How Do You Plan Spending In a Trying Economy?

All industries face peaks and troughs and drilling is no different. Geothermal rode high for a while but is no longer in high demand, while Geotech services are seeing steady growth. How can drilling contractors and other small businesses in the industry continue to grow during rough years?

spending budget

Famed British economist John Maynard Keynes advised to “spend against the wind.” While this may sound like he’s suggesting businesses should spend money even when it seems ill-advised, that’s not the truth behind the strategy.

Logic would suggest that businesses should save money during the leaner years and spend during boom times. When your field of drilling expertise is riding high and your services are in demand, it would stand to reason that would be the best time to spend profits to expand and grow the business. Similarly, when the phone isn’t ringing quite as much, instinct tells us to hold on to every dollar and be frugal to stretch funds.

This causes a paradox of thrift, in which precautionary saving by people trying to establish financial security leads to a fall in demand of products and services, reducing output, income and wealth. Without a boost from kind of an external stimulus, the economy will then see a reduction in production, incomes, and employment.

According to Keynes, the way to avoid this kind of financial trough would be to save, pay down debt and lower exposure during the peaks and to invest in the business during the tough times by purchasing equipment to expand services, or charge higher rates. In either situation, spending against the wind will bring in more revenue and increase your business’s cash flow, promoting growth, stability, and longevity.

SIMCO Drilling Equipment encourages you to talk with your own financial advisor to see what moves would be best for your business. Our experienced sales and service teams are here when you’re ready to talk about creating the best tools for your drilling trade.

Contact SIMCO at 800-338-9925 or through our online contact page to learn more about the quality products and services we offer.