What's in Store?

Document destruction companies already have an established customer base that consists of great candidates for records storage services. If these customers are satisfied with their shredding service, they will likely favorably consider the destruction company for additional records management needs.

Perhaps the most attractive aspect of the records management business is that it generates recurring revenue that is largely immune to down turns in the economy. Records management can bring a significant level of stability and diversity to a business. In fact, as long as a records management contract is structured correctly and the account is provided with good service, it is very unlikely that the client will ever elect to move to another vendor.

Changing vendors in records management can be quite expensive and can require quite a bit of effort. Consequently, once a company has acquired a client, that client has incentives to remain in perpetuity. Another great attribute of the records management business is the sale value of the established business. There is an active market for existing records management operations.

Conversely, records management companies can be quite capital intensive. A successful operation requires a large facility, shelving, trucks and other service equipment. It also requires a number of employees to service the accounts.

Additionally, many document destruction companies rely on commercial record centers for referrals, and these referrals may diminish if they become competitors to their records center clients. On the other hand, many commercial records centers are getting into the shedding business. In fact we have found so much overlap between the two business entities that we have added a document destruction and bin management module to our records management software.

There is no disputing that companies are creating a lot of documents every year, and these documents must be retained for some period of time until they can be destroyed. This growing accumulation of records must be managed. As the quantity of documents grows and regulations increase, it becomes more difficult for a company to organize, manage and locate records. This provides opportunities for commercial records centers. A record management company specializes in organizing, indexing, storing and retrieving documents for its clients. Commercial records centers can also assist their clients in establishing records retention and destruction policies, which strengthens the existing destruction operations.

The purpose of this article is to provide a basic overview of the concepts related to starting and operating a successful records management business. First and foremost, it is important to understand that the records management business is a service enterprise, not just a storage business. Before outlining the key elements of setting up a commercial records center, it is beneficial to provide a basic overview of the typical services a commercial center provides.

Normally, documents are sent to a records management company in standard size 1.2 cubic feet boxes. Tapes and other magnetic media are normally stored in specially designed racks or specially designed transport cases in more fire-resistant rooms.

In order to bill and track the boxes and other items that are stored in the records management facility, the items must be added to inventory using a computer software program designed to manage the operations of a commercial records management business. This function of adding items to inventory is commonly referred to as indexing or registering the items.

When a new item is input into the software, it is assigned a unique tracking number that is converted to a bar code. The software prints a bar code label, which is attached to the item. As the item moves about the facility, it is tracked with portable bar-code scanners, and the location is automatically updated in the computer system.

A commercial records center bills its clients for storing items in the facility. A higher density of storage results in higher revenue per cubic foot. Storage revenue is recurring and is typically billed monthly or quarterly in advance, at a specified rate per cubic foot. In some cases, storage is billed semi-annually or annually.

Storage for hard copy documents is normally billed even when the items are checked out to the client. Tapes and other media may be billed based on high watermarks or average daily counts. Digital media must be stored in more secure climate/humidity-controlled areas with more comprehensive fire protection systems.

These more secure areas in a records center are commonly referred to as vaults. The storage rates charged for media stored in vaults are normally significantly higher than the rates charged for hard copy.

When a client needs to access items stored in the commercial center, the client is charged for locating and pulling the items from storage. In most instances, the item is then transported to the client, and the client is charged an additional fee for the transportation. In rare cases, the client may journey to the commercial records center to review documents.

Typically, a commercial records center provides a viewing room designed for this purpose. The client may be billed at an hourly rate for using the on-site viewing room.

Commercial records centers charge for transporting items to and from the client. The charges for transportation vary based on the type of service. Typically, records centers offer a variety of delivery options such as next-day deliveries, rush deliveries and after-hour deliveries.

Normally, standard next-day deliveries are scheduled based on cut-off times. For example, if a client makes a request by 4 p.m. one day, the item is delivered on the next weekday morning delivery run.

A rush delivery is where a client calls and requests an expedited delivery. For instance, if a client makes a request for rush service, the records center will deliver the file within a specified number of hours.

An after-hours emergency delivery occurs when the client makes a request for a delivery outside normal business hours. Not all commercial records centers offer after-hours deliveries, but commercial records centers serving medical accounts typically are required to offer this type of service.

When a client sends an item back to the records center to be placed back in storage, the records center charges for returning the item to inventory. The records center also charges transportation fees for picking up the item.

Clients establish records retention polices for their documents. The client’s retention schedules can be established in the software, and the destruction date for each item is automatically calculated. In many cases the client gives an actual "destroy date" for each item. The software manages and reports the destroy dates for each item.

On specified intervals, the client is provided with lists of items scheduled for destruction. The client approves the destruction of items in writing, the designated items are destroyed and a certified destruction certificate is printed for the client. The certified destruction certificate lists all of the destroyed items.

