BROADENING THE BASE
Oil-field suppliers diversify in downturn
After nearly 70 years in the business of supplying and maintaining oil-field vehicles, Oklahoma City-based Perfection Truck Parts & Equipment has expanded its focus, creating new revenue sources when the oil industry has slowed.
“It gives us a stable base of business, so when the oil industry has its downturns, we can still stay profitable and maintain as many of the key people in our company as we can,” General Manager Chris Simpson said.
About 70 percent of Perfection’s business historically has been related to the oil field. Several years ago, however, Simpson began directing company leaders and employees to look for ways to expand into other areas. Perfection now provides similar services for other companies and entities with large vehicles, including electric and natural gas utilities and city governments.
Perfection then expanded its offerings. The company almost three years ago began a graphics division, which provides vinyl vehicle wraps. The company now provides graphic wraps for showroom and office windows, as well.
“All the trucks we work on and rig up have logos on them,” Simpson said. “We started offering it as an added option for our customers. Then we expanded that as part of the effort to find every possible opportunity to generate income.”
Additional revenue sources have been critical over the past two years
as low oil prices have led much of Perfection’s base business to dry up, along with most of the country’s oil patch.
In recent months, Perfection further expanded its offerings by becoming a service provider for Auto Crane, which builds bodies and cranes for trucks.
“Historically we wouldn’t have taken that work on because we like to get the parts and the labor,” Simpson said. “But in order to keep our technicians busy, we’re able to take on some of the laboronly work.”
Diversifying essential
Flexibility and an effort to expand a company’s revenue opportunities is essential, especially in a down market, said Steve Agee, dean of the Meinders School of Business at Oklahoma City University.
“The more diversified you are in any business in terms of potential revenue streams is an advantage,” he said. “If you’re solely dependent on one resource for your revenue and it gets cut off, that’s a huge problem.”
Perfection was wise to begin diversifying while the energy market was good, Agee said.
“Businesses that are well managed try to look for many revenue resources, or profit centers,” he said. “If you can generate profit centers across a diverse number of entities, you’re going to be better off.”
While it’s often best to expand while business is thriving, companies that have not already diversified still should try to add new income sources, Agee said.
“If you haven’t already, you should start now,” he said. “You should start looking to see, given where I am now, given my assets, given my labor pool, what else could I be doing with the initiatives I have, equipment I have, employees I have that I’m not doing now. How could I extend my services across different sectors?”
OCU challenged
It’s not just businesses that should consider diversifying, Agee said. The Meinders School has faced similar challenges the past two years as oil and natural gas companies have had to scale back on plans for scholarships and other university support.
“We had to mitigate that unprecedented shortfall by seeing alternative scholarship mechanisms,” Agee said. “We engaged with other entities like the Chickasaw Nation. Gov. (Bill) Anoatubby has been very kind and supportive with eight tuition-funded scholarships for Chickasaw students coming out of high school.”
While saying it’s important to have diverse revenue opportunities, Agee warned not to get stretched too thin. “The risk you run is that you don’t have the necessary assets to complete all the tasks you want to take on,” he said. “You need to make sure you have the necessary resources in terms of the personnel and equipment.”