Growing the Bottom Line

Published On: April 19, 2021By Categories: Business Management, Features

Focusing on business and finances all year is critical for groundwater companies today.

By William Wagner

You know water well drilling like the back of your hand. You can tell us about all the crooks and crevices in a well system and everything down to the nuts and bolts on a rig. But the business side of things? Well, not so much.

Spreadsheets aren’t the forte or passion for some people who operate water well contracting companies. The work itself is.

“Groundwater professionals are very, very good at their trade,” says Becca Calkins, CPA, director of finance for the National Ground Water Association. “But they don’t always focus on their business; they focus on what they do best. That’s probably the biggest mistake people make. They think, Oh, my accountant or bookkeeper will handle it. A lot of times the bookkeeper is telling you what already happened and not what is going to happen. So, someone has to have that business mind to say, ‘What else should we be doing to look to the future?’”

Along those lines, we present you with some simple tips for growing a healthy bottom line so you can keep doing what you love.

Look at the Big Picture

Where do you want your well drilling company to be in five or 10 years? It’s a question you have to ask yourself, because growth—or even survival—won’t happen magically. You must step outside the day-to-day grind and set long-term goals for your business.

“Once you get comfortable with the basics of the bookkeeping or numbers of your business, you really need to start looking toward the future,” says Calkins, who works at NGWA headquarters in Westerville, Ohio. “Instead of just looking to the end of the month or end of the year, you need to start looking further down the road.”

David Traut, MGWC, CVCLD, vice president of Mark J. Traut Wells Inc. in Waite Park, Minnesota, has been in the groundwater business for decades. His years of experience have taught him that an in-the-moment approach to running your company is no longer viable.

“The (growing) expense of our equipment and labor are going to make successful people take a different approach,” he says. “It used to be that the majority of profitable drilling businesses maybe met with their accountant mid-year and then at the end of the year. And then they looked to see if they had any money left. If not, they might have raised prices, or maybe not.

“(Now) we’re not only competing with the driller down the road. We’re competing with the truck driving industry and the construction-heavy equipment industry. Right now, with inflation kicking in, it would be foolhardy to wait until the end of the year to see if you have a profit.”

Traut adds the industry isn’t static and companies are “either moving up the ladder or sliding down the ladder.” The smart ones position themselves to move upward.

Plan Ahead

This ties in with surveying the big picture. As counterintuitive as it may seem, you need to look backward to chart a path forward.

“One of the best ways, in my opinion, to look down the road is by looking backwards,” Calkins says. “Look at your trends and history. A lot of times, especially in a business like the groundwater business, you’re just looking forward. What’s the next job? What’s the next bid? You need to have a little bit more of a higher-level view of where your company’s going. If you can see where you’ve been, often that gives you a good picture of where you’re going.”

Know How to Decode All Those Numbers

Your financial books might seem as if they’re written in Greek, but as the person running the business, it’s incumbent on you to figure out what everything means. Jobs depend on it.

“Obviously, everyone knows there are the big costs, like your rig, that you need to plan for,” Calkins says. “You either need to save up cash for it or prepare for the loan-repayment process. But then there’s also that maintenance. And there are also costs that you don’t necessarily feel.

“We’re not only competing with the driller down the road. We’re competing with the truck driving industry and the construction-heavy equipment industry. Right now, with inflation kicking in, it would be foolhardy to wait until the end of the year to see if you have a profit.”

“An example would be the depreciation of your rig. Every year on your financial statements you’re going to see a line for depreciation. That doesn’t actually mean you spent that much money this year. So sometimes financial statements are misleading in the sense that you think you may have more or less money than you do. A balance sheet does not always equal a cash-flow statement.”

Consider All Your Potential Expenses

Given the many expenses of operating a groundwater business—the many moving parts—this is particularly important.

Traut, who serves on the NGWA Board of Directors, says, “If you’re not cautious and don’t pay attention and make a mistake—with labor and equipment now costing what it does—it’s going to be much more expensive than a decade ago, when you could have maybe weathered the storm.”

In other words, you must be meticulous about planning and be constantly vigilant.

“If you’re not planning for increased prices—increased labor costs, increased insurance costs—that’s something you really have to think about,” Calkins says. “A lot of times, people do think about the materials. They think, I can’t get that specific part for the same price I used to. But you also have to think about the overhead of the business.

“For example, the electric bill at your office; if that goes up, it’s something you should plan for. Labor costs: If you’re giving your people raises to match inflation, that’s going up every year. It’s not just your rig costs, your gas—your direct materials. You have to run the numbers on all of the scenarios.”

Seize Growth Opportunities

Companies, both Traut and Calkins believe, always must be on the hunt for new revenue streams.

“Think about expanding beyond just drilling,” Calkins suggests. “Once someone buys from you and knows, likes, and trusts you, they’re more likely to use you again. So, what other services can you offer?”

Traut can think of one right off the bat: water treatment. “It’s a no-brainer,” he says. “It’s the lowest-risk thing out there for water well people. And a lot of the manufacturers are very helpful. They grab you by the hand and teach you what you need to know. It’s return work.”

Take Seasonal Ups and Downs Into Account

When Traut started out in the 1980s, he says his company routinely had to lay off people in wintertime. But he figured out how to turn that downtime into uptime and says he hasn’t laid off an employee in about 20 years.

“We find things to do,” says Traut, whose company has around 55 employees. “We fix our equipment, I do my OSHA refresher. If I lay my people off, I’m going to get the multiplier (from the government, related to unemployment benefits) that will increase my labor expenses the rest of the year.”

Reinvest in Your Business

If you’re in it for the long haul—and most people in the water well industry are—this is the key to the whole deal.

Says Calkins, “If you have a fantastic year and you’ve already been smart enough to have a budget and plan ahead and there’s still extra money, invest it back into your business in a way you’ll be able to see results—whether that’s in people or materials or a rig or something that will make you more efficient.”

Chances are, you’ll be glad you did. It should translate to a business that is profitable far into the future.


William Wagner is an award-wining writer, editor, and project manager for Wagner Communications. He has written for magazines, newspapers, books, and websites. He lives in the Chicago area, and can be reached at william.wagner7@gmail.com.

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