The Ultimate Guide » Small Business Bonfire

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December 24, 2022
UPDATED: 
December 24, 2022


Do you have a passion for oil? Are you looking to start your own company? If so, this is the guide for you! 

In this post, we will walk you through everything you need to know to start an oil company.

Whether you’re just starting or already well on your way, this guide will help you take your business to the next level.

What Are the Steps To Starting Your Own Oil Company?

Step 1: Do Market Research

Getting an oil company off the ground is no small feat! Before you plan to acquire land, drill holes, and transfer crude oil to refineries and fueling stations, you should start by researching market. 

Conducting market research will help you map out 

  • how saturated the market is
  • how much of a demand is there for your products
  • and how other rivals are succeeding or failing.

This information can help determine which areas have the most potential for your business and how to best reach consumers. 

Doing market research will also help you create a comprehensive business plan outlining how you manufacture and sell your product. It’s also important when getting a loan or investors, as they want to ensure that the business they’re putting their money into makes sense and has a solid foundation.

Market research is an incredibly important step in starting any business; you should not overlook it. It could make or break the success of your business endeavor.

Step 2: Decide Your Geographical Location Invest

Where you decide to establish your oil company is one of the most crucial decisions in how to start an oil company.

Factors you should consider when deciding where to establish your oil company include:

  • how much land are you able to acquire
  • how accessible the land is for transportation
  • how close it is to refining and storage facilities
  • local government regulations
  • how close is it to existing refineries or any other associated infrastructure

Climate could also be a key consideration when setting your sights on the optimal investment location; some locations may be more suitable for oil production than others due to their climate and topography.

Investors who approach this step with ample research can ensure they make the best choice possible for their new venture in the oil industry.

Step 3: Build a Rockstar Team

When it comes to how to start an oil company, having the right team of experts is essential.

After you have determined your business plan and financing options, it’s time to build a rockstar team. 

Experienced professionals who have each worked on successful projects within the industry are key—you’ll want personnel knowledgeable in areas like:

  • finance
  • legal
  • production
  • and engineering

You will also benefit from hiring specialists with expertise in conveyor repair, pipeline repair, and oil well maintenance.

Hire a rockstar team

For your oil company to reach its full potential, find talent who will go above and beyond the call of duty and exceed expectations in how they approach their work. Make sure your team has a mix of highly skilled specialists, creative minds, and problem-solvers.

With ambitious goals and excellent leadership from your rockstar team, you’ll be well on your way toward launching a successful oil enterprise!

Step 4: Create a Business Plan

Taking the time to create a well-thought-out business plan when starting an oil company is essential.

A well-made business plan should include the following:

  • a detailed explanation of how you plan to operate your oil company
  • what type of machinery and equipment you will use
  • how do you plan to fund the venture
  • how much you anticipate from profits at the end
  • how do you plan to market the company

With a well-crafted business plan, you can more easily navigate the ever-changing industry and adjust how you approach obstacles or successes. 

Having an organized and realistic document of your goals in mind when starting an oil company will help you identify how you want to develop your business and how you’re going to reach success. This can also help you set realistic expectations, identify weaknesses, and determine the best marketing strategies. 

Having a clear vision of how to start an oil company before getting started ensures that you consider all steps which will result in a more successful venture!

Set up a legal entity

Starting an oil company is a large undertaking, and setting up a legal entity should be taken seriously.

When deciding how to structure your business, corporations and limited liability companies (LLCs) are the two most popular types of entities.

A corporation is considered its own individual “person” under the law and can be a powerful shield against personal liabilities.

The benefits of setting up a corporation rather than an LLC are: 

  • Tax benefits: Corporations can benefit from different tax advantages than individuals and other business entities. It often depends on how much money the business earns, how it pays its employees, and how it is structured.
  • Raising capital: Corporations are often better suited for raising capital through equity investments or debt financing than other business entities, as investors may be more comfortable investing in a corporation than in an LLC or sole proprietorship.

