Years ago, I worked for a software company. I joined their documentation team right out of college. The company made accounting software for small to mid-sized governments.
Leadership at the company considered 20 percent revenue growth normal, expected and attainable for any technology company.(Heck, that may still hold true; I haven’t worked at a tech company since.) That lofty goal drove us, even in years we fell short. Still, I remember thinking at the time that the only way to maintain that level of growth came through mergers and acquisitions. A handful of companies hit that level. Others got bought to fuel someone else’s growth. Sure enough, another company acquired the software company I worked for not long after I left.
What about smaller companies whose owners just want to build equity and not buy their way to the top of the pile? Think of all the small companies you know of in the drilling field, all of the mom and pop shops with one or a handful of rigs. These companies can work for decades in one area, perfectly happy they hadn’t taken on debt to grow faster than they should. What does growth look like for these companies? Let’s look at some scenarios.
How many markets can you serve with the drilling rig or rigs already in your fleet? Are you serving all of these markets? If not, why?
Get trained, either privately or through the manufacturer, on all aspects of your equipment. The more useful customers find you, the more customers you will have. Knowing your equipment in and out makes you more useful. When you solve tough problems for customers, word gets around.
Setting stretch goals for the types of jobs a company does is “horizontal” integration. Contractors can also set stretch goals for the difficulty of jobs they do within a specialty. Are you the contractor people call to get the job done when others failed? Congratulations, you have “vertical” integration. Whichever direction you pick to integrate with customers, training can help.
One bonus of a reputation for problem-solving comes at invoice time. People who consistently solve tough problems for customers can command higher rates for their work. Which brings me to my next point.
It may seem like an obvious way to raise revenue, but contractors as a group do not revisit pricing as often as they should. When was the last time you raised your prices?
Inflation always chugs along at 2 or 3 percent. If you haven’t raise prices in five years, you’ve effectively given yourself a 10 to 15 percent pay cut. Now, the types of bids and contracts you do may limit your ability to raise prices, but you can always make a decision to raise prices at the future date (say, Jan. 1). Give repeat customers notice of the change, and incorporate the higher prices and bids for the new calendar year.
Billing More Hours
Contractors who work more jobs, schedule less downtime between jobs and have more rig uptime have more revenue. The harder you and your equipment work, the more revenue comes in. Diminishing returns set in after a while, when crews get sick of long hours and travel. Contractors also have to keep an eye on the balance between turning over jobs and safety. But, you can build in efficiencies that help you work smarter.
Small companies can use any one of these three scenarios to fuel growth, or any combination of the three. Set revenue goals with trackable metrics, see where you go, and change course if you don’t like the results. You may not get to 20 percent, but I bet you won’t do to badly.
Stay safe out there, drillers.