Acton in Action: Growing Charger Services

After our students graduate from Acton’s accelerated MBA program, they start putting their lessons to the test in the real world. The long hours of case prep and intense classroom debate may be over, but the hard work of building a business and a career is just beginning. So, we like to check-in with our Acton business school entrepreneurs from time to time, see how they’re doing, and share the results here with “Acton in Action.

Back in September 2012, we spoke with Acton alumni Kyle Davis (’12) and Tom Hull (’12) about Charger Services, LLC, the business they launched promptly after graduating from Acton.

Both in the same class, Kyle and Tom met at Acton and began working on their business plan as part of their business pitch. We recently circled up with Kyle to find out more about the company’s growth, successes, and challenges since we last spoke with them.

Dossier

Company: Charger Services, LLC

Acton Alumni: Kyle Davis (’12), CEO and cofounder; Tom Hull (’12), COO and cofounder

Founded: June 2012

Headquarters: Midland, TX

Employees: 12

About:

Charger Services is a specialized construction company dedicated to supporting the oil and gas industry. After a drill site has been determined, Charger Services prepares the location for drilling. The firm levels the sub grade and trucks in material to create a large, football field-sized surface so that the well can be drilled. In addition to spreading material, watering, and packing it, they may also build pits in the earth to hold drilling fluids and frac water.

Growth

At the start of 2013, Kyle and Tom expanded the company with a second crew, increasing their employee roster from six to twelve. They are now leasing thirteen pieces of Caterpillar equipment, which required them to expand their line of credit from US$600,000 to US$1 million.

“The bank reviewed our operations, contracts, and revenues, and extended the increase in credit, which sort of affirmed the strength of our business,” said Kyle. Given that oil companies operate on 90-day payment terms, the line of credit was crucial for covering the cost of growth.

“We’ll start receiving payments for the new crew in April. Then we’ll start paying down our line of credit,” he said. After a few months, he expects they’ll be ready to expand again and take on a third crew in June. Kyle explained that each crew is independent and is responsible for their own job site. Because of this, adding additional crew is expensive.

“It’s a lumpy cost, but we were pleased to realize some economies of scale,” said Kyle. “Since the crews are on different sites, we didn’t really expect to realize cost savings from adding one crew. But in fact, we have seen our profit margin increase.”

“Our transition from one to two crews was exceptional,” he explained. “We’re going to take what we learned and apply it to our third. It’s a real challenge because you pretty much have to bring in a 30 percent increase in business overnight.”

The company’s economic growth has been strong, but Kyle reported that operationally their growth has presented real challenges. And he faces an obstacle that many Acton grads will recognize.

“I still find myself wearing all the same hats as when I started,” he said. “Currently I’m still an important part of the business on the sales side. I do all of the books. I meet with the customers. But we’ve reached a point where I need to delegate many of these tasks. I’ve started to do this, but it’s a major priority for the coming months, and I’m planning to bring someone on to help me with that.”

Lessons Learned at Acton

Kyle credited what he learned at Acton for several critical areas of Charger Services’ success.

“At Acton they teach cash flow, cash flow, cash flow, and that ‘cash is king’,” he said. “This first quarter of the year we have had a large increase in net income and more work than we can handle. Without Acton, I know I would have added equipment and employees, chasing after all the business I could because the net income was there. This very well could have been the end of the company because we would have run out of cash without a doubt. Acton taught me how to watch cash very closely, and to grow at a pace that will not sink a successful business.”

He said that he and Tom also relied on key lessons from Acton’s People class, in order to attract and retain talent.

“It is very difficult to find quality operators with experience in the oilfield. All operators promise that they can run any machine better than anyone—and very few can. Acton taught me how to put together the right compensation package to attract and retain some of the best operators, and to fire quickly when operators are not meeting the standards we hold.”

And finally, he cited surprise at how impactful the Life of Meaning course has been for him, a year after taking it.

“It was probably the most difficult course for me to engage in and it was probably the class where I stood out the very least. At times it was downright frustrating. We are coming up on a year since the launch of Charger Services and I can’t explain how much comfort and perspective the Life of Meaning class has given my journey. I put a lot of pressure on myself to succeed, and sitting down and reflecting on what I learned in that course reminds me of what truly is important.”