Energy Crue
Welcome to 'Energy Crüe', the podcast that dives deep into the heart of industry innovation, entrepreneurship, and personal growth. I'm your host, JP Warren, and each episode, we embark on a journey to uncover the passions and motivations that fuel industry leaders. We're not just talking business here; we're exploring the personal drives, the triumphs, and the challenges that shape today's pioneers. Alongside these inspiring conversations, I'll be sharing my own story - the battles with imposter syndrome, the pivotal mindset shifts, and the lessons learned throughout my entrepreneurial voyage. As a certified coach, my goal is to empower you, our listeners, to break free from the barriers holding you back. Join me as we navigate both the professional and personal landscapes, learning and growing together with 'Energy Crüe'
Energy Crue
Overcoming Industry Challenges: Jim Holmes on LFS Chemistry's Journey
What does it take to steer a startup through the storm of a global pandemic and come out stronger on the other side? Join us as we sit down with Jim Holmes, President of LFS Chemistry, to uncover the secrets behind his company's remarkable resilience during the COVID-19 crisis. You'll hear firsthand how Jim's unwavering persistence, innovative pivots towards R&D, and a tight-knit team morale not only kept LFS Chemistry afloat but positioned it for future growth despite a downturn in the oil and gas industry.
Dive deep into the intricate world of developing new chemistries with Jim, who shares the long and challenging road from concept to market. From identifying early adopters to navigating regulatory hurdles, Jim offers invaluable insights into balancing short-term needs with long-term goals. Learn about the meticulous process of creating a dry scale inhibitor and the importance of tailoring solutions to meet diverse regional requirements. Jim's experiences provide a roadmap for anyone looking to innovate within a highly regulated industry.
But it's not just about the technicalities. Jim opens up about the vital role of financial planning and the necessity of having the right people in key positions, including the lessons learned from past failures. We also explore the evolving landscape of sales strategies, emphasizing the power of building lasting relationships even in a remote work environment. Whether you're an entrepreneur, a business leader, or someone keen on understanding the future of the oil and gas sector, this episode is packed with actionable advice and inspiring stories that showcase the true essence of leadership and adaptability.
Oh, you never know what dumb assery is going to come out about Al yeah, I think you've done this before enough with this and also the Rachel V knows. All right, three, one, two.
Speaker 1:Not ready yet. Okay, we're taking it off. I think it's weird to have the stand on and hold it All right. If we're not comfortable with that, I'm not sure what's going on here.
Speaker 2:Here, just give me this no, no no, no, we'll just toss it over here. Oh, this could be good. It's something like this I'm doing this. I'm doing this, I'm Well, you got to show it off a little bit. That's the first Baja logo and welcome to an Energy Crew podcast. We're doing this in the home studio of my house I guess that's a home studio, a great backdrop, and I told the guest today you better come over prepared to throw down with me.
Speaker 2:Roll as a jujitsu sparring. Is it sparring or is it rolling? It's sparring, it's sparring. Yeah, first off, I want to say thanks for tuning in to this podcast. There's a lot of podcasts out there. Lately we've been changing this style of podcast, more of a hot seat style, question and answer. I think you get more insight Before we've done hundreds of podcasts where we get in the background, dive into a tell us your of, tells, your story. However, I'm changing it up, we're changing it up. I think I like getting kind of hot takes from different leaders around the industry and today, uh is the second time you're on the second time. Second time on the podcast is the legend jim holmes, the president of lfs chemistry, and also the uh, one of the uh main inspirations that actually got me into the uh, the martial arts, if you will, as you just love it. Love being an influence.
Speaker 1:Thanks for being here.
Speaker 2:Man, I know that you're about to uh to you. We were squeezing this in the morning. You're a busy day a lot of traveling, a lot of, a lot of stuff going on your schedule, so I appreciate you taking your time and joining us. Question on stuff. What are some, I guess, uh, key lessons that you've learned since growing a business from because you started at lfs chemistry around time of covid? Is that correct right before?
Speaker 1:it was officially started around may of 2019. Okay, first commercial sales at the end of july of 2019 and, uh, during incredible business all the way up until end of March of 2020, when we all knew it happened. It hit the fan, yeah. Completions pretty much ceased to exist at that point. We were heavily weighted towards frack stimulation at that point. It definitely hurt us there, but some persistence.
Speaker 2:Well, let's start there. That's kind of an interesting place to start your, your, your building of your company right, the lfs chemistry company out there. So what's some lessons that? I guess, uh, that you've had to learn differently at that moment of time, that because previously you built companies before you, you've worked and built teams before, what was some like lessons learned, that kind of that? You didn't have a playbook, a page in your playbook about that you've learned from COVID, sure.
Speaker 1:So historically, oil and gas is very cyclic. We all know that. There's this massive waves of peaks and valleys that we all ride and sometimes they're predictable and sometimes they're not. This one was one of those valleys that definitely was not predictable, correct? So there definitely was not a playbook for a startup company with less than one year of operations, especially a company without outside funding or investment. We self-funded the startup of this company, so there's no fallback plan when we did this and of course, we certainly weren't expecting the company to go from riding this massive growth trend all the way down to what do we do now when there's not a single frat crew running that we were working on at the time. Right, that ultimately turned out to, I think a little bit be a blessing in disguise, in the sense that we got to we had one really good customer that kept us just busy enough. Uh, sometimes it alive.
Speaker 2:Sometimes that's all you need?
Speaker 1:Absolutely, and it was, you know, about three months of really rough times, okay, but we had accumulated enough assets and enough equity in the company to keep it alive. We didn't lay anybody off, we kept going and we decided at that point, instead of sitting back and waiting, you know, these in-person meetings were out.
Speaker 2:I think a lot of people did that because, again, no one really knew what to do, so a lot of people were just like I think my plan is to wait or hope things get better.
Speaker 1:We decided to invest more in the research and development side. So we took what we had and of course we had a lot of time on our hands with the folks that we had on staff at that moment and we decided to go develop some new chemistries. And of course that wasn't easy either when everybody's trying to work remote. Did I congregate in small areas like a lab, but we we pull it off and we came out of out of that that COVID three we'll call it three or four months of of rough. And then we had to start the growth.
