If your business in touches the oil and gas industry, you need to be ready for the rebound.
The oil and gas business, like any industry, is cyclical. Boom after bust after boom and bust. There are some very strong indicators, though, that the oil and gas industry is beginning to rebound. In 2016, oil prices hit a 12-year low, near $26 a barrel in February. But then prices more than doubled later in the year, climbing to $55 a barrel in December. The Permian Basin is burgeoning with new activity due to these rising prices and anticipation of an upward trend.
There are literally thousands of blog posts on the internet about what to do when your business is struggling, but let’s talk about what you can do to get ahead of an upswing. If you’re not prepared for the increased workload, you will get left behind!
To help prepare to ride the new wave of prosperity, think about four areas of business you MUST get right: People, Strategy, Execution, and Cash.
People is the first area, because, like Jim Collins says in Good to Great, “First who, then what!” Getting the right people in the right seats doing the right things is a crucial first step to ANY part of the business cycle, but especially during a rebound from a recession. Make sure your people-process is in a place that will attract and retain A-Player talent: inspiring company culture, competent leadership, a rigorous hiring processes and adequate accountability standards.
When you have a solid people plan, the next area of focus is Strategy. Strategy is all about driving revenue. Can you state your strategy (read – key to making money!) in one clear, concise sentence? A meaningful, effective brand promise will engage your team and turn heads in your market. Be relentless in seeking your X-Factor, the innovation that will give you a 10x advantage over your competition.
Execution is how well you turn your revenue into profit. All your processes MUST be efficient and lean to hit your Big Hairy Audacious Goal. Once, a business I previously owned was scaling up in a hurry. We exploded from 17 to 92 employees in 18 months! But, our profits were flat. Revenue was streamed out as quickly as it came in. Why? Our execution was bad. Exceptional execution requires focus on the right priorities, tracking the right metrics, and great communication. We fixed these areas and profits shot right up, exceeding our revenue growth.
Lastly, Cash is your oxygen. Human beings can live without food and water for some time, but only a few minutes without oxygen. The number one reason companies fail is because they exhaust their cash reserves and funding sources. In any industry, the company with the most cash usually wins. Analyze your 12-month rolling cash forecast to assure that you’re ready for what lies ahead. Have two months of operating expense in a separate account used only for emergencies and rare opportunities. Remember, growth sucks cash, so line up your funding reserves and sources to finance your growth.
When you have a plan in place addressing each of these four areas, you’ll be better prepared to ride the rebound.
Your company survived the oil and gas recession; don’t let an influx of business take you out because you weren’t prepared!