Industry experts explain why taking care of your money is a smart decision when it comes to your business.
It’s not always easy taking over an established business. There are many things to consider when doing so, like offering the same services or not, adding or cutting staff and what to charge. It’s wide open on decisions that need to be made.
It can be scary for the new owner coming in and for the previous owner leaving. One of the biggest concerns for the current owner is: Am I leaving the business in the right hands?
Rod Peterson, owner of R.P. Oilfield Service in Rock Springs, Wyoming, won’t have to worry about those things when he hands over his business later this summer to longtime employee Patrick Hartford.
Hartford will take over the company, profiled this month, after being an employee of it since he was 15 years old. Hartford stayed with the company while earning a degree in business management and graduating in 2012.
KEEPING IT TIGHT
Peterson founded R.P. Oilfield Service 30 years ago and has been through many ups and downs in the oil industry. While it was tough to make it through some of them, he did so by keeping a diverse menu of services and not expanding too fast.
The company kept close tabs on costs and avoided fast, exponential growth. Companies that grow too fast run the risk of running up debt that cripples operations when a downturn hits. Peterson kept going by growing slowly and keeping payments on equipment as low as possible.
That tip is also found in the Building the Business feature this month. Gas Oil & Mining Contractor talked to Rooster McConaughey and Butch Gilliam, stars of CNBC’s West Texas Investors Club reality TV series and oilfield entrepreneurs.
The millionaires both said staying out of debt is one of the greatest business advantages to have.
PLAN TO STAY OUT OF DEBT
According to Business Insider, 50 to 70 percent of small businesses fail within the first 18 months. There are no foolproof guidelines for opening a business, but here are some ways to remain debt-free:
Consider your funding options — Before running out to the bank for a loan, determine if you’ll be able to repay it.
Pay with cash whenever possible — It might take you longer to purchase something, but you’ll avoid the burden of debt.
Avoid impulse purchases — You see a new directional drill and want to buy it because it’s the latest and greatest piece of equipment, but your 5-year-old machine can do the same thing.
Think: Do you really need the new machine?
There are many other ways to remain debt-free, including performing regular maintenance on vehicles so they last longer, and purchasing used equipment
instead of new.
Not going into debt will help you and your business stay afloat, especially when the industry is in a lull. Take the advice of the experts in this magazine.
HOW HAVE YOU SAVED?
How have you avoided going into debt? Did you have a plan going into your business or did someone help you with advice? Email me at firstname.lastname@example.org and tell me about your success stories.
In the meantime, enjoy this issue!