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MarketsOpinionsDrilling Business InsightsConstruction DrillingWaterGeotechnical InvestigationGuest Columns

Four Tips to Recession-Proof Your Drilling Company

By Chris Galloway
drilling job

Whatever drilling sector you work in, it’s tempting to turn to low-balling bids when the economy goes south. Make strategic efforts to find clients who pay for value while the economy is strong.

Source: Jeremy Verdusco

November 18, 2019

Recessions come and go. But just because recessions have a beginning and end, doesn’t mean that your business can weather the storm. Even if your revenue is strong, that doesn’t mean you’ll have the capital to hunker down until the downturn passes. Recessions are hard on the drilling industry, and while no one emerges from the fallout unscathed, there are ways to plan for the next recession (and it is coming!) and keep your head above water.

Follow these four tips to blunt the impact of a recession and help your business make it out the other end.


Monitor, Understand & Respond to Revenue Forecasts

Profits don’t freely reveal their stories at a glance. If they did, businesses wouldn’t rely so heavily on revenue forecasting. The truth is, an upward climb in your quarterly revenue is great, but it’s not telling you the whole picture.

Continually increasing revenue is “must” in the drilling industry. A year in the green is a normal year. But, proactive drilling company owners set revenue targets that equate to sustained, scalable growth — and actually meeting them.

As a recession looms, you’re going to see the first ripples in your forecasting well before the brunt of it hits your business. Before this even happens, you should have already quantified your resources — that includes staffing — to understand what can scale back when a pattern of missing revenue goals rears its head. This allows you to gradually respond to the market, rather than make drastic, panicked cuts while your business rapidly loses money.


Create a Long-Term Strategy for Sustained Growth

Needing to scale your drilling company means you’ve found your footing in the industry. However, the last thing you want to do is grow your business if it means incurring debt. While it’s true that you may have a plan for paying those debts off, you never know how the market will shake out from year to year.

Market projections are not set in stone. Recessions are unpredictable. If you head into a market downturn with debts to pay, you’re going to be one of the first to fold under pressure. Instead of getting ahead of yourself with an over-eager growth strategy, take a more conservative approach. Growth is good, but too much — at too high a price, will come back to bite you.


Rethink Your Equipment Strategy

Your drilling business needs the right tools to be effective. Construction equipment is an investment that needs to last you for years, even decades, to pay for itself. Making the wrong choice is costly.

It’s best to keep an eye on the construction equipment industry. Today, many of the tools we take for granted in the industry have changed for the better, whether you know it or not. Investing in innovative solutions, as long as they are economical, can give businesses an edge and save money over the long run.

Innovations in the drilling industry can come so slow that we often fail to notice. However, you should always look out for ways to streamline your work. For instance, the gas-powered jackhammer is quickly finding its footing in the industry. Many companies find it cheaper to run, and it doesn’t require an air compressor. Rethinking equipment in ways like this can add up to big savings. A philosophy of questioning standard practices is one that will keep your business proactive and dynamic.


Understand Your Capability

While growth is always a great thing to behold, it’s not always the harbinger of good fortune that we take it for. You might find that a simple strategy of low-balling bids gets you through an economic downturn. However, consider your drilling company’s bandwidth for work and understand your profit margins before you become the lowest bidder in a region.

Not all work is good work. As the market bounces back from a recession, you’ll quickly find that you can’t sustain the prices you set. Even worse, you’ll realize you can’t keep up with the increase in work and afford new staff due to your low margins.

Being the lowest bidder undercuts your value, which is not a sustained business strategy. Instead, understand the capacity of your drilling business and make strategic efforts to find business that gives you long-term value. With or without a recession, slow and steady will always win the race. And when the economy turns for the worse, your cautious steps toward a consistent, loyal clientele will be what shelters you from the storm.

Be it the tools you work with or the growth you see projected in your quarterly reports, questioning your business and never taking anything for granted is what allows your drilling business to stay ahead of the game and weather the ebb and flow of the economy. Recessions are like hurricanes: They’re rare, but they come at you hard and angry. The best time to prepare for them is when the sky is clear.

KEYWORDS: geotechnical drilling water well drilling well drilling

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Chris Galloway is the owner of US Hammer Jackhammers and Postdrivers. A lifelong contractor, he runs US Hammer and Pioneer Machinery, his rental equipment company, from Woodland, California. For more information, visit www.ushammer.com.

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