Gas stations for sale in California offer entrepreneurs of all backgrounds an amazing opportunity to thrive with an evergreen and lucrative business. From the San Francisco Bay Area to Los Angeles, California gas stations are in high demand. This evergreen business has been a bonanza for many entrepreneurs.
Learning to operate a gas stations has a relatively short learning curve, has consistent sales and profits and performs well in most economies. Considered an essential business, gas stations for sale in California are in strong demand with more buyers than sellers in most markets. This is especially true of California gas stations for sale.
What makes a gas station successful is its location, strong fuel sales, additional revenue streams and how well its managed. These key elements are the foundation for a successful gas station business.
Stations in great locations sell quickly, for high value and usually with competitive buyers. One of the best locations is typically right off a freeway entrance or exit. Another great location is on a busy street in a California city or town. The closer to an intersection, with multiple points of entry, the better.
Strong fuel sales is one of the best economic drivers for California gas stations. Though margins are thin, they can be made up with strong fuel sales via competitive pricing particularly in competitive locations with multiple stations. Moreover, competitive pricing brings in customers to consume other products and services, such as convenience store, offered by the gas station. The idea is to maximize the selling opportunity by using the fuel sales to drive traffic and profit.
If you are fortunate enough to own a California gas station, you undoubtedly know that the profit margins tend to be thin. The real profit comes from having multiple streams of income connected to the station such as convenience store, quick service restaurants, car wash, cafe, automotive services and the like.
Quick service restaurants and/or a cafe that offers popular menu items in a clean and comfortable environment are one of the best ways for gas stations to be highly profitable. A clean, well lit, well-stocked convenience store with a beer and wine license is a highly profitable revenue source. An automated, well-maintained car wash is also a highly valuable financial profit center. While automotive services used to be found at many gas stations in the past, they have fallen out of favor and are not typically seen in new stations. Nevertheless, gas stations for sale that have quick auto services, like oil/lube and tire repair, and are located in towns and cities are still profitable and advantageous.
Finally, good management makes all the difference in selling gas stations since it often results in more buyers and competitive offers. Gas station owners that manage their inventory well, prioritize customer service, maintain good employees and are smart about their gas purchases enjoy years of profitability. They will also enjoy higher business valuations when they are ready to sell their business.
Gas station sellers should start preparing their business for sale at least 3 years prior to their sale date. Often a gas station seller will contact a business broker when they are actually ready to sell. Depending on how well the business is managed and the state of the financial records, however, might force the business seller to leave money on the table.
An earlier contact with a gas station broker permits the seller to get a valuation of the business. At this point, the business broker can offer the owner with guidance on what they will need to do to maximize their valuation with exit planning guidance.
Where the seller is taking excess business deductions, the business broker can show the gas station owner what they would need to do in order to optimize their financial statements along with the gas station’s accountant. Reducing excess deductions for the 3-year period prior to sale will allow for higher cash flow in the valuation. A higher cash flow permits higher multiples to determine the most probable selling price (MPSP).
Sellers that take excess deductions are intent on reducing their taxable income. Yet, by reducing their income, they are basically devaluing their company. To sell their business for the highest price, the owner will want to minimize or eliminate excess deductions in order to maximize cash flow. The stronger cash flow increases the multiples from 2.3 to 3-5x cash flow. This can make a substantial difference in terms of how much money the seller can make from the sale of the business.
Additionally, the business broker can also provide the seller with guidance on how to make the business more appealing to prospective buyers comparative to other comparable gas stations sold within their market.
Since fuel station business opportunities can be limited and competitive, business buyers need to optimize their chances for a successful sale. The first step for a business buyer is to analyze their financial needs and how much they income they will need to draw from the business.
Secondly, the buyer needs to determine how they will get financing. To buy a gas station necessarily means getting qualified for financing either through the Small Business Administration (SBA) loans, seller financing, home equity loans, or alternative commercial sources, such as hard money lenders. Of course, if there are pooled financial sources by a partnership, then third-party financing may not be necessary.
Once the buyer has determined their budget and financing, they need to look at a variety of business opportunities to learn more about the market. Evaluating a variety of listings of gas stations for sale is a good way to better understand the range of business opportunities, the relevant terminology, fueling contracts, the differences between branded and independent stations, the various additional revenue streams, the business valuations and a variety of other details. The buyer’s investigation into this information will be time well spent as they better inform themselves of this industry as information is power.
After the buyer has explored a variety of California gas stations for sale and has zeroed in on the type of station that they want, they will want to contact a specialized gas station business broker that is experienced in selling stations like Mission Peak Brokers. The broker will further educate, inform and guide the buyer’s business acquisition process towards a successful outcome.
Gas station businesses for sale in California can be found on our website under Current Listings.
We also advertise on all the major business listings sites as well as commercial real estate websites. We also promote our listings through our professional association networks such as the California Association of Business Brokers (CABB) and the International Business Brokers Association (IBBA).
Mission Peak Brokers also advertises and promotes our California gas station business listings for sale through our website, email list of 4,000 buyers/sellers, and social media marketing on the major social media sites.
For experienced gas station owners, additional opportunities exist via commercial real estate that may or may not have an operating business. These opportunities are more expensive but offer 30 year financing opportunities via SBA loans.
Mission Peak Brokers offers California station realty for sale through Loopnet. We provide valuation services, help determine financing and assist our clients with remodeling and build construction loans.