Do you want to start a natural gas distribution company? If YES, here’s a complete guide to starting a natural gas distribution business with NO money and no experience.
There is hardly any entrepreneur who would want to go into a business if they know the chances of making profit from the business is slim hence the need to start a business whose products or services is accepted by all, and one of such businesses is the distribution of natural gas. It is fact that all homes and cooking related businesses make use of natural gas on a daily basis.
A natural gas distribution company is not one of those businesses that can be started without proper study of the industry, so you need to conduct detailed research in order to find out what it will take to set up the company, how to leverage on the existing market to sell your products and also how to create new market channels.
Starting a natural gas distribution company is capital intensive, but it is indeed profitable if you are able to create a robust distribution network.
The truth is that you can start your natural gas distribution business in a small town in the United States and if you put proper structures in place, it won’t be too long before your brand becomes nationally recognized and your products are distributed all across major cities in the United States of America and other countries of the world.
Steps to Starting a Natural Gas Distribution Company
1. Understand the Industry
The natural gas distribution industry comprises of businesses that manage gas distribution systems. Other companies are gas marketers that buy gas directly from the well and sell it to a distribution system, while others still are gas brokers or agents that arrange for gas to be sold via distribution systems operated by other companies.
If you observe the Natural Gas Distribution industry, you will agree that the industry has performed erratically over the past five years. Revenue declined significantly in 2012 in line with the shale gas boom, which resulted in a flood of domestic natural gas production. When combined with a shortage of pipeline infrastructure and export facilities, this triggered a collapse in natural gas prices.
The economic significance of natural gas has grown over the past decade, with manufacturers and electricity utilities relying increasingly on natural gas as an energy source due to declining prices. Over the five years to 2022, natural gas production is projected to slow, while infrastructure investments will boost pipeline and export capacity.
The Natural Gas Distribution industry is a thriving sector of the economy of the United States of America and the industry generates over $163 billion annually from more than 456 registered and licensed natural gas distribution companies scattered all around the United States of America. The industry is responsible for the employment of over 85,027 people.
Experts project the natural gas distribution industry to grow at a 3.4 percent annual rate between 2012 and 2017. It might interest you to know that no natural gas distribution company can boast of having the lion market share of the available market in the United States of America.
Please note that there are a number of barriers to entry into the Natural Gas Distribution industry. A major barrier to entry is posed by the large sums of capital and considerable expertise required to successfully establish an enterprise. Regulatory requirements at both federal and state levels requiring industry specific expertise and knowledge of industry structure can deter would be industry participants. In addition, entry into certain states’ natural gas distribution markets is limited to existing companies, at least for some categories of customers.
Some of the factors that encourage aspiring entrepreneurs to venture into natural gas distribution is the fact that the market is growing rapidly in the United States and it is not seasonal. The entry barriers might be high but any serious minded entrepreneur can comfortably raise the startup capital even if it means collecting loans from the bank.
The Natural Gas Distribution industry is a profitable industry and it is open for any aspiring entrepreneur to come in and establish his or her business as long as you are able to obtain the license and permits. You can choose to start on a small scale as a broker or agent or you can start on a large scale as a gas marketer that buys gas directly from the well and sells it to a distribution system.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those that make use of natural gas cut across industries that run gas turbines, households and all players in the food preparation business such as hotels, restaurants, bakers, caterers et al. So, it will be safe to say that the demographic composition for a natural gas distribution company is all encompassing.
3. Decide What Niche to Concentrate On
Natural gas distribution business is a niche area in the Oil and Gas industry, but we are not ruling out the fact that it is the practice for natural gas distribution companies to engage in any aspect of the business value chain for the purpose of maximizing profits.
Little wonder you will find natural gas distribution companies engage in some or all of the under-listed;
- Operating gas distribution systems (e.g. mains and meters)
- Buying gas from a well and selling it to a distribution system
- Acting as gas brokers or agents that arrange the sale of gas over gas distribution systems
The Level of Competition in the Industry
There is hardly any industry in the world where there is no competition; as a matter of fact, it is competition that brings creativity and innovation in the business world.
If you are looking towards starting a natural gas distribution company, then you should brace-up for competition in the industry. You are expected to compete with other players in the Natural Gas Distribution industry even if they operate as brokers or agents that arrange for gas to be sold via distribution systems.
