WorldWide Drilling Resource

25 AUGUST 2022 WorldWide Drilling Resource® Drilling Into Money Not Boring by Mark E. Battersby Coping with Inflation, Surviving a Recession The Federal Reserve is trying to tame inflation without causing a recession. A similar strategy should be the goal of every drilling professional. Inflation occurs when prices rise due to increases in production costs, wages, shortages, a troubled economy, and supply chain issues, all of which appear present for the foreseeable future. A recession, on the other hand, is a period of temporary economic decline during which trade and industrial activity are reduced. In a recent Capital One survey, small business owners had already taken the following actions to help mitigate the impact of inflation: c 27% built up their cash reserves c 23% preemptively raised prices c 21% purchased more inventory Building up cash reserves can be as basic as sweeping extra cash into interest-bearing accounts. While interest rates have been so low that keeping cash in a regular or interestbearing checking account didn’t matter, this may be changing. While raising prices isn’t an ideal strategy, it can be helpful in combatting inflation’s impact, if handled judiciously. Avoiding dramatic across-the-board price increases by, instead, raising prices slowly in modest increments, might make them less noticeable. As for inventories, even if only supplies and replacement parts, now might be a good time to stock up. In fact, now would be a good time to make any large purchases whether for inventory, property, or equipment. After all, prices will likely continue to increase as supply continues to struggle to keep pace with demand, and financing these purchases will, obviously, become more expensive. Among other strategies helping drilling professionals cope are: c ANALYZING PROFIT MARGINS - Reevaluating costs and analyzing profit margins is a good first step of ensuring increases or decreases, real or anticipated, in those margins won’t impact quality or service. c AUTOMATION - Streamlining and automating processes including commonly overlooked areas such as accounting, payroll, and scheduling is another step toward coping with inflation. c IMPROVING PRODUCTIVITY - Productivity can be improved by stocking up on supplies and cutting expenses whenever and wherever possible, including renegotiating lease and rental agreements. Economic challenges notwithstanding, most small business owners are confident their business will be operating in the next six months. Unfortunately, despite this confidence, there is nothing that will make any business 100% inflation-proof. However, implementing the strategies outlined can help ensure the operation survives and, perhaps, even enables it to profit. Mark Mark E. Battersby may be contacted via e-mail to