Speaker 2:So how do you hand? I mean, I guess in that circumstance it's such a unique circumstance, you just got involved in this company how do you handle that type of pressure, I guess, starting off leading the company?
Speaker 1:You try to have some confidence for everybody that you're working with. That's outward. What do you mean? You try to have confidence. Dive into that a little bit.
Speaker 1:Well, as an owner and the one essentially responsible for making payroll and writing checks, especially at that time, there's a lot of sleepless nights. It adds a lot of gray hair. You're wondering how long is this going to last, how long can we make this work before the really difficult conversations come into play, which is we simply can't afford to do this anymore. And where do those cutbacks come? We had an incredible team. It was a small, very small team at the time, but you know, the way we run our company today is the same way we ran it back then. When it comes to personnel is. We don't want to wait for a crisis or a financial review or something else to decide that we don't have the best players on the team. So, going into COVID, we had the best players on the team and there's no reason to let that go, other than a financial decision. Right, which is the worst one? You could possibly be Right.
Speaker 2:Because it's out of your control. At that point, it's what you want to do, and what you have to do are different. They don't align. Yes, yeah.
Speaker 1:So trying to exude some level of confidence that this is going to work. It's going to be great when we come out of this. Let's put our heads down, let's get to work, let's create some fantastic new chemistries we hope that the world's never seen before. We talked about that before on the podcast that creating differentiated technologies is not easy in the chemical space. You have buckets that you work within and they're creating something truly unique within those buckets and they're trying to create a need for those. But you know, trying to stay optimistic through that entire process how do you go about building that need?
Speaker 2:is that more just kind of because chemistry again, I feel it's one of those things you kind of have to really hold people's hand and walk through. Hey, this is what it does because it's such a molecular level, it's a small level, yeah, right, so how do you actually, I mean, that's such a unique let's talk about that that's such a unique cell, it's such a unique, I guess, conversation to have. Hey, we've got this new chemistry and you can do xyz, how do you, I guess, showcase that type of knee or the, the lack of? Hey, you don't, we can do this for you. And this, we have this new chemistry. It's like get that snake oil out of you. How do you, how do you, uh, I guess, convince?
Speaker 1:well, it's a. It's a probably one of the most difficult propositions to have, particularly in our space. That doesn't. That doesn't view value-add chemistry the same way that certain other industries might. So you know the oil and gas industry and I'm lumping everybody together and I know I shouldn't do that.
Speaker 2:We're talking to generalities.
Speaker 1:There's certainly some engineers and companies that that really want to look at new technologies and really grasp on it.
Speaker 2:Those are the folks that we have to work with and you're also seeing those and just side note too from around proof club tables and all that stuff. You're also seeing those customers, those operators and all that stuff actually see a lot of increased improvements in their wells.
Speaker 1:Whenever they do try out the UPA Correct, which is absolutely why we're seeing a reduction in rig count. But you know, completed lateral feed or drilled lateral feed is actually increasing, or at least saying year over year with significantly less number of rigs out there running. So the efficiencies are through the roof and that's largely driven by technology and certainly improved operation. Right For us on the chemistry front, we definitely have to follow a very specific sales cycle and we have to have a couple of those early adopters.
Speaker 2:Yeah, because that just builds your case a little bit. Hey, we have this out, couple of those early adopters. Yeah, because that just builds your case a little bit. Hey, this is we. We have this out. This is actually what it does, you know we can you know?
Speaker 1:we have a emerging technology right now. It's a. It's a dry scale inhibitor, for example and it's a great story just because it took us three years to develop it. Okay, so three years to from a concept to a formulation, to something that's commercially viable and that's getting through all the regulatory hurdles.
Speaker 2:So these are around.
Speaker 1:When you create a brand new molecule, there's no data on it, right? So it's all lab-driven data. There's no CAS number, which is basically a government identification for the new molecule. How was the guy to be able to sell it outside the US? There's other regulatory hurdles that have to be cleared. So a lot of that is we develop a new chemistry, we create a new molecule, we do a bunch of testing, we put together the cost on it. Can we actually make it in an economic fashion? So the customers will pay for it? But then we have to clear all these regulatory hurdles, which could take six months, 18 months, depending on where we're at.
Speaker 2:Depending on how fast we're going to go to yeah.
Speaker 1:For a company the size of ours. We invest a huge amount of money in the development of these new chemistries but we may not see revenue for three or four years from the initial investments that we make. We could create all the lab data in the world. We're very good at that. We have partner labs, we have universities. We have a lot of partners out there in the energy space that help us create these data sets.
Speaker 1:A lot of the data sets we can't do internally because the equipment and the personnel just is too expensive to have in our own labs. We have to go pay for it in other labs and we have to create partnerships to make that happen. At the end of the day, we can drop all of the data in the world on a brand new technology. It takes very special customers to actually understand the value of that and take the risk to believe out of us that we have something that's going to improve. Ab or whatever that may be the dry scale in Hebrew, for example filled a ditch. There's only a couple of them out there, but none of the other ones, as far as we're aware, do some of the things that ours does. We wanted to target a very specific niche. This chemistry is not for everybody.
Speaker 2:This is kind of a long-term strategy approach. When you're developing molecules, you're going through this whole process also. Whenever you are leading a, you're going through this whole process also. Is that whenever you are leading a company, leading a team and all that stuff, do you have a different strategy whenever you are focused on long-term versus short-term? In your previous career, how do you manage that within your team, the different levels, I guess strategy and I guess whether it's long-term, short-term.
Speaker 1:Talking to your team and getting them on board. We're always developing multiple new technologies. Some of those are a short-term, maybe it's a modification of a chemistry, maybe it's you know, we have something off the shelf that we need to change slightly to achieve a very specific result for a very specific application. Okay, customer in a very specific region. For very specific application. Customer in a very specific region, for example we just did this not too long ago where, you know, in two or three months you can create a chemistry because it checks nine out of 10 boxes, but maybe it doesn't hit a temperature threshold right. It has to function at a very specific temperature. Typically, the hot temperatures become a challenge for a lot of chemistry. So you know, when you take a chemistry that was developed from the Permian and you want to take that over to the Hainesville, for example, sometimes there's some temperature Adjustments right and you have to create some modifications in those chemistries. Those are typically short term Okay In our world, which can be weeks, it can be months, and then you have the long term strategies.