The relative competition the industry is not hampering the performance of new entrants as most of them know how to strategise to reach out or attract more customers.
4. Know the Major Competitors in the Industry
In every industry, there are always brands that perform better or are better regarded by customers than the others. Some of these brands have been in the industry for a long time, while others are best known for how they conduct their businesses.
These are some of the leading natural gas distribution companies in the United States of America and in the globe;
- Chartiers Natural Gas Company, Inc.
- Columbia Gas of Pennsylvania, Inc.
- Leatherstocking Gas Company LLC
- North East Heat & Light Company
- National Fuel Gas Distribution Corporation
- PECO Gas (Exelon Corporation)
- Peoples Natural Gas Company LLC
- Peoples – Equitable Division (Formerly Equitable Gas)
- Peoples Gas Company (Formerly Peoples TWP)
- Philadelphia Gas Works (PGW)
- Pike County Light & Power Company (Gas)
- UGI Central Penn Gas
- UGI Penn Natural Gas
- UGI Utilities Inc. (Gas)
- Valley Energy
- Dolan Integration Group (DIG) | Oil and Gas Services
Economic Analysis
Starting a natural gas distribution company isn’t difficult, but at the same time, it requires thorough economic and cost analysis if you are looking towards making profits in the industry.
Part of what you need to focus on in this line of business is how to build relationship with owner of natural gas wells, build robust distribution networks, branding, how to maintain your storage facilities and distribution trucks and how to take care of your overhead before your business breaks even. Other costs that should be considered during planning and budgeting are supply and maintenance costs et al.
Lastly, in other to play safe with your investment, it is important that you hire the services of experts to help you carry out thorough economic and cost analysis before committing your resourcing to the business.
5. Decide Whether to Buy a Franchise or Start from Scratch
There are loads of factors that should be considered before choosing the option to follow. Some of the factors to consider are the cost of starting from the scratch or buying a franchise, your financial capacity, your vision, and your business skills and experience.
If your intention of starting a natural gas distribution business is to grow beyond one city, then starting your natural gas distribution company from the scratch is your best option. But if you want to start a business with the aim of just making profits and you don’t have the required experience to build a business from the scratch, then it will pay you to buy the franchise of a successful brand in the industry if you are lucky to come by one.
Please note that most of the successful natural gas distribution companies around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.
6. Know the Possible Threats and Challenges You Will Face
If you decide to go into natural gas distribution business today, one of the major challenges you are likely going to face is the presence of well – established brands in the industry. The only way to avoid this challenge is to create your own distribution network. Also, unfavorable government policies can also hamper the growth of your natural gas distribution company. There is nothing you can do as regards these threats and challenges other than to stay positive that things will work well for you.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
If you have plans to launch a natural gas distribution business, the legal entity you choose will go a long way to determine how big the business can grow.
You either choose a general partnership, limited liability company or even a sole proprietorship for your natural gas distribution business. If your intention is to grow the business and have distribution networks spread across the United States of America and other countries of the world via franchising, then choosing sole proprietorship is not an option for you. Limited Liability Company or even general partnership will cut it for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholder meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your natural gas distribution business; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes. If you study the various legal entities available in the industry, you will agree that limited liability company; an LLC is the most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or ‘S’ corporation especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your natural gas distribution business so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company.
8. Choose a Catchy Business Name from the ideas Below
When it comes to choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents.
If you are considering starting your own natural gas distribution business, here are some catchy names that you can choose from;
- Pearl® Natural Gas Distribution Co
- Peacock® Natural Gas Distribution Company, LLC
- Ben ken® Natural Gas Distribution Company, Inc.
- Silver Group® Natural Gas Distribution Company, Inc.
- Cole Lewis® Natural Gas Distribution Company, Inc.
- Lara Brown™ Natural Gas Distribution Company, Inc.
- Chilean Brothers© Natural Gas Distribution Company, Inc.
- Eel™ Natural Gas Distribution Company, LLC
- Julius Cephas© Natural Gas Distribution Company, Inc.
- Solomon Steve© Natural Gas Distribution Company, Inc.
9. Discuss With an Agent to Know the Best Insurance Policies for You
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your natural gas distribution company.
