Welcome to part two of our three-part series on important considerations for starting a new self storage business or expanding an existing business to a new location. In part one, we explored the importance of understanding regional supply growth trends before investing in a new market. In this post, we'll discuss the impact of low barriers to entry and entitlements on your decision to enter a new market.
Low Barriers to Entry, Increased Competition
A barrier to entry is anything that stands between your self storage company and the ability to enter a new market. Some of the most common barriers to entry include things like:
- Start-up costs
- Local government regulations and zoning restrictions
- Technology limitations
- Differentiation between your brand and your competitors
- Economies of scale
- Competitive response from existing storage companies
You might think it'd be a good idea to set up shop in a market that is especially accommodating to self storage businesses. The only problem with that thinking is that every other self storage owner probably has the same idea.
Entering a market with a comparatively low barrier to entry might help your new self storage location get up and running faster, but you'll need to be prepared to deal with increased competition and accelerated market saturation.
Why Barriers to Entry Can be Good for Your Self Storage Business
As the supply of self storage units in Nebraska increased over the last 12 months, residents in the Omaha suburb of Elkhorn began to speak out against continued development. In fact, that's a bit of an understatement. Elkhorn area homeowners actually took their opposition all the way to the Nebraska State Supreme Court. Spoiler alert: the residents lost.
As a result, there is now very little prohibiting a self storage owner from building a footprint in Omaha. If the residents had won their case, however, the resulting zoning restrictions would have likely made it that much more difficult-although probably not impossible-to enter the market. This outcome would have done something else, too. It would have shielded existing self storage facilities from the rapid supply growth the Omaha market is experiencing today.
The takeaway from all of this is simple. If the market you're evaluating sounds too good to be true, it probably is. Don't let low barriers to entry woo you into entering what will likely become a highly competitive battleground-if it isn't already. Instead, don't be afraid to elbow your way into an area, even it means clearing a few of the barriers to entry listed above.
Self Storage Business Tips Part 3: Operating Costs Outpacing Inflation
In part three of our series on what to consider when starting a self storage business, we're going to take a look at what happens when operating costs rise faster than the inflation rate. If you missed part one, catch up now. Otherwise, we'll be back soon to conclude the series.
StorageMart started with a single store in Columbia, MO and has grown to be the largest privately-owned, family-operated storage company in the world. StorageMart is led by the Burnam family, which has been in the storage industry for three generations. Dedicated to providing easy, clean, and friendly service to each and every customer, StorageMart is also committed to giving back to the many communities it calls home.