The Pig is a project-oriented business model. It completes client projects by allocating resources in line with project requirements.
No two client projects are the same. Resource requirements vary, at times significantly. There is no certainty that the Pig will be able to amass needed resources in as quick and efficient a manner as desired.
Retaining idle resources is a strategy to overcome this uncertainty. It is, however, an expensive approach. Capital equipment is a cash drain, a challenge for construction firms like Manitowoc (NYSE: MTW) and Illinois Tool Works (NYSE: ITW). Engineering firms like Butler National (OTC: BUKS) balance capital and human resource utilization.
Boots and Coots (NYSE: WEL) specializes in fighting oil well fires. The business is highly volatile. When there are no fires to extinguish, revenues dry up. As shown in the table below, the firm struggles to retain highly skilled (and rare) employees (including keeping them on staff part time) in the face of volatile revenues.
| Year | Employees | Part time employee % | Revenue ($mil) | Net income % |
|---|---|---|---|---|
| 1998 | 602 | 25.7% | $32.3 | -- |
| 1999 | 354 | 19.2% | $33.1 | -- |
| 2000 | 196 | 39.3% | $23.5 | -- |
| 2001 | 173 | 23.7% | $36.1 | 3.6 |
| 2002 | 46 | 6.5% | $14.1 | -- |
| 2003 | 39 | 5.1% | $35.9 | 19.8 |
| 2004 | 66 | 10.6% | $24.1 | -- |
Boots and Coots is a fascinating company. Their 10K filings are fascinating and can be read in many ways:
Compare the company situation in 2004 to 2008. Management turned a financially troubled company into a healthy one. Ask yourself: how did they do this, in business model terms?
An on-going debate within my circle of friends and students centers upon how Wall Street evaluates a firm. Look at WEL's stock performance and ask yourself: Does Wall Street "get it?"
To improve your mastery of the business model template: Chickens and Pigs - The Book