Typically, commercial records centers provide miscellaneous services for clients such as faxing, copying, converting physical documents to digital images, consulting services, shredding and hourly services. Likewise, they sell records management type goods such as boxes and media. Many commercial record centers provide digital imaging services, including Scan On Demand™.

The foregoing discussion provides an overview of the types of services typically provided by commercial records centers. Now let us discuss what is necessary to start a commercial records center.

Records storage takes space. In order to get space efficiency, a commercial records center will wish to have a facility that can efficiently store large quantities of records with proper shelving and fire control. Experts agree that a large warehouse facility with high ceilings is required for efficient operations. Opinions vary on the best ceiling height and racking layout, but an 18-foot high clear ceiling or greater is typical.

Racking is another key element of operating an efficient records center. Two types of configurations are common. Typically, records centers run parallel rows of racking from the floor to near the ceiling. Because the racks of records extend up into the air many feet, it is necessary to use lifts to reach the boxes that are stored out of reach of the service employees or to build mezzanine between the racks. When using lifts, the racking must be spaced far enough apart for the lifts to operate between rows.

One consideration in how high to go with racking is the capabilities of the lifts. Each lift has a limitation of how high it can extend. As racking becomes taller, the cost of lifts to service the racks can increase.

Alternatively, some records centers like to run a mezzanine every eight to 10 vertical feet up the racking. The mezzanine serves as a walkway for individuals who are pulling and putting away boxes, files and documents. Mezzanine racking is more costly but provides higher box-storage density because the rows of racking can be closer together, reducing the cost of real estate per cubic foot of records.

Some proponents of mezzanine believe it provides greater efficiency for their warehouse employees who are servicing the records management accounts. Others believe that the increased cost of mezzanine racking cannot be offset by increased efficiencies.

Another factor that should be taken into consideration when purchasing racking is the type of records that are being managed and their corresponding level of activity. Proponents of mezzanine believe it is best for active files. For instance, medical records and attorney files may be requested much more often. Very active records are often stored on open shelf configurations (i.e., not in boxes). This reduces the time necessary to locate, pull and put away items.

Fire control devices such as sprinklers are another consideration in the cost of racking. Fire codes in each jurisdiction vary, and the requirements of a particular jurisdiction may affect racking decisions. It is a good idea to price racking from multiple vendors.

Because racking is very heavy, its cost may vary based on how far the manufacturer is from the records storage company. Locating a manufacturer near a storage company’s facility might lower the cost. A good racking company will help storage professionals to understand the issues and will design layouts at no additional charge. Records storage companies should make sure to use a racking company experienced in records management racking sales.

Vehicles are required for transporting items to and from the client. Many records centers say that the company signage painted on the vehicles is one of their best sources for leads. Other companies choose not to put any signage on their vehicles, believing confidentiality is important. They use this confidentiality as a selling tool. Signage on the facility can also be a source of leads, but some vendors again argue that signage is inappropriate because it comprimises confidentiality.

Another key element in the successful operation of a records management business is software. It is important to use a software package that is specially designed for operating a commercial records management business. Good commercial records management software will help a records storage company to be efficient in its procedures and will help it to develop and to maintain a good workflow.

Commercial records management software will track and automate the billing of all services performed for each client. At the end of the month, invoices will automatically be created for each client. Records management software interfaces with portable bar-code scanners to track all movements of all items stored in the facility. Work orders are created when services are requested by the client and are used to manage a company’s operational processes.

When purchasing commercial records management software, it is important to understand the long-term costs and licensing obligations. Many software companies offer only annual license fees. This means a records storage company’s software shuts down if it does not pay the software company money each year. Other companies offer perpetual license fees. In the case of perpetual license fees, a company does not have to pay money each year to keep the software functioning.

Client Web access is a very important area of records management software. Using a specially designed Web interface, records center clients make requests for service. The Web orders automatically create work orders in the records management software.

Some vendors allow commercial records centers to host their own Web servers, while others host records storage companies’ Web servers on their computers and charge the records centers monthly fees for usage and hard disk storage. Some vendors provide a license for an unlimited number of client users when the Web module is purchased. Others charge for each concurrent client user license. Prior to purchasing any software, all licensing costs should be completely understood.

Another consideration is the software’s ability to store and track electronic documents. Imaging will likely be a much more significant portion of records storage businesses as the market continues to evolve.

This article only provides a basic overview of some of the fundamental concepts of commercial records management. As a result of my position with DHS Worldwide, I have found that all successful records centers have one thing in common: a commitment to providing outstanding client service.

Starting a records management business is a commitment. In order to ensure a successful business enterprise, one should plan well for the venture.