Buying A Gas Station For The Right Entrepreneur
Buying a gas station can be a great opportunity for the budding entrepreneur seeking to own their own business. Gas stations are stable investments that provide solid cashflow in most economies. Even with the volatility of oil prices, gas always remains in high demand, especially branded gasoline in convenient locations.
Because they are highly desirable, they are also relatively easy business opportunities to sell as there are usually more buyers than sellers for this type of business. Despite the likelihood of success for a competent operator, there are still risks as gas stations can be influenced my a variety of factors such as location, competition, brand, and whether additional income streams are available.
For most business buyers, a period of self-reflection is key to determine what is the best business opportunity to purchase. For someone who knows how to manage (or very willing to learn), stays on top of tasks, and likes to work with people, such as customers, distributors and employees, buying a gas station can be one of the best decisions they will ever make. The learning curve is typically short (under 6 months) which is a short investment of time given the profitability. Cash flow tends to be consistent. Since these businesses are highly desirable, the buyer can reasonably expect a large payout when they sell the business at a later point.
What makes a good gas station?
A gas station business itself does not need much in the way of labor. Customers pump their own gas. If the gas station includes add-on income streams like convenience stores, car washes, cafes, auto repair or service, and quick service restaurants (QSR), then the labor demands increase accordingly. Typically, staffing only requires a few part-time workers mostly in the convenience store, QSR or in automotive services. Most pumps and car washes are automated and the majority of customers pay via credit or debit which eliminates the need to staff the pumps.
The majority of gas stations have convenience stores or other additions to increase sales and profits. The more services and products the better to capture as much profit as possible per customer visit.
Branded gas stations tend to be favored. This is due many gas station owners preferring to sell fuel from a branded oil company because many customers by gas based on the brand of fuel. Branded fuel contracts tend to be long-term. They typically require gas station operators to sell a minimum amount of fuel each month.
Liquor sales are a great profit source for gas stations. Most gas stations that sell liquor, sell beer and wine. When buying a gas station, always carefully examine the California liquor license type issued by the Alcohol Beverage Control (ABC) Board. You want to understand the limits of the liquor license and whether there are any restrictions on it due to any seller misconduct.
How profitable are gas stations?
Profits will vary based on the volatility of gas prices. Moreover, seasonality plays a part and gas station owners often see a profit boost during the warmer months.
While margins are low, sales are steady. The low margins are the reason that most gas stations offer additional products and services. Over half of all gas stations include a convenience store which provide much higher profit margins than gas sales.
An excellent location is pivotal for success. Those gas stations located near freeways are the most desirable. Depending on location, competition can be high especially at high traffic locations. Many gas stations will offer self-service, operate 24/7 and expand their offerings to increase attraction and, therefore, sales. Since high-volume traffic is the key to success, many competing gas stations may be close to one another. Location is one of the best predictors of gas station success.
Is buying a gas station right for you?
Operating a successful gas station business demands a solid understanding of customer needs and behavior, excellent management skills, and a good understanding of how to maximize good profit margins. The gas station owner needs to exercise good judgement and practical marketing skills by assuring skillful inventory management of popular convenience store products.
When buying a gas station, prospective buyers must be ready to roll up their sleeves and learn management, marketing, customer service, basic accounting and how to leverage technology. To operate a gas station successfully, the buyer needs to be aware of what makes a gas station thrive. The gas station owner/operator should:
- Maintain a variety of popular products with a high turnover rate to attract customers. This can include cigarettes, prepared food and toiletries. Having solid vendor relationships with convenience store brands (such as beverage companies) sells products. The owner may want to include a cafe and QSR as those are highly attractive and provide excellent margins.
- Owners should leverage technology for POS system, inventory management and security. Automating as much as possible prevents fraud, theft and labor.
- Aligning with a branded fuel suppliers helps business owners establish a solid reputation. Operators can also take advantage of the fuel brand’s best practices to learn how to attract customers and marketing support.
- Be prepared to work long hours and possible include the family in operations. Most gas stations operate on a 24/7 basis. Buying a gas station means that you must be available if your employees are not. Your family needs to be on board with this commitment.
While owning a gas station business can be a significant commitment, the profitability for a solid operator can be lucrative and consistent. Knowing and catering to the customers, an operator who optimizes the products and services to fit demand can anticipate lasting success. Buying a gas station business can be the best decision the operator ever make to enjoy the benefits of small business ownership.
Buying a gas station? How Mission Peak Brokers can help you.
We have performed hundreds of gas station valuations and closed numerous gas station deals. We know the ins and outs of what makes gas stations valuable and how to get the deal done. Check out our current listings and our done gas station deals too. We also broker financing for gas station deals and handle the commercial real estate.