The downsides of setting up a corporation rather than an LLC are:

  •  Increased paperwork: A corporation requires more paperwork to maintain than an LLC, and the filing requirements can be complex.
  • Legal complexity: Corporations are bound by corporate law, which can sometimes be difficult for individuals unfamiliar with how it works.
  • Cost of formation: Forming a corporation is often more expensive than forming an LLC
Start an LLC

An LLC is a business structure that provides limited liability protection to its owners. Limited liability protection means protection from personal liability for business debts and other claims.

The benefits of setting up an LLC rather than a corporation are: 

  • Flexible management: LLCs do not require a formal board of directors or other organizational structures, so they offer more flexibility in managing the business.
  • Tax advantages: An LLC can choose how it wants to be taxed—it may opt for pass-through taxation, allowing its profits to be taxed at the individual level.
  • Simplified paperwork: An LLC requires less paperwork than a corporation and is generally easier to set up and maintain.

The downsides of setting up an LLC rather than a corporation are:

  • Limited liability protection: LLCs may not offer the same limited liability protection as corporations.
  • Raising capital: LLCs typically have a harder time raising capital from investors than corporations since many investors prefer to invest in entities with more formal management structures.

It’s important to do your research and look into what legal structure will protect your investments and interests both now and into the future as you establish yourself in this competitive industry.

Step 6: Seek Funding

Once you have thought through how to start an oil company, the next step is to seek out potential funding sources.

Various funding sources are available for starting an oil company, so let’s break down some options.

Self Funding

If you’re an entrepreneur looking to start your own oil company, self-funding is one way to get started.

There are a few key advantages of self-funding such as: 

  • You have complete control over how you will use the money and how long it will take for your company to reach its goals.
  • You won’t have to deal with the frustrations of raising capital from investors or taking out a loan.
  • There are fewer restrictions on how the funds are used, allowing entrepreneurs to make decisions without seeking approval from a third party.

Of course, this approach requires extra time and money upfront for the business to generate profits, which is not possible for everyone.

However, if done properly and with patience, businesses can become profitable quicker and more sustainable in the long run. Self-funding is one of many options for those who want to start an oil company.

Angel Investing

Angel investing is an attractive option for entrepreneurs looking to start a business.

  • Angel investing involves having a high net-worth individual, or an angel, invest money in exchange for ownership equity in the company.
  • From there, your venture can take off and become a profitable enterprise.

If you’re looking for ways to fund your oil company, angel investing may be the right choice.

You’ll get the capital needed to get the ball rolling and have someone closely involved with your company’s success. Plus, angel investors often have advice they can offer to guide you to success. 

Finding genuine angel investors is no small feat, but the right investor could be the missing link between your dreams and reality.

Bank Loans

A bank loan might be your answer if you want to start an oil company but don’t have the funds for it

With a bank loan, you can apply for a certain amount to help start your business and give it the jumpstart it needs. 

The benefits of securing a bank loan to start your business are:

  • it provides you with the capital you need to get started without having to search for an investor
  • the repayment terms are often flexible
  • the interest rates are typically lower than other forms of borrowing

However, to qualify for a bank loan, you will need to have a solid business plan demonstrating how your oil company will generate profits and how and when you intend to repay the loan.

Be aware of any additional fees, such as closing costs and processing fees, that could come up.

Moreover, it’s important to remember that you will still be liable for the loan repayment if your business fails.

That said, bank loans can be an ideal financial choice for those ready to dive into oil production, as they tend to provide generous amounts with competitive interest rates!

SBA Loans

Starting an oil company can be a daunting task – you need to make sure that your startup capital is sufficient and how to get the best functioning team together.

Luckily, the Small Business Administration (SBA) offers loans to help entrepreneurs like yourself start their big projects.

Applying for an SBA loan can help cover the costs of starting up and running your business. Plus, the SBA offers low-interest rates and long repayment terms, making loan repayment more flexible for small businesses. 

