{"id":211,"date":"2022-08-16T15:57:03","date_gmt":"2022-08-16T15:57:03","guid":{"rendered":"https:\/\/www.runstella.com\/blog\/?p=211"},"modified":"2022-08-17T20:45:59","modified_gmt":"2022-08-17T20:45:59","slug":"portable-storagerent-prorating","status":"publish","type":"post","link":"https:\/\/www.runstella.com\/blog\/portable-storagerent-prorating\/","title":{"rendered":"Portable Storage Rent: The Benefits of Prorating"},"content":{"rendered":"

Scenario:<\/strong>\u00a0 A Customer rents a portable storage container for <\/span>3<\/span><\/em> months<\/em> and calls before their next month’s rent is due to schedule the final pick up for day<\/em><\/span> 5<\/span><\/em> of the new month.\u00a0 They ask, do you Prorate or do I have to pay the full month?\u00a0 \u00a0 Or, they don\u2019t ask, you charge the full month, and they call to complain.<\/span><\/p>\n

Your response could be one of two (ok.. three) things:<\/span><\/p>\n

    \n
  1. Yes, we charge the full month whether you have it 1 day or 30 days in the month.<\/span><\/li>\n
  2. Yes, we Prorate to a Daily rate of $XX\/day or the full monthly fee, whichever is lower.<\/li>\n
  3. Or some in between answer that confuses the customer and causes you time and money in the end.<\/em><\/li>\n<\/ol>\n

    Which answer saves you the most cumulative time and leaves the customer with a positive experience, and ultimately saves you money?\u00a0 Charging the full month’s rent no matter what, on paper, makes you more money- when you simply compare it to a Prorated rate. \u00a0 However, a Prorated rate, if redefined as a Daily rate, will most likely make you more money in the long run.\u00a0 Per an article on prorating referring to tenants on www.biggerpockets.com, “Prorating doesn\u2019t cause you to lose money\u2014it helps maximize your cash flow instead.” 1\u00a0<\/strong> A typical Prorated rate would be a division of 30\/31 days. \u00a0 That is not enough to warrant your hard work and what you’d lose on rent that month, so <\/span>come up with a higher rate and call it a Daily rate.<\/b>\u00a0 <\/span>A good formula to follow is your monthly rate, divided by 30 days x 3.\u00a0 \u00a0You’re not Hertz… you’re a local Portable Storage company busting your hump and deserve to be paid for it, as the customer deserves to be treated fairly and not pay for days they are not renting the Container. A Win-Win.<\/span><\/p>\n

    Let\u2019s break down the scenario above:<\/b><\/p>\n

      \n
    • \"\"Your monthly rate is $189<\/strong>.<\/li>\n
    • Your Daily Rate is<\/span> $20<\/span>\u00a0x 5 days = <\/span>$100<\/strong> in this scenario<\/span><\/li>\n
    • So far we\u2019re at <\/span>$189<\/strong> versus <\/span>$100<\/strong>.\u00a0 A difference of <\/span>$89<\/strong>. <\/span>But it\u2019s not that simple.<\/span><\/li>\n
    • If you don\u2019t Prorate you\u2019ll likely spend another <\/span>15-minutes (or more) discussing this with your customer, and it\u2019s not because they are happy about the answer.\u00a0 They may now ask for more detail on their billing as they lack trust.<\/span><\/li>\n
    • They\u2019ll not only end this service with your company with a bad taste in their mouth, but they\u2019ll be less apt to recommend you to their friends.<\/span><\/li>\n
    • Whereas if you told them (up front) you had a Daily Rate of <\/span>$15<\/strong> per day- they\u2019d be thrilled they are saving money (it\u2019s a WIN to them). The call would end on a positive note.\u00a0 They\u2019d be more apt to write a Review and recommend you.<\/span><\/li>\n
    • If the customer was charged the full month’s rent and calls when they see it on their statement, they\u2019re even more frustrated and y<\/strong><\/span>ou’ll likely offer them a refund anyway to diffuse the situation.\u00a0<\/b><\/li>\n<\/ul>\n