Speaker 1:No-transcript it. There's no value to it. The age-old description of value is what are you willing to pay for, not what am I going to sell it for. So you have to operate in these buckets of. Is it economic, is it functional, is it environmentally friendly? Are you even allowed to sell it in certain states? We had to recently create a new chemistry modification of a chemistry to be able to sell it in a certain highly regulated state, because we had one raw material in there, a very minor amount, that's not allowed and sold in this state.
Speaker 2:So many hurdles, it seems you have to jump through and guess that long work. Yes, so how? Okay? So when you, when you do have all these, I guess like oh, do we check all the boxes? Do we have a regulation? How do you ensure that you have all your ducks in a row? I guess, with such a cause, it seems like listen, lfs chemistry. I see y'all's presence.
Speaker 1:I see this, I know, I know the majority of your team, but it seems like a lot of hats to wear for the size that y'all are. Yes, so you have, you know, you have your, your development chemists. They become ones that have the applications experience. They understand how to formulate, how to pull different chemistries together, okay, something, uh, functionally adequate. Um, then you have, we have, an entire legal team.
Speaker 1:Of course, most of it's our source, but they're the ones that are looking at regulatory hurdles and they're looking at patent and IP space. They're looking at trademarks. They're looking at is anybody else in the industry, you know, touched on this? You have to be careful with it, because if somebody else maybe had the same idea 10 years ago but never took a commercial, we may never know about it unless we search the patents. And the next thing, you know, it's legal trouble. At that rate, we create these chemistries and usually it's a concept at one point and then we have to go through some legal background to make sure we can even move forward with it. And sometimes we know that there's not going to be an issue because it's something so wildly unique that more than likely it's never even been looked at before, and a lot of these ideas come from our customers actually.
Speaker 2:Well, I think. First off, I think it's a great place to start doing your R&D. It's a great place to start solution-driven creation, especially when you're dealing with the customer. So I want to shift from chemistry to kind of leadership and team building. I think we've been diving to that around the crew club table a bunch. We touched on it in our last podcast, but that's kind of a subject I've been fascinated with lately, just kind of like different perceptions of leadership, how leadership has changed throughout. So let's talk about how leadership has changed throughout your career and what you're seeing today when it comes to effective leadership.
Speaker 1:So I'd say early career and first one, maybe two company startup iterations which you know I don't know which lens you look through either went okay or they didn't go at all. I would say that they were massive successes and there's a lot to learn there. I think we've covered it before that. You know I've had one pretty epic failure yeah, yeah, business and that was not having the right people in place and that's really the biggest reason that first one did not survive after three and a half.
Speaker 1:Because the people, the people, we didn't have the right people. Okay, we had a lot of really good people. We'll talk about it.
Speaker 2:Let's talk about that. Then let's talk about the really good people and right people in the right places, because that's such a soft skill to have. I mean to get to know someone and understand, like this person's good, but they'll be great here. How do you determine that? Is that technical knowledge? Is that attitude what makes a good teammate?
Speaker 1:Sure. So I think that's going to be different case by case. Our particular case is we were really lacking in the financial planning end of the business. We did not have a CFO, we had a bunch of accountants and this is not a knocking an accountant. An accountant is very good at what they do, but that doesn't help us grow a business. Accountants are a lot of data entry. They make sure that the business can afford to pay payroll bills, blah, blah, blah, all that stuff, and they're very good at that.
Speaker 2:But that's not a financial strategic decision. We should be going on, okay.
Speaker 1:So our first attempt at this, we actually outgrew what we were capable of, okay, and that was just poor financial planning, poor forecasting. We had a great operations team. We had a really good sales team. We had an okay operations team. We had a really good sales team. We had an okay management team. And the reason I say okay management team is I think some of us were very good in very specific areas, but we didn't have again, we didn't have that financial planning. We didn't have conversations around financial planning.
Speaker 1:Okay, you know, we just, honestly, we look back and this is going to may or may not sound bad, but I'm going to dumb it down a little bit for myself, telling the stories that we would look at the bank account at the end of the month, we'd look at our accounts receivable and we'd look at our accounts payable. Well, all three of those may not be updated because we didn't have a very good CFO financial plan. Okay, right. So you look at your AR and you look at your AP. Well, you have a whole bunch of bills that haven't hit your desk yet, so your APs may not be up to date. Your AR is typically pretty current, right, because that's not stated yet, and your bank account typically matches exactly what you have in there.
Speaker 1:Well, we would look at that. We'd say, man, look at our AR, look at our AP, look at our bank account, we can go open a new facility in this other basin that we really want to do. It's like that basic. So that's really what got us this week. You know, sitting around the table, our CDO at the time, who started the company really I came on a little bit later, okay, thought that he was a very good financial planner and it turns out none of us were.
Speaker 2:Interesting, so that was a great lesson to learn, just kind of when you are growing a company.
Speaker 1:It's a painful lesson because I'm the one that had to go around the country and tell everybody we were close in the door. Okay, and that was the most painful thing I've ever done in my life, I can imagine, for no fault of their own.
Speaker 2:So I guess, hindsight, looking back on that, obviously financial, I guess, having someone that understands financial planning, financial strategy. So, again, finding the right people, how do you ensure that they're the right people for the position? Is that going back? Is that attitude? Is that knowledge, that skill set, technical knowledge? What is that? How do you determine?
Speaker 1:that Well, you know the technical knowledge is probably the hardest one to judge when you're starting up and you're bringing in brand new people. So you know, as a startup company, you tend to lean on mentors and resources of you know. I know that they've had success in the past. I know they're this type of attitude and this type of personality. Is that somebody that I can work with? When you're talking about financial planning like a CFO role, it's really important that you have a CFO that'll tell you no.
Speaker 2:Okay.
Speaker 1:All right, and a lot, of, a lot of business owners and founders want to go with the yes, the yes, the yes people around, right, yeah, so it's our CFO today. Is is absolutely fantastic. I consider him a mentor. I get to ask him all, asking all kinds of questions, and he's always willing to take the time to sit down and explain it. As a matter of fact, just this week, I think on Monday, I had a call with him asking to explain a little deeper some of the financial reporting that we're doing so that I can understand it better, so he's teaching.
