California Contractor Battles Challenges as He Continues to Grow His Company

Despite a history fraught with close calls, S&S Directional Drilling persevered, with a bounty of lessons learned along the way.

California Contractor Battles Challenges as He Continues to Grow His Company

The leadership team at S&S Directional Drilling includes, from left, project managers Matt Fensler and Joker Barber, and owner/CEO Scott Sanchez.

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“Roller coaster” is a fitting term for the tortuous route Scott Sanchez has taken to find entrepreneurial success.

In an industry where market fluctuation is simply the name of the game, S&S Directional Drilling in Norco, California, has flirted with disaster more than almost any company out there. Despite that, Sanchez has managed to weather two recessions and come out relatively unscathed, now building his company back up to its peak form.

“I had to learn everything the hard way. You can’t go crazy when the money comes in; you’ve got to save your money for a rainy day,” Sanchez says. “We took a bunch of steps backward, but I’m an eternal optimist. I think most entrepreneurs are, and they have to be.”

Borrowing money from family and taking on debt to get off the ground, he has had to contemplate bankruptcy and fight back from the brink of collapse more than once, in part due to the nature of the industry, but also because of youthful mistakes. Along the way, he has learned his fair share of lessons about staying profitable in the complex field of directional drilling.

MISADVENTURES OF A BUDDING COMPANY

Sanchez received an introduction to the volatile world of directional drilling within the first few months of running his own business.

“I remember I wrote a check, like the first month after we got started, I wrote my dad a check for 80 grand, to pay him back, and that was after one month of being in the business,” Sanchez says. “We thought, ‘Oh man, we’re going to be rich.’ And then fast-forward another six months and we’re figuring out how to not go bankrupt.”

After business went downhill, Sanchez and his drill operator brother-in-law had to take their rig all the way to Georgia to keep working and stay in business. That lasted only a few months, and then came a big job that was both a blessing and a curse.

Adelphia Communications was the sixth-largest cable company in the U.S., before one of the biggest corporate scandals of the era sent it into the ground. Cooked books and theft from shareholders found the company — and every contractor working for them down the line — in shambles.

“We were making some good money, kind of getting back on our feet, and then all the sudden, our general contractor just called us one day and said, ‘Hey, stop.’ We were like, ‘What do you mean stop?’” Sanchez says. “They were my only customer at the time.”

That might have been the end for Sanchez and his supporters, but for a stroke of luck. Owed about $250,000 in receivables, as he was literally sitting in a bankruptcy attorney’s office, he got some news that gave his still-forming company new life.

“I got a phone call from the general contractor, who said, ‘I can pay you 70 cents on the dollar for your receivables.’ I said, ‘Done. Done! Pay it!’” Sanchez says. “We took that deal. I got out of the bankruptcy office and was able to pay off a lot of my vendors that I owed money to. They took the same deal I took, and we moved on our way.”

Staying small for a while after that, the company eventually began working on the Verizon Fios fiber optic network in Huntington Beach. What followed was the most profitable period of the company’s history.

PROBLEMS COLLIDE

That wasn’t the end of turbulence for S&S. As with many in the industry, the 2008 recession was a crushing blow. Though Sanchez says they weren’t really affected until 2009, it was another period of hanging on for dear life. Their low point came after losing $300,000 in a single year.

Challenges due to the recession were compounded by a personal crisis in the Sanchez family. “I kind of took my eye off the ball when my mom passed away in 2010,” he says. “The company took a really hard hit, and that’s when we had that huge loss. We had to cut way back.”

Unfortunately, bouncing back a second time wasn’t as easy as finding a single big job to spur growth.

“There were a few years where there was literally no work in California, so we worked in over eight states during that year,” Sanchez says. “We were just following the work. Anywhere we could go we’d follow the work. That really wasn’t working out, so I downsized to two rigs. I’ve been crawling out of that hole ever since.”

Today, the company is three rigs strong — as well as a smaller fourth drill machine that doesn’t run full time — with 28 employees, on a growth trajectory. But they still haven’t regained their peak five rigs and 40 employees, which is where they were during the Fios boom. Part of that is intentional.

“Right now it’s just really starting to kick into high gear with some of the projects that are going on, and we’re actually looking to get bigger,” Sanchez says. “But I don’t want to go crazy. That’s my biggest lesson that I’ve learned is just to not dive in too deep.”

FOLLIES OF YOUTH

Sanchez was only 26 years old when he started the business, and he admits now that he made some mistakes early on.

“Now I’m 44, and it’s kind of like when you’re investing, right, you’re conservative,” he says. “I’m a heck of a lot more conservative than I was when I was 26.”

Part of that, in addition to experience and growth, is perspective. With a son about to turn 18, Sanchez has to look toward the future.

“Now we’re starting to look at this thing and go: Are we looking at a second-generation company, a two-generation company? Is this something that they’re going to want to do?” he says. “That’s where my head’s at now. We are currently engaged in these conversations right now; we’re trying to figure that out.