Here are some of the basic insurance covers you should consider purchasing if you want to start your natural gas distribution company in the United States of America;
- General insurance
- Health/Medical insurance
- Liability insurance
- Building Insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
When starting a natural gas distribution company, you may not need to file for intellectual property protection/trademark because it is possible to run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO.
11. Get the Necessary Professional Certification
When it comes to natural gas distribution, you do not need to have any formal training or special certification before you can be allowed to start your business. All you need is informal training that will give you the needed marketing skills.
On the other hand, if you come across any form of certification that can aid you to conduct your business successfully, then try and pursue such certification.
12. Get the Necessary Legal Documents You Need to Operate
It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long hand of the law catches up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own natural gas distribution business in the United States of America;
- Business and liability insurance
- Tax Payer’s ID
- Fire certificate
- Certificate of Incorporation
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Employee’s Handbook
- Operating Agreement for LLCs
- Insurance Policy
- Online Terms of Use
- Online Privacy Policy Document (basically for online payment portal)
- Company Bylaws
- Memorandum of Understanding (MoU)
- Building License
- Franchise or Trademark License (optional)
13. Raise the Needed Startup Capital
It is often said that money is the blood of any business, so raising startup capital is one of the major concerns of entrepreneurs. It can be challenging raising capital to launch a business idea. Your idea must be workable and promising for you to secure finance from financial institutions or from angel investors.
The first thing to put in place before sourcing for startup capital for your natural gas distribution production business is to draft a detailed business plan. With a good business plan, you can easily convince investors to invest in your business. The truth is that no bank can give you a loan if you don’t have a good and workable business plan. Besides, investors will not take you seriously if you don’t have a business plan on ground before launching out.
Here are some of the options you can explore when sourcing for startup capital for your natural gas distribution company;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
14. Choose a Suitable Location for your Business
When it comes to choosing a location for your natural gas distribution company, there are key questions you should answer and key factors that must be considered. You are expected to choose a location that is easily accessible to your supply and distribution network if you don’t have your own natural gas well. Affordability, availability of labor and safety are also some of the factors that you should consider.
Despite the fact that natural gas is used by households and commercial users, it is important to choose a location that will give you economy of scales and would help you to favorably compete in the industry.
It is important to note that a business facility in a good location does not come cheap hence you should be able to allocate enough fund for leasing/renting in your budget. If you are new to the dynamics of choosing a location for a business such as natural gas distribution company, then you should feel free to talk to a business consultant or a realtor to help you out.
15. Hire Employees for your Technical and Manpower Needs
If you are considering starting a natural gas distribution company, then you should make plans to build a standard gas production plant. A standard natural gas plant includes gas mains, meters, vessels, tanks, and conveyor belt system et al. So, you are expected to put all these equipment in place and also purchase standard distribution trucks.
Although you can get fairly used of the above listed equipment, but it is advisable to go for new equipment that can serve you for a long time especially if you have the required capital to make the purchase. Even if you don’t have the required amount, you can enter an agreement with the suppliers of such equipment and spread the payment over a period of time.
As regard acquiring a facility, if you have the required finance, it is to your advantage to acquire a property or lease a facility to be used for your plant; it usually gives you the freedom to design the facility the way you want to it to be and install safety gadgets as you so desire. But if you are low on cash, then you don’t have any option other than to rent a facility.
When it comes to creating a workforce structure for a standard natural gas distribution company, then you should look towards getting qualified and competent people to fill the following roles; Chief Executive Officer (Owner), Plant Manager, Quality Control Officer, Human Resources and Admin Manage, Merchandize Manager, Sales and Marketing Manager, Accountants / Cashiers, Production Workers / Machine Operators, Distribution Truck drivers, and Cleaners.
You will need a minimum of 15 – 20 staff members to successfully run a standard natural gas distribution company.
The Services Delivery Process of the Business
When it comes to distribution of products, there are no hard and fast rule about it. Basically, it is the duty of the merchandize manager or marketing manager to help the organization source for owners of natural gas wells to help distribute their products.
Once the deal is sealed, the marketing executives cum distribution drivers either load their trucks directly from the natural gas production company or from their well. Usually there will be a business agreement between the natural gas production companies and natural gas wholesale distributors so that they can access credit based on their capacity.
