An oil boom offers a lot of opportunity to make a lot of money. For some, that money comes from the high wages and long hours of working for a drilling or service company. For others, the money comes from starting and operating their own business. For the latter, many will try, but not all will succeed.
The ones with the best chance of success will be the ones who move quickly but purposefully. That means not dragging their feet, but also, not rushing in without doing their due diligence in learning all they need to know to succeed.
The first order of business is to determine what type of business you want to own. Will it be a product or service-based business? The key in either case is finding a product or service that is in demand in the oilfield but that few others can offer. That is the most ideal case. That means finding some needed niche to fill and filling it. You have to be prepared to move quickly at that point to establish yourself as the best choice. Others will follow you, but if you do it right, you become the business of choice and thereby create barriers of entry for other businesses.
The next step is to write a business plan, even if you do not need financing. There are many aspects of a business plan that will prove beneficial to you in your decision-making processes. One key part of the plan is the financial analysis.
In this part, you will need to determine how much operating capital you will need to start with. In many cases in the oilfield, a business may not realize revenue for services rendered for 90 days or more.
One of the most common mistakes made by business startups is under capitalization. That is, they do not start with enough money in the bank and are unprepared for the surprise expenses that invariably come. Additionally, they are surprised when they learn the piles of money they expect to come rolling in dont flow at the rate they need. They arent prepared for the delayed cash inflow. Their boom actually becomes a bust.
Businesses that plan properly and purposefully will have the long-term advantage over the ones that dont. It isnt necessarily the first one to the starting line that wins; the first one that has planned and is prepared to go the distance will be successful.
The good news is that you do not have to figure it out on your own. The advisers of the Angelo State University Small Business Development Center can assist you through the entire process of starting your business and beyond.
Business Tips was written by James Leavelle, Business Development Specialist and Certified Business Adviser I of Angelo State Universitys Small Business Development Center. Contact him at James.Leavelle@angelo.edu.