With financing up to 5 million dollars, an SBA loan could be the perfect solution for helping you get your oil business off the ground quickly and smoothly.

Venture Capital

Starting an oil company is not easy, and obtaining venture capital can be crucial to success. 

Venture capitalists provide funds in exchange for a stake in the company’s future profits.

Venture capital is how entrepreneurs launch their businesses without betting all of their own money and how established companies continue to grow when conventional financing doesn’t suffice.

Secure funding for your oil business

Obtaining venture capital means show investors proof that you have: 

  • unique idea and understanding of how to get it out of the ground
  • a competent product or service that can make money
  • a strong likelihood of success
  • a strong team that can help you execute your plan

Investors need to be confident that your business will do well, so your goal should be to demonstrate your company has potential. 

However you secure the funding, venture capital is often essential for helping passionate businesses reach their goals.

Those are a few options for securing funding for your oil company. Whichever route you choose, remember to form a solid plan and present proof of how your business will succeed.

Step 7: Get the Equipment

Now that you’ve covered the less tangible aspects of how to start an oil company, it’s time to get into the elements that make it a reality. Step 7 is all about nabbing the equipment necessary to bring your business plan to fruition.

Depending on the scale of your operations, this typically includes: 

  • pumps
  • gas tanks
  • pipelines
  • oil rigs
  • drilling machines
  • vehicles
  • land surveying equipment

No matter how small your budget may be, getting quality materials to produce a good product and last many years of service is important.

Don’t skimp on this part – a little research into what works well and where to purchase it from can pay dividends later on!

Step 8: Focus On Profitability

The eighth step of starting an oil company is making sure your business is profitable over time.

When focusing on profitability, ask yourself questions such as: 

  • how much revenue do you need each month
  • how many products or services should you be offering
  • how much money is coming in versus going out
  • how can you decrease outgoing costs
  • and which marketing techniques will help increase sales

Researching business trends and planning are key elements to success in this industry.

Additionally, setting achievable goals and tracking financial performance can give you insight into how to continually improve your business operations.

Taking the time to focus on profitability can help ensure that your oil company remains successful in the long term.

Wrap Up

Starting an oil company is no easy feat, but it can be a great business opportunity with the right planning. 

From researching how to get funding and choosing the appropriate equipment to stay focused on profitability, there are many steps to setting up your oil business for success. 

By following this how-to guide, you, too, can create a thriving business in the oil industry.

Now we’d like to hear from you! Have we missed anything? If you have some tips and advice on how to start an oil company or make an existing one more successful, let us know in the comments below!

How to Start an Oil Company FAQ 

How much does an oil company owner make?

The average oil company owner makes around $150,000 per year. However, this figure varies greatly depending on the size of the business, its location, and how successful it is.

Is owning an oil well profitable?

Owning an oil well can be extremely profitable as long as a steady oil supply is available. There are also tax breaks associated with owning an oil well, which can help offset the cost of operation and make it more profitable.

How can I start oil industry?

Starting an oil business can be a complex process, but it can also be extremely rewarding. Before getting started, you will need to get funding, research the industry and how to start your particular type of oil business, purchase equipment, and stay focused on profitability.

How profitable is the oil business?

The profitability of an oil business is dependent on how successful it is in the market. If your business has a steady supply of customers and can manage costs effectively, it can be highly profitable.

How much does it cost to own an oil company?

The cost of starting and running an oil company can vary greatly depending on its size. However, typically you will need to factor in expenses such as the purchase of equipment, operating costs, taxes, and other overhead costs.

Who is the richest oil company?

The world’s largest publicly traded oil company is ExxonMobil, with an estimated market capitalization of over $352 billion. Other large oil companies include Royal Dutch Shell, BP, and Chevron.



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Author

  • Chuck Parsons

    Chuck is Score LA’s Executive Director of Events and Marketing. He aims to help business owners and would-be entrepreneurs in Los Angeles improve their business practices.

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