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HOW TO HANDLE A PRICE INCREASE

Renters don’t want to pay more. Managers don’t want to handle the complaints. Owners don’t want to lose customers.

But price increases are a necessary part of the self storage business model. Energy costs increase. Taxes go up. Inflation makes supplies more expensive.

There’s no way around it — the extra money has to come from somewhere.

NOBODY LIKES PRICE INCREASES

It can be very stressful to iron out all the details: when to increase and by how much, how to inform the tenants, how to handle the potential complaints, and, of course, how to maintain your sanity while politely responding to any furious phone calls.

Knowing the best way to handle things can make your price increase go a lot more smoothly. Read on to learn how you can break down the process into manageable steps.

WHAT TO DO WHEN YOU DECIDE PRICES MUST GO UP

The one thing to remember is that every storage facility is different. What works for the one down the street might not work for you. Everyone has a different customer base, a different management style, and a different relationship with their tenants.

The easiest way to organize a price increase is to make it part of the yearly schedule. If you raise everyone’s rent by, for example, 7% each year they’re at your facility, the increase won’t catch them by surprise and you’ll be better able to integrate your projected earnings from your price increase into your budget.

WHEN TO INCREASE PRICES

Of course, 7% might not be the right amount for your facility. As you figure out what works best for you and your business, keep in mind that certain customers’ prices are easier to raise than others.

Renters of larger units, for example, will generally tolerate greater increases in their monthly rent in terms of raw dollar amount, while renters of smaller units will generally tolerate increases of a greater percenatge as compared to their previous rental rate.

THE AMOUNT OF INCREASE

For example, an extra $10 is not much when the renter has been paying for a large warehouse unit at $150 per month, but the guy paying $30 a month for his 5’x5’ will be a lot less happy.

On the other hand, if you were to raise everyone’s rent by exactly 10%, the one with the large unit would be paying $15 more while the one with the small unit is paying just $3 more per month.

THE AMOUNT OF INCREASE: A COMPARISON OF POTENTIAL PRICE INCREASES

This table shows that not everyone’s rent needs to be increased by the same amount or the same percentage.

THE AMOUNT OF INCREASE: A COMPARISON OF POTENTIAL PRICE INCREASES

Unit Size Current Price $ Increase % Increase New Price

5’x5

10’x30

$30

$150

$3

$10

$15

$10

10%

33.3%

10%

6.67%

$33

$40

$165

$160

Another important thing to consider is that you don’t have to increase everyone’s rent at once. Be strategic, using resources like a thorough understanding of your occupancy rates to make the most informed decision.

For example, if your 10’x30’ units are almost full, while your 5’x10’ units are half empty, it’s easy to determine which population’s rent you should raise first.

WHOSE RATES TO INCREASE

One must also consider the potential loss of tenants when increasing prices. If you’re raising rent for ten customers all paying $50/month and you expect one tenant to leave because of the price increase, plan to make up the loss in the new revenue from your remaining nine tenants.

WHOSE RATES TO INCREASE

WHOSE RATES TO INCREASE:MAKING UP FOR A TENANT MOVE-OUT

Price Increases for Each Tenant

New Revenue(9 tenants)

Loss(1 move-out)

Total NetLoss/Gain

$1 $9 -$41

$50

-$32

-$23

-$14

-$5

+$4

+$13

+$22

+$31

+$40

$18

$27

$36

$45

$7 $63

$72

$81

$90

$2

$3

$4

$5

$6

$8

$9

$10

$54

As you can see in the previous chart, you would need to raise the monthly rent by at least $6 in order to break even after the loss of a tenant in this scenario.

Of course, more than one tenant may leave, or none might leave. There are lots of variables to consider when predicting the loss of tenants.

For example, renters with units that are not drive-up accessible are less likely to leave due to the added effort of moving out.

WHOSE RATES TO INCREASE: MAKING UP FOR A TENANT MOVE-OUT

The easiest way to explain an increase is to time it along with an improvement or repair to your facility. While that was likely one small part of the various cost increases that led to your decision to increase rent prices, it’s the easiest for the customer to accept.

Customers all deal with bills and taxes in their everyday lives, so they will probably have less sympathy for you if you cite those reasons. They’ll understand, but they won’t like it. Conversely, pointing out the ways in which the facility has improved during their tenure will give them tangible proof of the necessity of their rent increase.

HOW TO EXPLAIN THE INCREASE

Try to break the news in person. This is not always possible since a lot of customers rarely visit their units, but try to talk to as many as you can.

Let them know beforehnad so they aren’t blindsided by the sudden increase in one of their monthly bills. There will probably still be some complaints, but if you put in the time and effort, you can increase your rapport with your customers and lower the amount of dissatisfaction later on.

HOW TO EXPLAIN THE INCREASE

The hardest part of a rate increase is handling the complaints the tenants may have. Remember your basic customer service skills and:

1. Always remain calm. 2. Show them that you’re sympathetic and hate to raise rents. 3. Explain in detail the reasons why it has become a necessity.

Some tenants may leave solely because of the price increase, but some may already be thinking of moving and use the increase as their reasoning when you ask why they’re moving out. This is a point to consider and watch for as you determine how much rate increases affect your retention rate.

HOW TO DEAL WITH COMPLAINTS

That isn’t to say you should ignore the complaints on the assumption that most of your tenants will stay. Always greet your customers with open ears and a smile on your face, and think of ways to show them why you’re worth the rent increase.

Try planning a fun community event or holding a raffle of some kind. Do whatever you can to get their mind off the extra money they’re now spending and back on why they love to be your customer.

HOW TO EXPLAIN THE INCREASE

Every storage facility is unique, so it might be difficult to know the best way for you to approach a price increase until you’ve actually done it. Always gauge the customer reaction, the retention rate, and the net increase in revenue.

If you realize a particular method doesn’t work for you, you can try something else next time. Don’t let rate increases ruin the fun you have running your storage facility. They’re a necessary evil, but with proper planning and customer service, they’re little more than a bump in the road.

Do you have any other tips for owners and managers preparing for a price increase? Share them with us in the comments below!

HOW TO HANDLE A PRICE INCREASE

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