Should I Get Into This Business?
By Jim Spinney, Spinney and Huber LLC

In a recent Inc. Magazine article by Norm Brodsky, he wrote how much he enjoyed showing clients his warehouse with hundreds of thousands of boxes, and how much he loved this business. Norm said that "to be a successful entrepreneur you need to feel in your gut that it's the most interesting, exciting and worthwhile enterprise that you could be engaged in at that moment."

Many of us who have chosen the records storage business as our business enterprise can easily relate to his comments. This is an easy business to love.
Some of the reasons that I love this business are the following:

1. This is a business with unlimited prospects to sell. Every business creates records, and has a need to retain and protect them. From the Banking and Financial industry to the Medical and Professional Services fields to your local McDonald's franchisee, every business has records to store.

2. This is a service business where you will provide a more efficient, better protected, less costly method of records management than your client was previously using. There is no "buyer's remorse." For every customer I sold on using my services, I solved a problem and, in most cases, provided a significant improvement in their records management program.

3. Revenues are recurring with very little client turnover. For example, if you are billing $10,000 a month in storage revenue in December, you already know that you will bill at least $120,000 in the following year, even if you don't sell another customer. And, if you are providing a good level of service, these clients are with you for life.

4. Receivables are controllable. This is a business to business enterprise; you are not working with individual consumers. Receivables are controlled by restricting access to the services of your records center when slow pay situations arise. Of the thousands of customers served by our records centers, I can count on two hands the number of accounts that ended up as no pay, dead accounts.

5. Once you meet the break even point, strong profit margins can be achieved along with a high return on your investment. This business can build great value, with higher than average multiples earned, when the time comes to sell your business.

6. There are multiple diversification opportunities. Many organizations in the professional records management business have added vault media storage, destructions services, business forms management, document imaging, and/or fulfillment services to their product and service offerings.

By now you are probably asking yourself, "So what is the downside?" Well, there are some issues to face when starting this business from scratch. First, it can be a capital intensive business, both in the startup and growing stages. You will need a facility, shelving, material handling equipment, a vehicle, software and hardware, office equipment, boxes and supplies, and staffing.

Also, the sales process can be slow. Typically, the sales cycle can be 60-120 days from the initial proposal phase to the actual signing of the agreement. Even after the agreement is approved and signed, it could be another 60 days before the records are prepared and ready to move offsite.

Depending on the services offered and the efficiency of your operation, labor expense could be intensive. Industry averages run in the 40-45% range, so labor cost is going to be one of your big issues. These costs can be controlled, however, by establishing good policies and procedures, management tools, and by selecting the right records management software for your center.

It can be said that this is a very simple business. You receive a box from your customer, you place it on the shelf, you find it when they need it back, and deliver it to them. Simple. The problem is doing this, error free, hundreds of times a day, with hundreds of thousands of boxes. The devil is in the details. Once again, this is where the importance of having a detailed policy and procedures manual, and the right records management software program come into play.

Even considering the capital expense, labor, sales process, and inventory detail issues, this is a great business. Unlimited prospects, residual revenue, and building business value far out weigh the downside issues. You too, will learn to love this business.