What should we keep in mind in creating a solid operations arm of a real estate company? How to hire the best of the best? What are the tips for creating a great company culture? How can one set up for success in an early or late stage? Anne Mari DeCoster, President & COO at Kingdom Storage Partners & Self Storage Investing, shares her knowledge.
Tell us a little bit about you.
I've been in self storage for over 20 years and this is a new position for me. I've been involved in the development from concept to exit of a variety of properties in a variety of US locations, as well as having written business plans for starting self-storage in Guam, Hong Kong, Shanghai, Beijing, Nagasaki, and Tokyo. Also, I did a lot with associations over the years, built a national brand, as well as a protection plan and so to be here now is almost like a completion.
You led operations for many years within a handful of organizations, what are some of the biggest things that we should keep in mind with regards to building a solid operations arm of a company?
It's critical that you keep your eye on the numbers. Every software system has a management report, and the management report will tell you where dollars are leaking out. You can develop the best proforma in the world but if it's not implemented the way you intend, because you have invisible leaks, then you're not going to succeed the way you should, you'll still succeed, but not as well as you should. It's really easy to turn that over to someone else and trust them, but it's not always wise. I've been heard to say that not every manager steals, but every owner is stolen from. And so, the way to prevent that is to keep your eye on those numbers.
I'm a believer in consistency and simplicity. Whoever is running your shop, whether it's a remote manager, or an onsite manager, or even if it's you, it's really important to understand what are your processes, how you do them, and do them that way every time. The thing I love about our industry is that we have a simple business model and I always encourage people to keep it simple, don't complicate it with extra services that are logistically intensive, or manpower intensive, or maybe the technology isn't quite there yet to integrate in order to be automated. By keeping it simple, and having simple procedures and implementing them across the board, you up your game.
I've talked to a lot of owners and things seem to fall into two camps, either an owner is frustrated that they can't get their manager with remote, or third-party management, or on-site to do what they want. And then others would say, I don't understand why they have a problem. And the difference between the two is accountability, people will deliver what you inspect, look at it, measure it, take a look at the MSR, if you're asking questions, you'll get much better responsiveness. If you do that with the team and you do that with each other, live, there are very few people who want to say, I did a bad job this year or this week, I didn't sell any tenant protection to any of my new tenants. The next week, they're not going to want to go back to that meeting with their peers and say, I did the same thing again this week. I don't show any improvement whatsoever. Nobody likes to experience that.
I find that kind of accountability, peer to peer, is critical but it's also simply holding people accountable for what they've committed to you that they will do. That will close your leaks, it'll pick up the money that has been left on the table, it all improves your bottom line. The great thing about our industry is that our break-even point is so low that after that point of about 70%, every additional business unit goes straight to the bottom line with no additional cost. Every additional rental, every additional protection plan or insurance plan sold, everything that you can sell, go straight to the bottom line after you've taken care of your cost of money, your cost to land, and your operating expenses. That's the glory of this business, and that is why I love it so much, it's a simple business model, it has a low break-even point and people like you and me can still get in. You don't have to be the owner of Exxon to get into self-storage. You don't have to be Public Storage to compete, you can get in as Steffany Boldrini and as Anne Marie Koster and you can succeed.
Don't subcontract managing the numbers out, you always look at the numbers. I know an owner who is well into his 80s now. In the old days, when everything was run by a manager, he talked to his manager every day, they were best friends. Lo and behold, they were stealing 10s of 1000s of dollars from him every single year. And he had constant contact, but he was not looking at the MSR, he wasn't looking at the Management Summary Report to see that there were a lot of credits that shouldn't have been given, there were a lot of fees waived, there were mystery units, 20% of this square footage was not accounted for on the MSR, all of these places where the money leaks out.
And if you're going to buy a property, I've always encouraged folks who are buying an existing property to check every unit. What's in it, is there a lease, is the lease signed? And then, you can identify your mystery units, the money that was going into somebody else's pocket, it was rented off the books or it's just somebody's friend, and money was never collected. There is this rural Arizona property where I think that there were only about 150 units and the former manager had filled 40 of them with junk.
You have hired several people over the years, I think the company's number one priority is to focus on how to hire the best of the best. What are some things that you look for when you are interviewing someone for either a low-level job or a high-executive job?
That's one of the hardest things today, isn't it? It's a market where it's very difficult to find the kind of people that we are. We used to be very common in the workplace, pursuing excellence, being committed to doing a good job, you go to work every day, compassion is important, and caring about what you do - these are the things that I look for. And in the process of talking with people, I try to understand what their values are and see if there's an alignment of values. I found in life that if you're very clear on your values, you establish your priorities based on your values, and then your decisions line up with that. That doesn't mean decisions are easy, but they line up. If you're talking with someone and you can tell that they don't value people, and if valuing people is important to you because you want people who rent from you to give you five-star reviews because you cared enough to make sure they could access their Christmas presents on Christmas Eve to put them under the tree on Christmas morning. This actually happened. There was a tenant who was calling at 10 o'clock at night on a Christmas Eve leaving messages that we're supposed to have 24-hour access and now it's 10 o'clock and Christmas Eve and I hit my Christmas presents here. And a chief of staff saw the alerts, answered the phone and got someone there to open the property because she cared, and I look for that.
