The Risks and Benefits of Outsourcing to Third Parties

The core objective of self-storage operations is straightforward: rent units to customers. But as any facility owner or manager can tell you, running a self-storage business involves many tasks beyond those related directly to unit rentals. In today’s competitive market, self-storage facility owners and managers are called on to juggle operational tasks such as website design and maintenance, social media management, email communications, advertising, retail product sales, truck rentals, landscaping, snow and ice removal, repairs and maintenance, bookkeeping, credit card merchant services, and more.

In order for your self-storage clients to maintain their focus on the core business objective, it may be valuable to outsource some of these tasks to third-party vendors. Contracting with experienced, insured, licensed, professional service providers offers a variety of potential benefits for the self-storage business. These outside resources focus specifically on their areas of expertise, employ experienced staff to handle the required tasks, utilize their own network of resources to create process efficiencies, and understand the laws and statutes that pertain to those activities. In other words, outsourcing may help the business enjoy better results, create fewer liability exposures, and free up internal resources to focus on the core objective.

Benefits of Working With Third-Party Vendors

For example, contracting with a third-party marketing firm could give a self-storage business access to that firm’s website design, branding, advertising, social media, email, and list management expertise with projects managed and executed by their professional staff. The vendor also will be aware of issues related to marketing that could create liability exposures to include spam email laws, website security and privacy laws, and social media communication protocols.

Be Aware of the Risks

Once a self-storage owner decide to outsource a task to a third-party vendor, it is critical to approach the contracting process carefully, particularly in regard to indemnification and hold-harmless clauses included in the contract. An indemnification clause is a provision in a contract under which one party commits to compensate the other for any harm, liability, or loss arising out of the contract. Language detailing how the compensation is to be calculated is usually included in the contract. A hold-harmless clause is a provision in a contract under which one party agrees not to hold the other party responsible for any loss, damage, or legal liability.

A Team Approach to Contracts

Self-storage business owners should carefully examine all contracts for every project and third-party service. The details make all the difference in mitigating the risks involved with utilizing third-party vendors. Insurance agents, as well as the business owner’s attorney, are critical to the contracting process, specifically when it comes to reviewing contracts and indemnification and hold-harmless requirements. An attorney can alert the business owner to any unintentional transfer of liability. The insurance agent plays an important role by identifying potential exposures created by the contract, managing requests to add named insureds to the contract, and recommending appropriate insurance coverage to mitigate potential out-of-pocket costs that may result. An insurance agent also can identify insurance coverages that are mandated by the contract and ensure that the business owner’s policy includes such coverages.

Third-party vendors offer a number of potential benefits that can make a self-storage business more efficient, more competitive, and more successful, all of which enhances the overall value to the facility’s customers. Work with your self-storage clients to ensure that they are aware of the risks involved with outsourcing and call upon the owner’s legal counsel. Working together, you can provide critical guidance that can minimize the risk of unexpected and undesirable exposures for the self-storage operation.

Mike Schofield
President and CEO

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