefficient unit size allocation. If larger units have a lower occupancy rate, while smaller ones are nearly always at 100%, it is time for a remodel of the facility. Aside from converting units into other types, occupancy rates can be improved by adjusting the prices to be more competitive or more aggressive marketing campaigns.
We can pair the analysis with market research to go beyond mere occupancy rates. Considering factors like demographic trends, competition activity in the area, and economic development of the region, we can accurately forecast future demand and act proactively.
Net Move-in Rate
This KPI compares move-ins to move-outs over a time period. A growing, successful business should have a positive net move-in rate. Some customer churn is normal and expected in self-storage as it is a seasonal business. However, a sudden exodus of customers always indicates a business problem. Good big data models can pick up correlations between specific customer behavior patterns, customer service interactions, and unmet needs with higher risk or churn. These predictive analytics are an early warning system for operators to intervene proactively before a problem becomes too big to manage.
Rent Per Square Meter/ Square Foot
Annual rent per square meter, or square foot, depending on the location, measures revenue efficiency. It is an excellent KPI for benchmark analysis of the competition in the market and pricing adjustments. We get the KPI by dividing the annual total rental income by the total space rented out in a year. When paired with demand analysis over the year, it is a powerful tool to maximize prices during seasonal peaks and lows.
Number of New Leads
This KPI measures the effect of marketing activities. New leads mean interest in the facility and typically mean more customers signing up. This is a quantitative and qualitative KPI, as we also want to look at the quality of these new leads. If most inquiries are for sold-out units, the marketing campaigns do not target the right customer. If there are many high-quality leads that are not converting, then there is a problem with the booking process.
Operating Expenses & Expense Ratio
Operating expenses are all fixed and valuable expenses associated with running a self-storage facility. These are energy costs, personnel costs, security, etc., but they exclude mortgages or loan payments. We get the expense ratio by looking at expenses as a fraction of total income. Typically, a self-storage facility will have an expense ratio of 25-40%. This KPI gives us insight into the overall efficiency of the facility's operations. If the expense ratio is higher than this bracket, the facility is in need of efficiency improvements. Data analysis and automation can improve the overall performance of many processes and positively impact this KPI.
Net Operating Income
Finally, we have net operating income, also known as NOI, which is a KPI of profitability. We calculate it by subtracting operational expenses (excluding loan payments and mortgages) from rental income. The higher the NOI, the more profitable the facility. If this KPI is underperforming, the business is at risk. It can be improved with a two-pronged attack:
· Analyzing the market to optimize pricing and to find ancillary revenue streams (e.g. additional insurance for renters or upsell to a larger unit).
· Analyzing the operational efficiency of the facility to find areas of improvement. These could be allocating staff or marketing budget more efficiently, reconfiguring units to meet demand, or adjusting the HVAC systems to reduce energy costs.
These KPIs are just an example of those we consider essential and insightful. The important bit is that no matter which KPIs your business uses to measure success, they must be data-based and data-driven. Only data can provide factual insights into what is really happening at your self-storage.
This article is provided by Unwired Logic.