Speaker 2:So that role also is the ability to teach, communicate Absolutely.
Speaker 1:Okay, you know, at the end of the day, leading a business, I need to understand of retirement a couple of times, you know, and he's been an incredible resource.
Speaker 2:So okay. So identifying people, getting to know people and making sure they're in the right position. So, when it comes to making strategic decisions, how much do you go with? What's your gut reaction versus kind of the circles around you like the mentorship, advice, feedback?
Speaker 1:So the feedback and the leadership opinions is absolutely critical. They're, in most cases, they're the boots on the ground. Okay, you know we've mentioned a lot of names in previous podcasts and everything.
Speaker 1:Yeah, our chief commercial officer, neil Hayes, the VP of technology, Darren Oswald you know some of our sales leadership with Chris Carpenter yeah, our chief commercial officer, neil Hayes. Npr technology, darren Oswald. You know some of our sales leadership with Chris Carpenter. What Culpepper and some of these other guys? Phenomenal people are at Proto right, but but they have the information, okay. So each of them has to make decisions based on the information that they receive and then, ultimately, there's a few decisions I have to make based on input from all of them. So, depending on what those decisions are, it may or may not even come to my desk. There's a lot of decisions that they have full autonomy.
Speaker 2:just to power and make it. Don't come up to move everything. Come to move the solution versus just a problem.
Speaker 1:Yes, and I've historically always been a fan of make a fast decision. Okay, let's adjust from there.
Speaker 2:Okay, all right. So yeah, I've been. I've been actually in trouble from making fast decisions and trying to make it work. Uh, historically it can always get you I think it's gonna probably happen too in the future with me 100 if it doesn't happen, then you're not.
Speaker 1:You're not pushing the boundaries.
Speaker 2:Well, what are okay. Again, these are hot seat questions, so again I'm just thinking of things that are popping up to kind of interrupt a little bit. That's what I do here. So what are some challenges that you face on a some recent challenges that I guess you've been facing as, whether you grow a business, whether it's whatever strategy you're choosing, finding the right people, what's some challenges you're facing as a leader?
Speaker 1:So finding the right people has always been a challenge.
Speaker 2:Is it more difficult now?
Speaker 1:It is difficult now. I'd say we're probably in one of the most difficult times.
Speaker 2:But you know what's interesting, though? Let's talk about that With so many people, with all these consolidations, with so much talent being on, I guess the sideline why is it so difficult to find people?
Speaker 1:I don't sit on the E&P side of the table so I can't speak to their challenges in hiring, but most of the consolidation we've seen has been on the E&P side. All right, but we're seeing some of that trickle over. We need a lot more of it on the circuit. Okay, and I'm going to lump us all in with the Circus side, because we all support the EMPs. At the end of the day, you see that happening.
Speaker 2:Yeah, what's the crystal ball? And listen, this is not a predation or anything like that. I'm curious about what, because we have these conversations. I was talking to a buddy of mine yesterday and he's like man, I got this article. It's like it's the bottom here for OFS. I mean, are people going to operate in the negative just to keep cash flow coming in, even though it's not smart business? So it's a lot of worry out there. There's a lot of concern right now for the OFS side of the business and I'm kind of curious on kind of what's to your turn, on how everything's going, and not only that, what's going to separate different OFS companies?
Speaker 1:So I think we're entering what I would call the bottom in terms of valuations of OFS companies. Okay, so I would call the bottom in terms of valuations of OFS. Okay, so there's a lot of companies. Are we there yet? That I wish I could predict. Okay, I feel like we should be right there, if not, there, we should be really close we got to get there.
Speaker 1:It's okay when you look at company valuations and you look at returns on your ROIs on a company. If we were going to go sell LFS, for example, what type of? Multiple of eva dot plus assets or whatever you get for the company is is ridiculously low. Okay, you know you get outside of a limit gas, so that means not a lot of people want to sell right now.
Speaker 1:It's not that they don't want to sell, is what people are willing to pay for it. Okay, right, ofs has historically had a much lower multiple on EBITDA than a lot of other businesses. So you get into technology, licensing, software and things like that can drive 15 to 20x EBITDA. Ofs. You're lucky to get to Forex, so you may have this amazing company. It's producing some really healthy cash flow. You start to get into these fundamentals of do we just do cash distributions to our employees or do we sell the company for one time, and that one time may not be enough when the offers come in to outweigh what you can do in cash distributions. So I think the companies coming into 2025, the ones that run on zero debt are going to be in a really good position and the ones that are vertically integrated are going to be in a really good spot. In the chemical space in particular, there's a lot of new chemical companies that pop up every year.
Speaker 2:Why is that? I mean, it seems like such R&D.
Speaker 1:Why do new chemicals pop up? Well, you know not to knock them, because there's a space for every single player.
Speaker 2:No, you can't knock them because you are on this podcast right now and there's no one else here. If there are, we'll jujitsu them Anyway go on.
Speaker 1:We had a portion of our company acquire around 2021. The reason we did that was to become vertically integrated. When we started up, lfsfs did not go out and buy facilities and build big tank farms and buy a bunch of equipment, go asset heavy and rack up a bunch of debt. You know, we also realized that at some point that we can't just toll manufacture and we can't just rely on other people to make chemistry for us Right. So when I say that there's a, there's a lot of our what I'm what I would say is competition that are buying a chemical, slapping a label on it or a name on it and then they resell it. Now they have a purpose, they're in a basin, they have local logistics, so it's fantastic, okay.
Speaker 2:They provide a service around the chemistry that a lot of manufacturers can't provide. So it's kind of like. I guess a comparison of that would be like. It's like you're like Garrison Brothers, like in Texas, you make your own stuff, versus one of those still Austin things where they go and they buy a lot of stuff from Ohio and then they make some slap-a-label.
Speaker 1:Yes, Okay and we are starting to see a little bit of consolidation. There was a public announcement the other day where S&F, which is one of the largest I think it might actually be the largest water-soluble polymers company is buying a couple of more local distribution and application-stacked companies. So you're seeing that a little bit in the chemistries. We're seeing that Now. That a little bit in the chemistry. We're seeing that. Now I have no idea what the financials of that acquisition looks like. It's definitely none of my business.