      There are many pros to Prorating, but mostly it comes down to your time and the customer’s experience (and you won’t lose money if priced properly).\u00a0 Your policy to charge full rent, no matter how many days the customer had the Container, was now reversed with a Refund either because the amount of time you spent discussing this with them was getting unbearable, or you felt you needed to difuse the situation.\u00a0 <\/span>The customer is done with the Container, so why not let them be done and end on a positive note?\u00a0 Then re-rent the Container to the next customer.\u00a0 You’ll not only earn the Prorated rent from Customer A, but another full month’s rent from Customer B on the same box in the same month, along with all of the other initial fees (Delivery, Insurance, Accessories, etc).\u00a0 \u00a0<\/strong><\/span><\/p>\n

      Then there is the topic of Prorating in the beginning of the rental and\/or at the end of the rental.\u00a0 It makes most logical sense to charge rent for each day the customer has the Container, paying the first month the day prior to Delivery.\u00a0 Then for each consecutive month, the Rent would be due on the anniversary date of the delivery date.\u00a0 There is no need to Prorate up front when you are doing anniversary date billing.\u00a0 However, if you are billing on a day of the month (likely because you are doing manual billing), do what’s easiest for you. Manual anything causes you to often make many exceptions- for time savings purposes.\u00a0 Best practice is to collect initial fees BEFORE the container is delivered, not the day of Delivery or definitely not after<\/strong>.\u00a0 That practice only leads to potential Collections- wasting time and money.\u00a0 28-Day Billing is a topic for another Blog and definitely has an effect on the discussion of Prorating.<\/span><\/p>\n

      The \u201cCustomer E<\/span>\"\"xperience\u201d should always be the center of your decision making process, and the rest will almost always fall in place.\u00a0 \u00a0 There is a happy medium and a way to achieve happy customers and a profitable business- you just have to take a minute and break it down.\u00a0 \u00a0Happy customers inevitably lead to more happy customers.\u00a0 Word of mouth is a powerful thing.\u00a0 Likely your competition does not offer \u201cProrating” or a \u201cDaily Rate\u201d.\u00a0 Use it as a competitive advantage and marketing opportunity, all while strategically being more profitable for the right reasons.<\/b><\/p>\n

       <\/p>\n

      Takeaways:\u00a0<\/strong><\/p>\n

        \n
      1. Have a Policy and stick to it.\u00a0 It will save you time with employees and training, empowering them with the answers.<\/span><\/li>\n
      2. List your Policy details in your Lease Agreement.<\/span><\/li>\n
      3. Explain your Prorate Policy to your customers at the point of rental, to be transparent and save issues on the back end (most of the time).<\/span><\/li>\n
      4. Redefine the word Prorate.\u00a0 Make it a higher Daily Rate. Call it a Prorated Daily Rate- the customer will understand that.<\/strong><\/span><\/li>\n
      5. Only Prorate the Rent, not any added recurring fees (insurance, added storage fee at your facility, accessory rentals, etc).<\/li>\n
      6. Automation is key.\u00a0 If you automate your billing- whether via software or a payment processor- see if they can also automate Prorating.<\/li>\n
      7. Policies + Automation= Time Savings + $$<\/li>\n<\/ol>\n

        Experience is what teaches you what works and what doesn’t, giving you live examples and data to analyze conclusions. But you can also learn from your peer’s experiences and break down the scenario with logic. \u00a0 Small adjustments to your business model will likely have lasting positive effects both for your company’s climate, but also for your bottom line. Always push yourself to try new things and experience the benefits and\/or failures!\u00a0\u00a0<\/span><\/p>\n

        August 18th, 2022<\/span><\/p>\n

        By Cathy Putnam, Stella Software<\/span><\/p>\n

         <\/p>\n

        References:<\/p>\n

        1: www.biggerpockets.com<\/p>\n

        How (and Why!) You Should Calculate Prorated Rent For Your New Tenants<\/a><\/p><\/blockquote>\n