5 Tips for Oil and Gas Startups

5 Tips for Oil and Gas Startups

So you think you can make it in the oil and gas servicing industry?

Well, with the growing demand for energy, how hard can it be?

Nowadays, propane and natural gas get utilized for the heating of commercial buildings. It is also applicable in industrial and residential properties. In addition to delivering the gas, installation, and maintenance of the heating and cooling systems is also required.

For this reason, starting gas servicing companies can be a lucrative undertaking. If you set up your business properly and carve out your market share; you could successfully provide your services to the same clients for years to come.

However, the gas servicing business is very competitive, and consumers have become very conscious of costs. In addition to starting your gas company, you also need to build a loyal distribution network.

To learn more about what it takes to start and successfully operate a propane and natural gas company, keep reading.

1. Start with a Detailed Business Plan

It may seem like an overused phrase, but a business plan is your compass. When navigating the gas servicing business, it can get very messy without a proper plan.

A business plan is a step by step guide as to how you intend to implement your business strategies as well as achieve your goals.

When formulating the business plan, it is essential to include the metrics of the industry as well as conservative forecasts for future demand and prices. This inclusion will enable you to stay prepared for market fluctuations and unexpected catastrophes that could leave your company vulnerable to collapse.

You can use the National Propane Gas Association Report for insights into the industry when developing your business plan.

2. Learn from Your Competition

To fully take advantage of a niche, it is always advisable to figure out what the competition is doing, and how you can improve. Before you get into the gas and oil industry, make sure you know who your competition is, and how they have managed to thrive in the business.

Important points to note about your competition include:

  1. How they have positioned themselves in the market

  2. What size of the market share have they tapped into

  3. Who are their suppliers for gas

  4. Which complementary service to they offer

  5. Their pricing

  6. The services that no one is providing

With this information, it is easier to design your company in a manner that will set you apart from the majority.

3. Consult with Veteran Gas Servicing Companies in the Industry

At this point, you want to look for advice from other entrepreneurs who are not within your targeted market place. For obvious reasons, your competition will not provide guidance nor will they be willing to share their business tactics with you.

Look for people in other towns who have experience in the industry. Ask them about their journey to becoming established gas service providers. It would be beneficial to also inquire about the hurdles they faced while starting up.

If you can avoid the pitfalls they encountered, you should have a smoother road to stardom in the industry.

Additionally, ask about how you can carve out a piece of the market despite there being established players already. Considering you are starting up in an industry where your competition already has years of experience over you; you need an advantageous edge.

Where else can you find an edge to implement than from a seasoned entrepreneur, with years of experience in the industry?

4. Get Your Funding in Order Before You Open Shop

Oil and gas servicing firms are quite profitable, but they also require substantial amounts of funding. It is essential to plan and acquire your finances beforehand, to avoid delays in your operations.

You could ask your family and friends to invest, but this is not the best nor the only viable source of funds. Below are a few ideas on where to get funding to start the company as well as meet your orders.

Independent Investors

These are individuals who are willing to inject capital into your venture for something in return. In exchange for their funds, they could ask for a percentage of the profits (loyalties) or a piece of the company (equity).

If you choose this option make sure to weight the implications of the deal before signing the contract.

Ideally, instead of committing to perpetual loyalties or parting with your equity, it would be best to find an investor who only wants their money back plus interest.

When looking for an investor, makes sure you are comfortable with terms of the agreement. Have a lawyer present so they can explain every aspect of the contract before signing it. Hence, you will not regret anything later on.

Business Loans

These are loans provided by banks to small companies if they meet the set requirements. The requirements may include a given amount of transaction history with the bank or an asset that can get leveraged as security for the loan.

The downside to business loans is that they take weeks to get processed, evaluated and finally approved. If you need the money urgently, this may not be the best option.

Invoice Factoring

Invoice factoring is the selling of invoices to a third party. It is a great way to acquire quick funding when you are short on cash. However, you have to sell the invoice at a discount because you split some of the profit with the buyer of the invoice.

For instance, if you can’t fill a pending order due to lack of funds, you can sell the order’s invoice. Selling the invoice enables you to secure the necessary funding to meet the order plus make a small profit.

Though you do not get 100% gain on the transaction, it is a low-interest rate cost considering you could not complete the order by yourself. Consider it a courtesy.

Merchant Cash Advances

These are cash advances provided to small business, by merchant lenders.

They are an excellent means of acquiring quick funding because the funds can get approved within a day or two. However, the interest rates on the advances can go as high as 30% of the initial advance.

Thus, they bite into your profits more than invoice factoring.

5. Strive to Provide Additional Services

Typically, oil and gas servicing is delivering gas to consumers. However, to get a better overall margin, you should also consider additional services that are related to the business.

For instance, you can provide underground propane tank installation services as part of your business. If you install propane tanks for clients, they will also ask you to be their gas supplier. Furthermore, whenever they require maintenance checks or servicing of the tanks, they will call you.

Providing more than one service is the key to outwitting your competition and securing your businesses longevity in the industry.

Conclusion on Tips of How to Get into the Oil and Gas Industry

Startup oil and gas servicing companies have a hard time becoming self-sustaining due to the fierce competition in the industry. To become successful, you will have to be at least one step ahead of your rivals at all times.

To achieve this, you need to have a solid plan of action:

  • Study your competition

  • Acquire professional advice from veterans of the business

  • Always stay on top of your finances

  • Provide more services than the competition.

To learn more on business and entrepreneurship, visit our blog for value-adding information and tips.

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