Dore Law - November 2020

Dore Law - November 2020

THE D or É R eport

D ore L aw . com

NOVEMBER 2020

SURVIVING AND THRIVING

Yes, this is another article about the “state of the industry.” Fair warning to the reader: You will love some of this, and you will almost certainly hate some. BANKRUPTCY ACTIVITY: As of this writing, crude oil remains barely over $40/bbl. There are not many domestic producing wells or drilling prospects that are economic at that product price. The best minds in the business believe prices will remain somewhat flat but with swings in volatility due to almost anything. As a result, the expectation is that bankruptcies will continue happening to E&P customers and will likely expand even more into the OFS sector. This opinion is not new to you, of course. As companies exhaust their current funds and industry activity levels remain depressed, there is little to be optimistic about. M&A ACTIVITY: Today, there are investor companies interested in strategic acquisitions even as they are withholding dollars from their current portfolio companies that are starving for operating cash. The biggest reason for this reduction is concern of the supply-demand cycle of oil and gas production, which has severely reduced energy consumption and economic activity worldwide and with it, product prices. The current expectation is private equity-backed groups may continue to hold off in acquisitions, which leaves room for those strategic acquirers who are quieter and abhor the media spotlight. BECOME A STRATEGIC TARGET: So, can your company take steps to be considered as an acquisition candidate or perhaps a company that should be given funds to acquire others? Target companies are preferably in high-growth business mode. Build financial models to show profitability projections. Include detail about capital investment requirements to meet these projections and information about your competitors. Consider engaging a financial advisor to assist in this effort, because most of us are more familiar with turning a pipe wrench or reading a gas meter chart. My suggestion is for you to create best management practices in your product lines. Ditch your paper field-delivery tickets and move to an electronic system. Take advantage of the COVID-19 era for e-ticketing because your customers want to avoid person-to-person contact. This

can remove days from your order-to-cash system. Make efficiency a priority in every aspect of your business and your pay cycle.

Be able to show how these business practices have placed your company into a better future position than your direct competitors. Take serious and painful steps to review your liquidity levels. This effort requires as much work and self-analysis as it took for you to prepare a business plan for your first bank loan. Most importantly, create your own plan to seek a target buyer or acquisition that is complementary to your company, your employee team, and your corporate culture. DIVERSIFY YOUR CUSTOMER BASE: In the previous downturns of 2010–2011 and 2015–2016, we watched as some service companies took extraordinary steps to expand their customer base and move into unusual areas. We are aware of one company’s effort to market its oilfield location mats to municipalities, governmental agencies, Corps of Engineer projects, and other work in the heavy construction industry. Another company expanded its drone technology from solely pipeline construction to multiple other industries. Still another has created a new entity with a name that does not include “ABC Energy Services” in order to appeal to a different customer base. CONCLUSION: The OFS sector is down but far from out. Despite the news cycles and the depressed industry activity levels, this could be a time for reflection, planning, and strategic thinking. We know our world will be dependent on oil and gas for its energy needs for a very long time. Some of the best minds are in the business of energy. It may be time to concentrate that intellectual power on strategic plans for the future.

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Published by The Newsletter Pro • www.TheNewsletterPro.com

A Fresh Perspective IT’S TIME TO SET GOALS FOR Q1 2021

This year was a mess. Many businesses were not prepared for the roller coaster ride that started in early 2020. By March, most businesses were told to close their doors or restrict access to the general public. As a result, many businesses struggled and some never reopened. There was a lot of bad news. But we’re not here to talk about bad news. We’re here to talk about good news: your goals to kick off the first quarter of 2021! There’s a good chance many of your growth goals for 2020 fell to the wayside. After all, you had more important things to focus on, like keeping your business up and running. No matter, it’s time to look at your goals with a fresh perspective and use the lessons learned from the past year. One of the benefits of steering a business through a pandemic is that you can better identify its pain points. What sort of worked? What didn’t work? What flat-out failed?

wake of COVID-19. The study reconfirmed that productivity increased among those workers, with 63% reporting an increase in productivity (this includes completing more tasks on any given day, completing more tasks ahead of schedule, and being less distracted throughout the day). At the same time, many businesses reported that they saved money by shifting part, or all, of their workforce to a remote model. While upfront, short-term costs of this new setup can be substantial, the long-term costs (and savings) may be worth it. Fewer employees on-site may mean a business can consolidate space and save on rent, utilities, and taxes. What’s the final lesson in this example? Many businesses are deciding to go fully remote. Shifting to a remote business model might be one of your first goals for the first quarter of 2021. If you’ve shifted employees to work remotely on a part-time basis, you’re already halfway there. The next step is to look closely at the numbers (costs, employee metrics, customer metrics, etc.) and work with your team to make it a long-term reality.

TURN PAIN POINTS ON THEIR HEAD

Start by evaluating your pain points, if you haven’t done so already. Shaping your first-quarter goals around these pain points means you can start the year off by addressing them. For instance, are there parts of your business that you can trim? Are there areas that need a complete overhaul? Maybe in 2020, you were carrying too much baggage. For instance, a lot of businesses were operating under the assumption that employees needed to be on-site to be productive. Because of this, most avoided the work-from-home model. Business owners just didn’t see the benefits or assumed it wouldn’t work for them. But in spring of 2020, many businesses were forced to adapt, and several lessons were learned along the way. One major lesson: Work-from-home is feasible and cost-effective.

YOUR NEXT STEP

What other goals should you be focused on for the first quarter of 2021? Consider how well or how poorly you weathered the last nine months. This is a great time to address any issues that may have come up. I’ll leave you with a few more questions and ideas to help you with first-quarter goals: Was your cash flow decimated? How did a reduced cash flow impact your business? How can you mitigate this in the future? (Potential goals: increase business savings, find alternative sources of revenue, etc.) Did you have to suspend products or services? What led to this suspension? Were these products/services useful at bringing in new or recurring business? Did they help your bottom line? (Potential goals: streamline or phase out products/services that no longer serve the same purpose that they once did.) Before you start setting goals, answer the above questions or other questions that the past year has left you with. Home in on your pain points from 2020 and focus on addressing those in the upcoming quarter. Turn those weaknesses into strengths and start 2021 with a fresh perspective and a fresh set of goals.

A LESSON IN PRODUCTIVITY

Nicholas Bloom, a professor at Stanford University, researches productivity and has contributed to the body of research that suggests remote employees are, on average, more productive than on-site employees. In 2013, Bloom ran a study on remote workers; it looked at their productivity when they shifted to a four-day workweek while working from home. On average, productivity rose by 13%.

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