“By no means do I want to dump this on my son if it’s not something he’s interested in,” Sanchez says. “But if he comes to me and says, ‘Hey, I’m ready to get started with my career and this is what I want to do,’ then I’m also going to say, ‘All right, where do we go from here?’”

With that possibility in the air, the focus is on stable, controlled growth. With age, Sanchez has also realized the importance of an establishing a reliable safety program, and has enlisted the help of Safety Compliance Co., which has a safety app and online training platform that simplify training while making sure it remains at the forefront of company practices.

All this leaves Sanchez and his team ready to take advantage of a thriving market.

“I think the industry itself seems to be doing really well. It seems that there is more work out there now than there has been in a while, so I’m just hoping that it continues along this path,” Sanchez says. “I think one of the biggest lessons I’ve learned is to not have all my eggs in one basket.”

SURVIVING ON FRIENDS AND FAMILY

Keeping the company in the family would certainly play into the history of getting S&S off the ground. When they incorporated in 2000, the four founding members were Sanchez and his wife, Michelle; father, Steve; and mother, Christine.

As the official secretarial officer of the company, Michelle quit her full-time job to run the books for the company. Sanchez says she was integral to getting the company off the ground.

His father also invested heavily in the company over the years. Both he and his father took out home equity loans to fund the initial equipment investments, and his father has remained a safety net for the business.

“My dad wasn’t rich. He just believed in me and believed in my dream,” Sanchez says. “I’ve been very fortunate to have my father as my partner, and my friend.”

Another family member who has been heavily involved throughout the trials and tribulations is Sanchez’s brother-in-law, Matt Fensler. He ran the first S&S drill machine, was one of the first crew leaders and is still the most trusted project manager today.

“You want to be looked after, and you don’t want somebody who’s going to come take advantage of you, and my brother-in-law has always been that guy,” Sanchez says. “He just takes care of us. He’s an important part of this company.”

Maintaining relationships with his vendors has also been essential to success. Without assistance from some of his biggest vendors, such as Ditch Witch, the company probably would have collapsed long ago.

The four rigs S&S runs today are all Ditch Witch — a JT2020, JT20, JT25, and JT922 — as are many of the company’s support machines. Sanchez says Ditch Witch earned that loyalty by supporting and helping him through the rough patches.

“When I was going through a lot of my hard times, I had some vendors — and Ditch Witch is one of my biggest vendors — that really helped me through a lot,” Sanchez says. “Maybe I couldn’t get a rig fixed. I would go in there and we would talk, and we’d figure out a way that I could make it through to the next year.”

He considers Mike Anderson, the local Ditch Witch dealer, an asset to the company — not a term often bestowed on a salesman. But the fact that they have gone the extra mile was lifesaving for S&S.

Beyond the bore machines, S&S also utilizes Ditch Witch and Vermeer mixing systems, Big Tex dump trailers, a Slabach Enterprises pipe trailer, Ring-O-Matic vac systems and a plethora of other support equipment.

RIDING THE HIGH

In a high-stakes world, numbers can often be deceiving, and though his revenue isn’t the highest it has ever been, Sanchez believes his company is in good shape moving forward. “It’s not always about how much you make; it’s about what you do with it,” he says.

There have been times when the company was losing money despite $2 million in revenue. Today, the company has found a balance, and though he’s not the most profitable he’s ever been, at $3.5 million in revenue and earning steady gains, he is poised for success.

“It’s a roller-coaster industry,” Sanchez says. “There’s a lot of good things going on, but I definitely had some peaks and valleys. It has its ups and downs, and luckily we’re on our way up right now.”


Finding his American dream

Scott Sanchez began his career the same way most find their way into the industry — working as a laborer for a large directional drilling company. Quickly seeing the earning potential in the line of work, he pushed to advance, until he was running the subcontracting arm of a large operation.

It was 1996 when he got his first drilling job, and by late 2000, he had bought his own rig. As the person in charge of subcontracting for the company where he worked full time, he was able to actually assign jobs to his own rig, with the owner’s permission, of course.

“I’m watching the money come in, and I’m watching the money go out,” Sanchez says. “So of course, it’s the American dream. We wanted a little piece of that, right?”

At the time, California was experiencing a directional drilling boom, and there was so much work coming into his employer’s office, Sanchez saw an opportunity. He asked his boss, if he bought his own rig, could he sub work out to himself? He got an affirmative, and S&S Directional Drilling was born.

“Basically, the work was right there at my disposal, and I could give it to myself. Which seems like a conflict of interest, but when there’s that much work, it really just is what it is,” Sanchez says. “So it just kind of worked out, but it didn’t work out for very long because the bottom fell out of the whole thing.”

As work began to dry up, his employer encouraged him to focus on his own company, and he broke off from full-time employment to pursue his American dream.



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