Starting a storage business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful storage business.
Importantly, a critical step in starting a storage business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Storage Business:
- Choose the Name for Your Storage Business
- Develop Your Storage Business Plan
- Choose the Legal Structure for Your Storage Business
- Secure Startup Funding for Your Storage Business (If Needed)
- Secure a Location for Your Business
- Register Your Storage Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Storage Business
- Buy or Lease the Right Storage Business Equipment
- Develop Your Storage Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Storage Business
- Open for Business
1. Choose the Name for Your Storage Business
The first step to starting a self-storage business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your storage business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your storage business.
2. Develop Your Storage Business Plan
One of the most important steps in starting a storage facility is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your storage business.
- Company Overview – this section tells the reader about the history of your storage business and what type of storage business you operate. For example, are you a self-storage, data storage, or a wine storage business?
- Industry Analysis – here you will document key information about the storage industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target market are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your storage business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your storage business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Storage Business
Next you need to choose a legal structure for your storage business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the storage business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small business owners. It is an agreement between two or more people who want to start a storage business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a storage business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a storage business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your storage business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Storage Business (If Needed)
In developing your storage business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a storage business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a storage business that they believe has high potential for growth.
5. Secure a Location for Your Business
When looking for a location for your storage business, it’s important to consider the following factors:
- First, consider the needs of your business. What kind of storage do you need: personal or commercial? Do you need climate controlled units? What are your storage space requirements?
- Once you’ve determined what kind of storage you need, research the areas in your city that best meet those needs. Consider factors such as cost of living, population density, and proximity to highways and public transportation.
- Narrow down your choices to a few neighborhoods that fit your criteria, and then take a closer look at the individual locations to see if they meet your specific needs (e.g., access, security, parking).
- Finally, visit each location at different times of the day to see how busy the roads are, and whether there’s enough parking for your needs.
Make sure to consult a commercial real estate specialist before you sign a lease. You may save yourself some time and money because they may be able to help find a location that meets all of your needs from the start.
6. Register Your Storage Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your storage business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your storage business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
Before you can start a storage business, there are a few licenses and permits you will need.
The most important license you need is a business license from your local government. In addition, you may need a special license to store certain types of items, such as hazardous materials. You will also need the local fire department to review and approve the installation of a fire alarm system in your business.
Make sure to check with your local government to find out what licenses and permits you need to start a self-storage business.
10. Get Business Insurance for Your Storage Business
The type of insurance you need to operate a storage business will vary depending on the state in which you operate.
Some business insurance policies you should consider for your storage business include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Storage Business Equipment
In order to start a storage business, you’ll need some basic equipment. You may need a truck or van to transport items, a self-storage unit to store them in, and locks and packing materials to keep them secure. You will also need some office equipment like a computer, phone, and printer.
12. Develop Your Storage Business Marketing Materials
Marketing materials will be required to attract and retain customers to your self-storage company.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your storage business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional storage business website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your storage business.
13. Purchase and Setup the Software Needed to Run Your Storage Business
To run a storage business, you will need accounting software, customer relationship management (CRM) software, and invoicing software.
14. Open for Business
You are now ready to open your storage business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Storage Business FAQs
It is easy to run a self-storage facility successfully. The reason for this is it only requires minimum investment to start. In fact, you can do it by using your own garage or even a spare room in your house.
There are a few things you can do to get started in the storage business with no experience. First, do some research on the industry and learn as much as you can about it. Next, try to find a mentor or someone who can help guide you through the process. Finally, start small and gradually grow your business as you learn more about it.
The most profitable storage business is the self-storage business. Self-storage businesses are those that allow customers to store their belongings in a storage unit that the customer rents. Storage facilities charge a rental fee that may be paid monthly, yearly or by another time period specified in the rental agreement. Self-storage businesses generally have higher average prices per square foot than other storage types because the customer is paying for the convenience of the short-term use of a storage unit and to keep a valued possession safely stored away.
Self-storage facilities are generally very profitable because the average revenue per storage unit is high. The self-storage business model has a lot of flexibility, allowing its owners to vary rental prices according to demand by offering discounts during slow periods and charging premium rates when occupancy is high.
Self-storage businesses are attractive to investors because of the business model's high average revenue per square foot, relatively low overhead expenses, and government regulations that protect storage owners from liability for stored items.
To start a storage business, you will need to invest in some initial equipment and supplies. The cost of setting up your business will vary depending on the type of storage business you want to start, but can range from a few thousand dollars to several hundred thousand dollars. You will also need to factor in the cost of marketing and advertising your business.
Some startup costs estimates for storage businesses include:
- $500 to $5,000 for a used storage container and trailer
- $12,000 to $25,000 for a new storage container and trailer
- $4,800 to $11,200 for a portable storage unit
- $7,400 to $1M+ for a prefab facility
- $200-$500 for packing materials and boxes
- $1,000-$5,000 for advertising and marketing
The ongoing expenses for a storage business can vary depending on the size of the business, the services offered, and the location. However, some of the most common operating expenses include rent or lease payments, insurance, employee salaries and benefits, and advertising and marketing costs.
Many self-storage facilities make money by charging customers to store their belongings. They may also charge for access to the self-storage units, or for certain services such as moving items in and out of the units. Another way storage businesses make money is by subletting the storage space they control to third parties.
Storage businesses are profitable. One reason is that the storage market is growing rapidly. In addition, the storage industry is fragmented, which means there are many small players in the market. This presents opportunities for consolidation. Finally, the storage industry is recession-resistant, meaning that demand for storage services remains relatively stable during economic downturns.
One of the main reasons storage businesses fail is because they do not have a solid business plan in place. This includes having a detailed marketing plan, pricing strategy, and financial plan. Other businesses also fail because they do not have the right team in place to help them run the business. It's important to hire employees who are knowledgeable in the storage industry and have the same values as your business. Finally, another reason storage businesses fail is because they do not have a good customer service strategy in place. Make sure you are responsive to customer inquiries and complaints, and always provide excellent customer service.