Speaker 1:Maybe one day it'll become a little more known what that looked like. Hopefully it drives a little bit higher multiple for people that have some perceived value outside of just a reseller. I know one or two of the companies that were in the middle of this acquisition and it seems like it was a very reasonable acquisition and I'm sure there's a lot of pieces to that puzzle that I'll probably never know about, but you're always going to see some of it. We've seen it on the frack side. We've seen it a little bit on the chemistry side.
Speaker 2:On the drilling side too.
Speaker 1:yeah, and on the drilling side and I think for our space, space in particular, the chemical side in order to be picked up and create value, you've got to have some unique technologies that other people really want.
Speaker 2:Okay, so as an OFS company I guess that would be one of those things be a competitive bench. How would you survive right now, Take away the data and all that stuff how would you survive as an OFS company? Would that be investing in technology? Would that be running your customer base?
Speaker 1:What would it be? I think the minute you stop investing in technology and you stop investing in sales, you're probably on a path down we hear it, we see it all the time where it's constant cuts in order to stay healthy. Sometimes, as the owner of a company, you have to put back in and say we need to push forward. We do believe in what we're doing. We believe in the technology that we have. How do we get in front of more people? Okay, Right, there's a lot of ways to market and be in front of people. You know we have a marketing company and you're well aware of it At midnight. They do an incredible job. They do an awesome job for me too. I love managing all of our outward looking, everything from websites. It's your dog.
Speaker 2:My dog is going to get fed. My dog is a make-believe dog and two real cats.
Speaker 1:The minute you stop investing in your business in your business, I think, is when you stop you start going backwards, when you say, oh, we don't know what's coming, or the market's getting really tight, the number of opportunities out there may be shifting a little bit, you know, in a downward trend and you know the the frack market for us has always been fairly predictable outside of a COVID type event. Right, yeah, you can kind of watch what's happening on the drilling side and you can predict what's going to happen on the frac socket and then, as drilling picks back up, you can kind of assume that the frac mark is going to pick back up. Okay, so it's you know those cycles are fairly easy and you see a lot of people retract when things get tough. And you know, right now we're we're doing some things that are probably the opposite of that trend and it's, you know, is now the right time to look at adding to the company.
Speaker 2:So do you find do you find kind of going against like what others are doing? Like I've been studying this and I'm like, if you're a salesperson, be the opposite of the salesperson. You know what I mean Like if you're this, be the opposite of this. I mean, I think that's a way, first off, to draw in and stick out and also to connect with people. So whenever it's like this, do you like being doing the opposite? Not not obviously all the time.
Speaker 1:You're obviously there's some strategy and some financial decision and all that stuff behind it, but like times like this, do you like kind of pushing against on how you manage the company when times are really good, If you don't overspend when everything's going great, just because revenues are high and your gross margin is doing well and you're putting some money in the bank, your R&D budgets are fully funded for the year.
Speaker 1:As long as you don't go out and overspend at those times and you sit on some cash reserves so that when times get tough and maybe there is some talent that hits the market, you can say you know, company, company a over here is is starting to struggle and we've heard that they may have some layoffs or reductions. It's a great time to go out there and try to get some people that are possibly undervalued Right. Okay, you know it's. To me right now it's a little bit crazy how much we have to put into G&A, into payroll, Okay, you know, but that's what it takes to acquire really good talent. You have to be willing to invest. I'm sure us, like a lot of companies out there, have struggled to bring on that talent.
Speaker 2:It's so difficult For a reason To find talent, Like again. I mean whether it's E&P and all that stuff. But even on the service side, whether people are saying, do you know anyone in Midland, Do you know anyone in Oklahoma City, it's still difficult to be like, yeah, I guess this part it's more challenging now than it's been previously, Absolutely.
Speaker 1:And you and I have had that conversation off the record. Yes, hey, if you hear of anybody that might be looking, here's where we're shopping. Here's your inbox it's going to be ripped. Rip your inbox after this podcast.
Speaker 2:We're actively pursuing right now, how has sales changed? How has business development changed? That you've seen throughout your career. Because I think it has changed.
Speaker 1:I think the traditional way to sell is it's becoming rare. Yeah, I'd say our biggest challenge and this probably spans about 20 years the change that I personally have seen. I think 20 years ago, maybe a little longer, you saw more career employees, Okay, right, Particularly at the NP level. Service companies have always had a lot of movement Well, noble Drilling.
Speaker 2:at first they Noble Drilling, they named their rigs after long-term equipment, yeah, you know.
Speaker 1:So I think salespeople 20 years ago built a relationship with somebody as an engineer. Maybe they were 25, 30 years old. You build an engineer and you got to work with them for the next 20 years within that same company. In a lot of cases and I'm not saying that doesn't exist today, because there's definitely still exists, but I know what you mean yeah, today we see so much movement, right, and I'll tell you right now, personally, without it's going to be a plug for for LinkedIn, but you know, without something like LinkedIn, there's times you go a month or two without talking to somebody and all of a sudden they're at a new they're yeah, it was issued. Yeah, or a new company or you know best case, they're in a new position within the company yeah, which that part has always been the case, right, younger engineers move from production to completions, to drilling, to reservoir, to geology, whatever it might be, to try to get all the various disciplines.
Speaker 1:So sales people are constantly chasing, trying to find the decision makers right and that's a tough task. I mean, there's a lot of accounts that we work with that could take two or three years to turn a sales cycle Just understanding who has the authority, who can make the decisions, who has the power? Absolutely. And this all starts with relationships. I know there's a lot of folks out there that would say that, no, the technology speaks for itself. You go in with a technical presentation. I'm going gonna tell you right now my personal experience and, I think, the experience in our entire team if you don't have a personal relationship, it's very difficult to get to the technical discussion you know, that's just to kind of echo that, I mean, that's, that's what you're hearing across the board.
Speaker 2:It's like networks matter, communication matters, your, your, your personal relationship matters, I mean. So the fact is, you're right, people might have started working with their 25-year-old engineer all the way up and all that stuff, but still, relationships matter, relationships matter if you take a call with someone, if you have a meeting with someone, if you do a lunch with someone. And it's getting so much more difficult, at least what I've seen.