For instance, a natural gas wholesale distribution company can deposit $200,000 to a natural gas production company, and they can have access to natural gas that is worth over $500,000.
16. Write a Marketing Plan Packed With ideas & Strategies
Running a business requires that you should be proactive when it comes to marketing your goods or services. If you choose to launch a natural gas distribution company, then you must employ strategies that will help you attract customers or else you will likely struggle with the business because there are well – known brands that determine the market direction for natural gas distribution industry.
Your marketing strategy should center on efficient distribution and pricing, and above all excellent customer service.
These are some of the marketing ideas and strategies that you can adopt for your natural gas distribution company;
- Introduce your natural gas distribution company by sending introductory letters alongside your brochure to companies you have the intention of destributing to.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, and LinkedIn
- Create a basic website for your business so as to give your business an online presence
- Directly market your products
- Join local natural gas distribution company associations for industry trends and tips
- Provide discount days for your customers
- List your business on yellow pages ads (local directories)
- Encourage the use of referrals
17. Work Out a Reasonable Pricing for your Services & Products
One key factor that will help you distribute your natural gas at rock bottom prices is to ensure that you secure good deal from owners of natural gas wells.
Another strategy that will help you distribute your natural gas at the right price is to ensure that you cut operational cost to the barest minimum and channel your efforts towards marketing and promoting your brand name. Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your products.
You can also try as much as possible to work with independent contractors and marketers; it will help you save cost for paying sales and marketing executives.
18. Develop an Iron-clad Competitive Strategies to Help You Win
Your ability to negotiate successfully with regulators, your supply contracts in place for key inputs and of course superior financial and debt management are part of what you need to stay competitive in the industry.
Another possible competitive strategy for winning your competitors in this particular industry is to build a robust distribution network. Over and above, ensure that your organization is well positioned, key members of your team are highly qualified and your distribution channels can favorably compete with the some of the best in the natural gas distribution industry.
19. Brainstorm Possible Ways to Retain Clients & Customers
When it comes to business, no matter the industry that you choose to pitch your tent in, one of the easiest ways to increase customer retention and perhaps to attract new customers is to satisfy your customers always. If your customers are satisfied with your products and services delivery, they can hardly source for alternative service providers or products.
If you can continue to make available efficient and timely distribution of quality natural gas, and your customer service delivery is top notch, then you won’t struggle to maintain loyal customers.
So also as a newbie, in order to attract more sales, ensure that you offer your customers incentives if you want to retain them and of course continue to generate repeated sales from them and also to attract new customers.
Part of what you need to do to achieve this is to track progress, results or outputs with the aim of improving on them quickly as the case demands. When it comes to managing your customers, and building a loyal clientele base, you should purchase a customized CRM software. With a customized CRM system, you can easily stay in touch with your clients (you can carry out quick surveys, you can introduce new products and prices to them without any hitch, you can felicitate with them on their birthdays and other anniversaries, you can keep track of their progress, you can send bulk sms and customized e – mails and above all, you can easily receive compliant and feedback from them).
20. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If you are in business and you are not deliberate about boosting you brand awareness and communicating your corporate identity, then you should be ready to take on whatever the society portrays your business to be. One of the secrets of larger corporations is that they are willing to spend fortunes to boost their brand and to continue to communicate their corporate identity the way they want people to perceive them to be.
If your intention of starting a natural gas distribution company is to grow the business beyond the city where you are going to be operating from to become a national and international brand by opening chains of distribution networks and exporting your products, then you must be ready to spend money on promotion and advertisement of your brand.
Here are the platforms you can leverage on to boost your brand awareness and create corporate identity for your natural gas distribution company;
- Sponsor relevant community based events/programs
- Leverage on the internet and social media platforms like; Twitter, YouTube, Google + et al to promote your natural gas distribution company
- Install your billboards in strategic locations all around your city or state
- List your natural gas distribution company in local directories
- Advertise your business in your official website and employ strategies that will help you pull traffic to the site.
- Position our Flexi Banners at strategic positions in the location where natural gas distribution company is located.
- Ensure that all your staff members wear your branded shirts and all your vehicles and trucks/vans are well branded with your company logo.