20 JULY 2025 WorldWide Drilling Resource® Drilling Into Money Not Boring by Mark E. Battersby Pricing for Profit It is a drilling operation’s prices that determine not only its profits but also plays a role in customer retention. Unfortunately, according to SCORE (Service Corps of Retired Executives), the SBA’s (Small Business Administration’s) education and mentoring partner, 80% of small business owners underprice their products or services. Understanding if prices are too low or too high is important to the success of every business. Even more important, is how prices can be increased to cope with today’s tariff-driven economic climate. After all, raising prices without losing customers or clients remains a ticklish situation. Contracts with customers, as well as contracts with the drilling business, usually contain prices. In most cases, the prevailing economic, financial, and commercial conditions existing when the contract was signed, will remain in effect throughout its term - unless the contract contains a price adjustment clause. A price adjustment clause, often referred to as a price escalation clause, is a provision in the contract which establishes the rules for price adjustments. Triggering a contract adjustment often involves factors which are beyond the parties’ control, such as a change in the inflation rate. Triggering events can, of course, be anything the parties deem likely to have a material effect on the contract price. Since the conditions that exist at the time a contract is formed rarely remain constant throughout its term, every contract should contain a provision to adjust the original prices. Making price adjustments is an important aspect of managing revenue and profitability. The price of a good or service impacts whether or not a customer will value it and make a purchase. Strategic pricing adjustments are often the determining factor of success. Many drilling professionals believe cost-plus pricing is the only way to set prices. The calculation is simple, merely add the desired markup to the new cost. Cost-plus pricing IS a fast and straightforward way of setting prices. But remember, cost-plus pricing doesn’t consider the customer, which means the operation may lose potential profit. Every business is suffering from the effects of inflation, supply chain disruptions, and the threat of tariffs. All of these factors have impact on the drilling operation’s expenses, making it more expensive to conduct business. And remember, those same pressures have all affected the operation’s customers. Fortunately, it is possible to keep the drilling business’s customers and raise prices. All that is needed is a well-thought-out strategy and keeping the customers informed. Mark Mark E. Battersby may be contacted via e-mail to michele@worldwidedrillingresource.com
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