Speaker 1:This day and age we're all hyper-connected, but it's been so much more difficult to build a relationship with people this day and age? Absolutely, and that's the reason it's very difficult for us to hire sales. Is that reason right there? When we interview for sales, one of the first questions we ask is how healthy is your Rolodex? We need to know that you have a Rolodex that you can call on. That will take a beating, you know. And then, secondly, is are you going to have a passion for what we're doing If you don't have a passion for the chemistry, in the sense that if you don't exude confidence in what you're selling right, if this is just another product, a yeah, I've done this, I have this in a big year because they offered me a great job your customers are not going to buy what we're offering unless you show a lot of passion for what you're selling.
Speaker 2:Yeah, your words are not going to match your tone, your pitch, your confidence, your body language. I mean, they're not going to be into it.
Speaker 1:Correct, and we've you know, we've had a little bit of turnover on the sales side because of that. Okay, you know, and that's it's understandable. Chemistry is very difficult to understand, I know. You know it's um. I know that a lot of people know that.
Speaker 2:Yes.
Speaker 1:It's very difficult to understand it's. It's not something that the EMP can. It's not tangible to them, right it's not casey, it's molecular yeah.
Speaker 1:You know they pump certain things because they know that, okay, it's on my spreadsheet for my well program. We have to pump a friture. We have to pump, sometimes, a scalable inhibitor. Sometimes we have to pump this.
Speaker 1:But when you're selling value-add chemistries in, say, the surfactic space or the clay control space or the prop and bed space or the formation preservation area, that's not something that you can just see and touch. These are things that are going to add long-term value to the. Yes, not okay, I put casing in the ground. I got to see that. I know it's there. I know what I got. If you'll touch it, yeah. So finding the sales staff to come up with work that has either heard of your company and said really good things are floating around the industry. You know we've we've actually had some cross, you know, interactions with your company out in the field, for example, and the feedback's great. I want to be a part of that team. Okay, that's who we're looking for in our organization is is people that want to be a part of the state, not for a paycheck. Paycheck's going to go If you're, if you're really good at what you do.
Speaker 2:The paycheck will come. So, yeah, it's a. I agree with that. Why isn't? Why do you think it's so difficult these days for people to kind of grow their networks, to get out there and meet people?
Speaker 1:I, I think, I think the COVID era pretty big hurting on that. You know, a lot changed just in the scope of business, how we conduct business, was it? People got more comfortable Like what, I think you, I think you went to the work from home mentality and it's. Everything can be done from phone calls and the occasional video conference. And I'll tell you, nothing beats a handshake, Nothing beats being able to look somebody in the eye and get actual feedback. You know a lot can be done over video conference that you get a lot of yeses and then it doesn't really Right. Yes, right, you know, but if you're sitting there in person, those yeses generally mean yes, right. They're also not afraid to say no, now's not the time, or no, I don't think it's a good fit, it's to read that language and it can be a no, but come back later, or no, this isn't right right now, whereas over a video conference or a phone call, you get.
Speaker 2:You're just looking to get off of it. You're like, yeah, sure, I'll do it. Yeah, I'm not gonna follow. Yeah, it's, it's a lot, it's a lot less, it's a lot less commitment. Yeah, I think you know it's one of those things too.
Speaker 2:It's like whether it's consolidation, whether it's because if I'm an ENP operator, I'm not in touch with a lot of what's going on or I don't know what's new technology coming out there or what new chemistry is out there, then you're kind of on the backside of the forefront of what you should be doing, adding value to that company. And that's through communications, through conversations, and I'll get off my soapbox here, but I do find it. There's real proof, there's real world examples of how a shallow network can hinder and hurt your career and whether you're an EP, whether you're a salesperson, all that stuff. So I always encourage people like I don't think I'm in the business of like networking, I'm in the business of making people aware. You gotta know, sure, you know, I think, and you see it all across the board service side, e&p, other industries too.
Speaker 1:Yeah, and you know, I think another way that the industry could be helped, particularly the OFS side, is in some more advanced sales training that focus on today's world. Okay, you know, a lot of what you do is huge for this right. It kind of goes back to what we just talked about. That kind of the world has changed in terms of how we make connections, how we, how do you create a long-term relationship. Yeah, right, it's.
Speaker 1:I think we've shifted into this and it's been coming for a long time. This is before COVID, but we've shifted into this. I need this right now. Transaction, transaction at all. I think the strategic buy is a little bit of a lost art. Did you pull the right strings right now? Because if we wait until tomorrow, I've lost interest. We're working on a couple of different sales trainings right now and sales strategies. It's something that you and I are going to talk about a little bit as well. We need to ramp up the, the continuing education, the sales training, the operations training, the safety training. Yes, and I feel like some of the big sales training organizations are still pre COVID. Okay, in their training. Okay, you know not to mention names, but if you look at some of their, you know their manuals and their books on how they're going to trade.
Speaker 1:It hasn't changed in a long time. So for companies like us, we're looking at this like well, let's get our entire sales staff into some sales training Right. Some could really gain some value from it. Others are going to sit through it and you know.
Speaker 2:I have to be here today.
Speaker 1:You know they're going to feel like they don't, they don't need it. Hopefully they get a little something from it. You know, yeah, even your most successful sales salespeople who were driving again, we're probably no different than most organizations where it's an 80-20 type of a scenario. You know 20% of the sales folks are drawing 80% of the revenue. We'd love to see that change. You know that's historically. Since it tracked information, it's been that way. Yeah, I don't know how you change that in our space but again, if we put our entire sales team through one of these sales trainings for a day or two days or three days, and if we put our entire sales team through one of these sales trainings for a day or two days or three days, you know there's public speaking training there's. You know the Thomas.
Speaker 1:Masters and the Wilsons and the Sandlers and all these. But you know, I think our organization could benefit hugely if they would. We need to advance that.
Speaker 2:I think there's a lot of sales. I mean, I talked to a lot of buddies and it's like this tactics used in 2018, 2017, 2019 are still being applied today. It's a sharpened pencil and it's bitching to grind, that's that's and that's kind of, and also it's a lot of back in back in the day. But earlier you could go like, hey, let's go uh, grab a beer. Or let's go, uh, this happy hour, meet some folks, grab a beer. Those days, to me, from what I've seen, are gone.
