Tips for Oilfield Service Companies after 15 Years in the Factoring Industry in the Permian Basin
Our team has seen a number of ups and downs in the oil and gas industry in West Texas. As we reflect on our experience over the years, here are three tips as you grow your oilfield service company in the Permian Basin.
- Play the Long Game. Running an oilfield service company in the Permian Basin can be a wild ride. When times are good, it seems like they will last forever and when times are bad it also seems like that will last forever. Try to position your company to win the long game. This means always thinking through best case and worst case scenarios and setting yourself up to survive through each. This may mean making a little less money during the good times, but that is a sacrifice it is worth making if it means surviving the bad times.
- Watch Out for Too Much Leverage. When times are good, it can be tempting to add debt to your oilfield service company to drive additional growth. Maybe you want to buy equipment or hire some new employees. Be cautious of doing so in a cyclical business like oil and gas. Many service company owners shun debt completely after getting burned in the past. Another option you could consider is invoice factoring which can be more flexible and doesn’t add debt to your capital structure. [Insert Article on Business Loans vs Invoice Factoring]. Or just stick with tried and true equity.
- Do Your Diligence on Your Customers. As a growing oilfield service company, it can be tempting to take on any new work that you can get your hands on. Rather than give into this temptation, it is important to remember that not all customers are equally likely to pay. It can be fatal to a growing oilfield service company if it does work for a customer that is not able to pay. This is another area where invoice factoring can help. For example, the team at Velocity has 15 years of experience working with all of the customers in the Permian Basin and can help you navigate which customers to work for and which to run from.
As you work to grow your oilfield service company keep these three things in mind. If you play the long game, don’t take on too much debt, and work for quality customers who will pay you what you have earned you set yourself up for success over many decades regardless of what the oil price does.
