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Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on March 3, 2022
Investment range
$301,550 - $604,100
Revenue potential
$168,000 - $230,000 p.a.
Time to build
1 – 3 months
Profit potential
$67,000 - $90,000 p.a.
Industry trend
Growing
Commitment
Flexible
Starting your self-storage business? Here are the most vital considerations:
You May Also Wonder:
How profitable is a self-storage business?
A self-storage business can be very profitable and is a great way to get a nice passive income. Your best bet to be successful is to offer superior customer service and provide value added services like valet storage services.
How can I find the right location for a self-storage facility?
To find the right location for a self-storage facility, consider factors such as population density, proximity to residential areas, accessibility to major roads or highways, and competition in the area. Conduct thorough market research to assess the demand for self-storage services and identify underserved areas.
How can I attract customers and market my self-storage services?
To attract customers and market your self-storage services, utilize various strategies. Develop a user-friendly website that showcases your facility’s features, security measures, and pricing options. Utilize online platforms and social media to promote your services and engage with potential customers. Implement targeted online advertising or local directories to increase visibility in your area.
How can I differentiate my self-storage business from competitors in the market?
To differentiate your self-storage business from competitors, focus on providing exceptional customer service and unique features. Implement top-notch security measures, such as video surveillance, access control systems, and well-lit facilities. Offer convenient amenities, such as 24-hour access, climate-controlled units, or online reservation and payment options.
Starting a self-storage business has pros and cons to consider before deciding if it’s right for you.
Trends in the self-storage industry include:
Challenges in the self-storage industry include:
Startup costs for a self-storage business range from $300,000 to $600,000. These costs are for purchasing an existing self-storage facility. Alternatively, you could purchase land and build the self-storage units, but you’ll easily spend well over $1 million.
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $150 - $200 | $175 |
| Business licenses and permits | $100 - $300 | $200 |
| Insurance | $100-$300 | $200 |
| Business cards and brochures | $200 - $300 | $250 |
| Website setup | $1,000 - $3,000 | $2,000 |
| Down payment on a self storage property | $300,000 - $600,000 | $450,000 |
| Total | $301,550 - $604,100 | $452,825 |
The average monthly rate for a self-storage unit is around $100. If your facility has 200 units, your profit margin will be about 40% after your mortgage payment and overhead costs.
In your first year or two, you could have 70% of your units rented year-round, bringing in $168,000 in annual revenue. This would mean more than $67,000 in profit, assuming that 40% margin. As your marketing efforts bring in more business, you could have 95% of units rented. With annual revenue of nearly $230,000, you’d make $90,000.
The only barrier to entry for a self-storage business is the high startup costs. You’ll need at least a 30% down payment and most storage facilities cost $1 million or more.
Now that you know what’s involved in starting a self-storage business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Research self-storage businesses in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a self-storage business that offers pick-up, or valet service.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as climate-controlled units for ecommerce businesses.
This could jumpstart your word-of-mouth marketing and attract clients right away.
In addition to storage unit rentals, you could offer valet services, moving truck rental, storage box sales, and even packing services.
Prices vary based on the size of the units and whether they are climate-controlled. They could range anywhere from $40 per month up to $200 per month. The average storage unit price across the country is around $100. You should check other storage facilities in your area to see what they charge to make sure that you’re competitive. Your costs will be for your mortgage payment and overhead. You should aim for a profit margin of at least 40%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target market will be very broad. You should spread out your marketing to include sites like TikTok, Instagram, and Facebook. You should also market on LinkedIn, which is where you’re likely to find local ecommerce business owners.
The location of your self-storage business is a critical factor in its success. Look for a spot in a busy commercial district with high visibility and easy access, such as near major highways or busy intersections.
Also, consider the demographics of the area, such as population density, income levels, and the presence of businesses or residential areas that may require storage solutions.
When selecting your location, ensure that it meets all necessary zoning and regulatory requirements for self-storage businesses.
By strategically choosing the right location for your self-storage business, you can establish a profitable and successful enterprise that meets the needs of customers and stands out from competitors.
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to self-storage businesses.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your self-storage business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best options, other than friends and family, for funding a self-storage business.
Starting a self-storage business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your self-storage business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as TRACKUM, Storable, or easystorage, to manage your units, billing, and payments.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your self-storage business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your self-storage business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a self-storage business or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in self-storage for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in self-storage. You’ll probably generate new customers or find companies with which you could establish a partnership.
You may just want to work alone, or you may need workers to fill various roles. Potential positions for a self-storage business include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
People have so much stuff it often doesn’t fit in their homes, which is why the self-storage industry is worth $23 billion. Starting your own self-storage business takes a significant investment, but it can provide a relatively passive income for a very long time. Demand for storage units is always high, so you shouldn’t have trouble keeping your units full.
Now that you know the business side, it’s time to jump into self-storage entrepreneurship!
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