Speaker 2:People very rarely enter into an environment where they don't know where they have to know, or even it's a casual happy hour. So I still know people doing the same strategies they've done for seven years ago and they're still in the same results, which is nothing, and there's no evolution. There's no thought of like oh, maybe we should change our strategy. For me it's shocking. There's no point. That was just me making a point. That wasn't a question. It's interesting the fact that we do need to evolve as an industry Our communications, the conversations we're having, the knowledge we're sharing, and being stuck and just bitching about it is not a strategy.
Speaker 1:Sure, and I, you know I'm I'm guilty of it right now as well. There's some things I've historically always done, yeah, and I'm still kind of pushing for those today and and I need a little guidance on how to get out of that rut. Okay, you know a good example, that is, we get the entire company together management sales yes, you know some of the folks from ops not all of them, because we can't have them all come out of the field and facilities, but you know a lot of the leadership get together twice a year. Okay, we do a kind of a summer retreat and then we do one around November, and that's just historically what I've always done, you know, and it gives every salesperson an opportunity to talk about the challenges they're facing.
Speaker 1:What do they need from the organization? The organization gets to respond with how can we better support you in your efforts? Sometimes that's here's some ideas on new chemistry. Sometimes it's I need a little more support from ops in this area. I'm really struggling here. Sometimes it's I spend too much time in front of the computer and I need to be out. Okay, great, these are great, which is a huge thing for a lot of people, right? Yes, yes, I'm trying to figure out a way and I'll be working with our, our sales leadership and certainly Neil on this is is how do we change this up, like how do we get it to be more energetic? Because a lot of times it comes across to me at the end of this is okay. Well, we have to do this.
Speaker 1:You know, that's a tough feeling. We have to do this now. You know some of it. I get a lot out of it, uh, in the sense that end of year we really start talking about the next year, we start talking about forecasting running next year. Um, because running a business you have to have a budget, at least a target for your budget, and a lot of that comes from the sales side. Here's what we're seeing in the industry. Here's what the activity level is going to be. Here's, you know, we're hearing some rumors that this customer may be acquired, that customer may be acquired, this one's acquiring more average, and how's that going to affect our opportunities for, say, for 2025? So in November or early December, we'll have another big powwow, okay, and we'll talk about these things. The sales team will present what they've always presented and I feel like it's it's something I need to work on and maybe we need to take a completely different approach. I don't know what that approach is today. I wish. I would love some feedback.
Speaker 2:You might not have the right answer. I say, whenever you have that feeling that you do have to change something, whether it's the communication strategy or the type of event, you're not going to have the right answer. You just got to try stuff out. In my opinion, Wrapping this up, we've been talking for a little bit what are some key skill sets that individuals need today to thrive in the oil and gas industry?
Speaker 1:I don't know if that's yes, I think time management is a big item these days, so this kind of goes back into that whole working from home conferences. I think we've run into broadly very poor time management. Okay, there's no way, and I don't want to go down this path because it leads towards micromanagement. I hate micromanagement. I want everybody to just do your thing.
Speaker 2:You seem like a guy that would hate it. You want to hire people I trust who do your job. Get it done.
Speaker 1:Thank you, unless we're training somebody to micromanage and tell me how bad I was at something In the business world. And tell me how bad I was at something In the business world and I'm guilty of it as well. You're working from home and it's distraction here and it's distraction there and you look back at the end of the day, you go man, I had 15 things to do there and I only got 12 done and I don't actually have the time to do them, but I got distracted. I think that plays a big role in sales, particularly today. Okay, you know ops not so much, because ops is pretty structured, right, we know what trucks have to roll and what type. Right, you can't mess that up. You have to have that, you have to do that, you have to have some manpower. I think sales we've really entered this.
Speaker 1:Neil actually brought this point up several months ago. He's actually brought it up many times. When he and I were working together previously, that was before LFS we could go to any city Denver, oklahoma City, pittsburgh, you name it and you could have seven good meetings in a day. I mean a full day Started at 7 am with a really solid breakfast meeting. You get meetings to the day. I mean a full day, right Started at 7am with a really solid breakfast meeting. You get out of the office, you'd finished all the way through dinner, fly home the next day. But you know you, you had seven, great yeah.
Speaker 2:It was a great, it was crunchy, yeah, and sometimes you're running from one meeting Right, yeah, cause you're like man, that was a great meeting. We're late, yeah.
Speaker 1:How are we even going to make it there? Those are the good old days, yes, and you know now, neil and I travel together and it's you know, you go to Denver and you get two meetings, yeah, and then you have a bunch of phone calls and emails, and it's not always the case, but I'd say, generally speaking, our days are not as productive when it comes to the sales side of it.
Speaker 2:Yeah, but okay, I mean I can see that. I mean it's again, it's the hyper-connected, disconnected world. I mean going and making those seven appointments that day. I mean that was a trivial back then because people wouldn't meet. This day and age it's very.
Speaker 2:It's like the first thing for me is like hey, let's have a phone call. Are you available next week for 15 minutes? I'll send you a counter. It's like just pick up the phone and call, right, yes, I have found and this is just kind of an observation, kind of wrapping this up I have found the stuff that I thought worked for the past two years is not working now, right, so, for example, like before I said the oil field never good.
Speaker 2:You know, we Before I said the oil field never Googled, we just pick up the phone. Hey, jim, who do you know? For chemistry I go LFS. Now I feel the oil field Googles because we don't talk. I feel that like I was going on a tangent, but like emails, I thought people would check emails. I think there's more business done picking up the phone and having conversations, because I don't think people check emails anymore these days and that's just kind of like I just I'm seeing this, like this pull away. Whether we communicate, correspond on our texts, on our texts on our phones or through email, I feel that there's a huge pullback from that. Now people kind of go old school like picking up the phone, calling people, you get more stuff done.
Speaker 1:Yeah, I don't even really have a good response.
Speaker 2:There's no response to that.
