Diversify to Thrive

Photo courtesy Denali Drilling Inc.

In today’s economic climate, expanding one’s business is vital to gaining more customers.

By Mike Price

The state of the economy sits squarely on the minds of every business owner in the groundwater industry.

It’s been that way for the past few years, and 2012 looks like it will be no different.   

Lamenting over the sagging economy, many are uncertain about the future of their company. Some are caught between a rock and a hard place.     

Lee Iacocca, one of the most famous businessmen in the world, was quoted as saying, “In times of great stress or adversity, it’s always best to keep busy, to plow your anger and your energy into something positive.”

Companies pursuing different market segments are the ones that will have the greatest chance to survive this environment. They will do so by reviewing their product or service and then their current customer/market base. Then they step back and ask themselves two questions:

• Is there another segment that could use my product or service?
• Can I adapt my process to open up another potential customer base?

One such company that did just that and then branched out its services is Denali Drilling Inc. in Anchorage, Alaska. The company began in 1970 and has scratched and clawed to survive ever since, completing more than 8000 projects in the state.

“For us to stay competitive and stay in business and be a viable business going on 42 years now, you gotta figure out things to do to keep yourself busy,” says Ron Pichler, president of Denali Drilling.

“We’ve built buildings, done carpentry, fabricated things. We’ve done whatever it takes to keep our workers employed and had some very, very hard times in our existence, but no different than anybody else in the grand scheme of things. We’ve been donkey kicked a few times, yet we always seem to get up. That’s just kind of our nature.”

The ability to adapt and come back stronger in these uncertain business times is evident across all divisions throughout the groundwater industry, making it the focal point in this state of the industry report.

Contractors

Due to the economy and housing market, today’s water well contractors are looking for some ways to gain new customers. 

That’s all Denali Drilling has done since its early days as a small geotechnical operation conducting test holes, working on the Trans Alaska Pipeline System, and providing crews and equipment to assist civil engineers with foundation design problems.

Denali Drilling has kept pace with Alaska’s development by diversifying and providing the professional crews and equipment. Its services include geotechnical drilling, mineral exploration, large diameter borings, environmental drilling/sampling, monitoring well installation, water well drilling and developing, and piling/tieback installation. 

Since the company began, Denali Drilling has worked offshore on the Port of Anchorage expansion project, which could be completed in the next three to five years. 

During peak oil development times in Alaska, the company conducted seismic drilling with heli-portable drills. It recently came off a heli-portable project right outside Denali National Park and Preserve in the interior of Alaska. The oil industry has slowed down quite a bit though.

“We work where we can,” says Pichler, who generally has a staff of 12 based on the workload, “so we’re involved with a mining company in southeast Alaska doing some environmental and geotechnical work for them.”

In the lower 48, contractors face the same type of issues as Denali Drilling.

Headquartered near Harrisburg, Pennsylvania, Eichelbergers Inc. has diversified its product and services as well as invested in people, buildings, and equipment to survive the recent economic challenges.

Since 2003 it has grown from one office to four strategically located offices. It has grown from 70 to nearly 140 employees. Eichelbergers also has two subsidiary well drilling companies. 

Today’s mix of work has also changed dramatically since the early 1990s. The company has expanded to include a safety consulting service, geothermal turnkey services, solar and wind energy products and services, and most recently, exploratory mineral drilling.

“Companies that survive these times will do so because of the strategies they implement today, not next month or next year,” says Jerry A. Rice, president and CEO of Eichelbergers, a 65-year-old drilling company in Mechanicsburg, Pennsylvania.  

“Eichelbergers prepared its first three-year strategic plan in 2003 and has updated it at least three times since. While the management team concluded that increasing or maintaining revenues were important, our overriding strategy is to tightly control our expenses. One can have record revenues, but if you don’t control your costs, it won’t be long until you’re out of business.”  

In the early and mid 2000s, drilling companies survived and thrived due to the housing and building boom. Geothermal opportunities then came and are still present, and now the Marcellus shale—a unit of marine sedimentary rock found in eastern North America that is the second-largest gas field in the world—in Pennsylvania and Ohio provides another opportunity for drilling companies. 

“You need to create a business that will put your business out of business,” Rice explains. “Put another way, one needs to turn their weaknesses into their strengths.

“Survival will be accomplished by being proactive and responsive to the changes in the marketplace. Balancing your resources and capital to achieve success is part of this process. Having excellent relationships with your banker, insurance company, attorney, accountant, vendors, and most of all your employees is tantamount for success in today’s volatile economic climate.”

Suppliers

Like water well contractors, suppliers are trying to grow and expand.

In the southeast region, operating exclusively in the residential water well market is not a good business model and diversification is almost imperative. 

Once solely a water well supply house, GPM of Alabama in Birmingham, Alabama—a supplier of well water pumps, pump supplies, accessories, drill bits, and water tanks—has entered the wastewater, irrigation, and mining industries. 

To serve Mississippi and western Tennessee, GPM of Alabama recently branched out by opening another location in Olive Branch, Mississippi.   

“We’re always looking for something different. We try to be more of a niche marketer,” says Gerry Rounsaville, president of GPM of Alabama who bought the company with his wife, Janice, four years ago. He employs a staff of 10 who have 10 to 20 years of experience.

 “We can’t go up against the big boys out there, so we try to sell our service and knowledge. We’ve got some really knowledgeable people who have been in the industry for years.”

Rounsaville, who has worked in the groundwater industry for decades, says one of their largest competitors is irrigation distributors that have diversified in domestic pumps. This is just part of today’s business market.  

“It’s been a tough couple of years for us,” he says. “We’re always looking for new products, and I might be wrong, but I think that’s pretty much where growth is going to have to come from is in new products in our area.”

Manufacturers

The water well video camera market has continued to develop with more products being introduced.

Two growing companies are Well-Vu Inc. in Brainerd, Minnesota, and Marks Products Inc. in Williamsville, Virginia.

With more than 80,000 units produced, Well-Vu has amassed a wealth of knowledge in the field. With six U.S. patents in place, the company’s flagship line of Aqua-Vu underwater cameras continues to lead the market it created.

The company is dedicated to the water well video camera market, which has kept it busy for more than 10 years. One of its diversifications was to add to its camera sales and existing camera customers.

More than 40% of its customers have two Well-Vu cameras, and more than 20% have three, and about 8% have four or more cameras.

“In attending major trade shows, we always have drillers come by with some type of different problem,” says Ray Roerick, sales manager for Well-Vu.

“So, of course each problem is an opportunity for new business, but it’s also an opportunity to ‘back-sell’ to our existing customer base. Some of the examples of this, starting way back, were an on-screen display of footage counter that was incorporated into our system and was also available as an accessory to previous customers.”

Marks Products, which was recently acquired by Allegheny Instruments Inc., designs, manufactures, and retails GeoVISION video systems. GeoVISION continues to focus on developing interchangeable cameras for use with portable systems that are designed to be effective in a variety of applications.  

“We continue to focus on top-of-the-line video systems to meet a variety of needs,” says Cotten Brown, former plant manager at Marks Products who now heads Allegheny Instruments. “We are working very hard to keep up with the expanding market for innovative geological exploration.”

Tags: business, business diversification, economy, profit

Category: Featured Articles