Gas Station Valuations & California Business Sales
In a word, “No.”
Gas station valuations are not lowered with lowered gas prices. Gas station owners buy gas on the wholesale market. When the wholesale price of gasoline falls quickly the difference between the cost of wholesale gasoline and the price at the pump gets wider. This boosts gas station profits. It’s intuitive, but the steeper the drop, the better for gas station owners.
Before you rob your first bank, knock off a couple of gas stations.— John Dillinger
Gas station profits will fluctuate based on the volatility of the oil market. Gas stations may not make much money from selling gasoline after credit card fees and other operating costs.This is why smart gas station owners have diversified income streams from their gas station such as a convenience store, car wash, auto services, etc.
When gas prices increase, people drive less and gas stations lose money. When the wholesale price soars, station owners are unable to increase their pump prices and stay competitive. When wholesale prices go down, however, there isn’t the same pressure to lower the price and there is still enough margin if they do.
Lower gas prices also increase driving. Drivers are so happy to see lower prices they fill their tank and avoid driving around to find the best prices. With lower gas prices, drivers are more inclined to spend money on the other services available at a gas station such as the convenience store. Consequently, profits are likely to increase which then boost gas station valuations.
Wherever possible, gas station owners are wise to add-on additional income streams or optimize the income streams that they have in order to boost profitability. Consistent profitability make gas stations desirable and the more desirable, the more value a prospective buyer will impute on the business
Interested in obtaining a gas station valuation? Contact Mission Peak Brokers for your complimentary business valuation. As the #1 California Gas Station Brokers, we have performed hundreds of gas station valuations and sold numerous gas stations in California. Consider us your gas station brokers whether you are buying or selling a gas station, buying gas station properties or seeking Gas Station SBA loans.