I asked questions that force choice and priority. One example is, We operate with deadlines and attention to detail is important, tell me, how do you operate? How do you manage those two? If you're running out of time, which do you choose? And their answer tells you what their value is. If their answer suggests that they would choose the detail over the deadline, but it's time to auction, you can't miss the auction deadline unless you start all over again. But if the detail is not adequately taken care of, you make the auction against the law. So, seeing how they answer a question like that tells you how they think, how they make decisions, what would they choose, is this a choice that would put my business in trouble, legally, is this a choice that would go well with the customers, is this a choice that we can get five stars or one star?
Sometimes, time is more important but it depends on what the situation is. If you're running a school system, and if you paid attention to detail and because of that you missed a deadline and that meant a kid didn't graduate from high school, that's a bad decision. But if you were so bent on meeting a deadline, that a kid fell through the cracks and didn't get the special education he or she needed, that's a time when you should have chosen the details. I look for critical thinking. I don't think our education system does a great job in teaching critical thinking but I do believe that it still exists and can be cultivated and we all have a chance to do that and when we do that for each other, we make that person stronger in every area of their life. I believe in a probationary period, too. Within 90 days, it's very clear, you can probably make a decision within 30. And I believe in hiring slow and firing fast.
You also take a good hard look at the interview and knowing that it's the best it's ever going to be, and if that's not good enough don't choose someone just because they breathe or because you have an emergency spot that you need to fill. It is not worth your time.
Being in the Bay Area, you see all these huge organizations like Facebook and Google, they have a certain company culture that they cultivate from the beginning where you can see that everybody's a professional and they're kind of very similar in the way that they behave. Do you have any tips for creating a great company culture? How can one set up for success in a very early or late stage of a company?
Culture certainly flows from the top down. "They don't care what you know until they know that you care." A lot of that is conveyed by being really clear on your core values as a company, you know what you're about as your mission and your core values, your customer care, attention to detail, those are enough in running a property.
Convey it clearly and frequently. James Reed is someone who does that very well, he founded StoreCo and every single member of his team knows what is the company mission, what are the core values and they're held accountable to carry out those core values in everything that they do and everything they do is also measurable. Re-emphasizing consistency and simplicity, it's not a big complicated hairy thing, it's rather simple and straightforward, and it's oft-repeated. You have to talk about it a lot and your actions have to match your talk. You can't say, "we are a problem-solving organization", and keep kicking the problems down the road to be solved because your team sees that your walk doesn't match your talk and they get discouraged. If they adhere to what you say, and then they keep bringing the problems to the surface to be solved and they continue to be kicked down the road, that's very frustrating. If we say, the customer is first and yet we don't answer the phone when the customer calls or we don't respond to the emails and we don't follow through with all the details necessary in the tenant profile so that the customer has access when they're supposed to, and doesn't have access when they're not supposed to, that's not customer first. That leaves someone at the front gate with a truck that they've rented and three friends and four pizzas not able to get in, which gives you bad reviews.
You really have to make your walk match your talk and you have to know what your talk is. Alyssa Quill, CEO of Storage Asset Management, when they onboard a new employee, they always ask them, how would you like to be celebrated? When you've done something that we want to give you a shout-out to everybody, what makes you feel good? You can get a big variety of answers, it might be a gift card, a bouquet of flowers, a donation of $100 to an organization that provides chickens and goats to poor families in the third world. And if you give another gift to the person who wants the flowers, it doesn't work and if you give the flowers to the person who really ought to have the cash, well so, the point is she tries to get to know what makes her employees tick, and she tries to line up with that to the extent that it also aligns with the company values and the way they do things.
Is there anything else that we haven't covered that you think is important for our audience to know?
I am a very happily married mother of four sons with a wonderful golden retriever. For me, that's an example of my values, my priorities, and my decisions because I didn't want to subcontract out raising my kids. I found work that enabled me to be here, I've worked remotely for 29 years and it meant that I certainly had to forego opportunities, but I didn't forego the opportunities that were most important to me, which were being here for them. And what I find is that over time, if you're true to yourself, you know your values, you know your priorities and you base your decisions on those, you have more return on your investment than you ever would have even though it means you forego opportunities, even though it means you perform at one level professionally that might be lower than you had before or you will be in the future, so that you can pour your energy into taking care of a sick loved one, or raising your children, or starting a charitable organization, whatever it is that your values drive you. I would encourage people to really be clear on that not only for their companies but for themselves and then to live them out and play the long game because, in the end, it's all going to be worth it, like Barbara Bush said, you're not going to miss one more degree, you're not going to miss one more business deal closed, but you're going to miss time with your loved ones.
Anne Mari DeCoster
(480) 980-7418
annemari@selfstorageinvesting.
facebook.com/annemari.decoster
Self Storage Investing