Speaker 1:And you're, you're dead. You're dead on with that. It's um. You know you have the option to not respond. Yes and heck, I'm guilty of it. I've been called out a few times like man. I sent you that email and it's like well, I mean I read it. I meant being a horrible text responder, you know. I mean one of the guys we trained with, I think I showed you the other day. I responded, after I don't know a day or two, to a text he sent and he said man, you're just, you're one most incredible.
Speaker 2:You're brilliant at communicating.
Speaker 1:It's like well, I read it, but you didn't really ask me a question and there was 30 other texts that came in I'm so guilty of that and you know, sometimes you're driving or sometimes you're at my son's jujitsu and it's it's not the right time to you know to respond.
Speaker 2:Yeah.
Speaker 1:At Texas. It's like, well, when I, when I get somewhere and then never I'll respond to it. You know, and we've all tried to, I'd say I'd like to think we've all tried to not text and drive as much anymore. You know, I can remember just six or seven years ago I mean it was constant while I was driving you had the phone up and you're texting, not me, evelyn.
Speaker 2:Not me.
Speaker 1:Not daddy. You know I was guilty of it, but it was very responsive. You know you didn't miss anything. It was constant responding. Now we know not to do that, but then I forget to respond, yeah.
Speaker 1:And I'm bringing that up because I think that's Cause, I think that's, I think that's the feedback from a lot of what we would say is our customer base. As well as they may read it, they may read the email. You know, I don't doubt that the emails that get sent don't get at least the subject line and maybe the first sentence read Right. And we've actually had a lot of conversation about that is how do we adjust the way we communicate written, yes, or oral, yeah To get their attention? I think you just did an entire topic on this elevator speech, particularly with your inter-training. I think we need to get back to I think that's a big part of where some of the sales training needs to go is how can I get your attention in, you know, four or less, or two sentences or five seconds, whatever metric.
Speaker 2:At first you think I need to do this background, but it's really kind of like providing that value in an impactful way. Yeah.
Speaker 1:And I've always been a big fan. I don't think email should be any more than about three or four sentences. I like that. If it needs to be any longer than that, it needs to be a report. That actually makes sense. But an email should be a memo. It should be a memo, it should be. You know, here's what we got going on, here's what we're doing about it. Have a great day. Some of these emails that you get that are, you know, taking 15 minutes to read and you're like you lose interest after the first paragraph. Yeah, and it's so.
Speaker 1:I think we really need to focus on the subject line. How do I get your attention? Yeah, because when you're looking at it on your phone, it's the only thing that pops up. It's a subject, who did it cover and what's the subject? Yeah, you know, I think pre-COVID you could send an email and it just said lunch. And then in the body you put hey, you're free on Tuesday. Yeah, 11.30, from lunch at wherever. And it was yeah, sure, now, it can't be that day Right Now. If you put lunch in the subject line, that's the first thing these guys delete. Man, I don't have time for that, I don't want. Yeah, people don't have time, and again, I think that comes down to that time management. Right, I think they do have time. I don't think a whole lot's changed other than our ability to manage time.
Speaker 2:We've got to manage our own time and I'm guilty of that too, working at the house. So you've got to have some structure. We all are. You have to have a little bit of planning and intent. I think having intention and being strategic. This day and age is vastly more important than it's been previously.
Speaker 1:Absolutely, and there's some positives that come from more remote work. You know I'll bring up Neil again. I think one of the greatest things in the world is Neil. Actually, his health has increased dramatically. He goes for a walk every single day, it makes a couple of calls and that's awesome.
Speaker 2:You didn't do that in an office. I'll walk and talk every morning and literally anxiety drops. You're trying to plan your day, get a little more clear. You take that hour to go for that walk and know you want to get behind that computer, but you give yourself that.
Speaker 1:Oh, a hundred percent. I'm a huge fan of that, so I think that's one of the positives is, I think we're becoming a healthier industry, as all of this, because of some of this stuff, you know you have time to go to the gym, you have time to go for a an hour long walk and make a couple of conference calls, or you know video calls from your phone, because you could do all. We're connected, right, we're, we're, I were connected, so you can do it from anywhere. You put your you know your AirPods in and you go for a walk and you knock out three or four calls, whether you're sitting at a desk or on a walk, nobody cares you actually.
Speaker 2:I think you're actually more productive Personally.
Speaker 1:Agree 100. If I'm on a walk on a conference call than I am sitting at my desk and you're thinking clear. Yeah, sitting at your desk, you're reading the emails that are coming in, you're going to get three other windows there's a lot.
Speaker 2:Three man, that's rookie numbers. You got to get those up. I got a lot of windows going up. Hey, listen, you got to catch a flight. Buddy, I appreciate your time. What's going on? What's the wise words?
Speaker 1:Man. Learn a couple of good chokes. Learn a couple of good chokes. Tap early. Always be aware of your surroundings. Be ready to jump in and destroy at any moment's notice.
Speaker 2:And also be willing to have your ego checked at the door.
Speaker 1:Always got to be willing to have your ego checked.
Speaker 2:No, but that's one of the coolest things about doing jiu-jitsu, it's like. It's like you have 120 pound like high school kid, kick the shit out and you're like, all right, I dig this I like this.
Speaker 1:You know what I mean.
Speaker 2:Last night oh really, yeah, yeah, coach, noah, oh yeah, okay, like two times. Actually, who's gonna be a petroleum engineer? Um, that's what I was going to mind. So I'm looking forward to kind of wrapping him on some of uh, absolutely, I really look forward to it. I dig that. I said I'll teach you communication, you teach me jujitsu, so it's a fair trade.
Speaker 1:I'm sure you'll be good at teaching communication. I oh, it's all. It's all two.
Speaker 2:Jim, I want to thank you for know what's going to happen in this world. I think you're going to go on a flight in that and hopefully people understand not to take the aisle seat Absolutely.
Speaker 1:I'll fight you for the aisle seat. I appreciate that. I'm an aisle seat guy too.
Speaker 2:I want to thank everyone out there for tuning in Again. Jim Holmes, president of LFS Chemistry Reach out to him, find his company on LinkedIn. Check their stuff out. Obviously, it's beautiful marketing Thanks to Midnight. It's beautiful marketing thanks to midnight, perhaps, and the whole group there, and uh, we thank you and I look forward to talking to y'all soon. It's energy crew thanks boom, boom boom, thank you.