Typically, you should budget around $450,000 or more to start a standard well drilling business successfully. A well-drilling business can be considered a capital-intensive business due to the cost of acquiring the needed equipment.
But it is important to note that apart from the amount quoted above, there are some key factors that can determine the total budget of starting a well drilling business and that is what we will discuss in this article.
Factors That Determine the Cost of Opening a Well-Drilling Business
-
Your Choice of Location
The truth is that the location of a business will determine how much you will spend on rent or lease, the amount you will spend on labor and related costs, the amount you will spend on acquiring licenses and permits, the amount you will spend on utilities, and every other cost associated with locations.
-
The Cost of Licensing and Permits
You cannot legally start and operate a well-drilling business in the United States and in most countries of the world without first applying for and obtaining the specific licenses and permits needed to start the business.
Basically, you should make plans to obtain a business license, contractor’s license, well drilling license, trade name registration, employer identification number (EIN), building permit, environmental permit,
Health department permit, signage permits, well drilling contractor license, hazardous materials permit (if applicable in your city), fire department permit, and zoning permit et al.
-
The Cost of Insurance Policy Cover
Well drilling can be risky hence it is required that a well drilling business purchase the required insurance policy cover. Well-drilling technicians face various risks, including exposure to harmful gases, machinery accidents, falls, and physical strain.
Environmental hazards, such as unstable ground conditions and unpredictable weather, further contribute to the occupational risks in this field.
These are just a few of the risks that a well drilling business is exposed to hence they will need different types of insurance coverage for the different types of risks they are exposed it.
Note that the cost of insurance policy coverage will depend on factors such as the size of your business and the coverage limits you choose.
-
The Cost of Well Drilling Equipment, and Tools
You will need various equipment, and tools for well drilling, so you should make a budget for them from the onset of the business.
You should make provision for drilling rigs, drill bits, mud pumps, casing and well screens, drill pipe, hammers and bits (for rotary drilling), well development and rehabilitation tools, grouting equipment,
Pump hoist or rig, water level indicator and measurement tools, well casing perforators, and safety equipment (personal protective equipment, first aid kit, etc.).
As expected, the amount you are to spend on equipment, and tools will depend on the size of your business and the well drilling projects you are handling per time.
-
The Cost of Purchasing Utility Trucks (Vehicle)
Depending on the size and location of your well drilling business, you may need a dedicated utility truck for transporting your workers, equipment, and supplies to and from job locations.
It is important to note that the cost of a suitable utility truck will depend on your preferences and also your decision to settle for outright purchase or lease.
Note that the business vehicles for your well-drilling business can also include company cars, commercial trucks, and vans.
-
The Cost of Marketing and Advertising the Well Drilling Business
Promoting your well-drilling business through marketing and advertising efforts is essential to attract clients. Even though there are no specific costs attached to marketing and advertising a business, the bottom line is that if you want to launch a business that will win a fair share of the available market share in your location, then you must invest a significant amount to promote your well drilling business.
-
Staffing Cost
This is a key aspect of your budget because you cannot operate a well-drilling business alone. So, as you plan to hire key professional employees such as drilling technicians, a geologist, project managers, drilling equipment operators,
Environmental engineers, safety officers, and administrative assistants, you should also consider their salaries, benefits, and training costs, and this can be a large chunk of your budget.
Note that your staffing expenses will vary because it will depend on the number of staff members you want to hire, and of course, their qualifications.
-
Operational Costs or Ongoing Expenses
Note that your operation costs include ongoing expenses such as office supplies, utilities, transportation costs, replacement parts for drilling equipment, and maintenance expenses for your equipment and tools.
We cannot categorically give an estimate of what you should budget for your operational costs because it will vary based on your business size and the volume of well-drilling contracts you carry out.