By Richard Parker: President of The Business Buyer Resource Center and author of How To Buy A Good Business At A Great Price ©
One of the most popular categories of businesses for sale is gas stations. If you want to buy a gas station, it is especially important for you to understand the peculiarities of this industry because, surprisingly, it is one of the most complex types of businesses to purchase.
The good news is that buying a gas station can provide you with a very solid and relatively easy business to operate. Despite the volatility of oil prices, or the future potential for alternate fuels, gas stations are not slated for extinction any time soon. Regardless of what may happen in the future, there will always be a need to have local centers to service the market, whether or not there will be a full shift to new vehicle power sources.
What Exactly Are You Buying? Make Sure You’re Comparing Similar Businesses!
It is hard to understand the vast differences of the key financial ratios when looking at the gas station for sale listings. You may have noticed that prices and profits vary greatly. That is due to the many variables involved with gas stations for sale. Some include real estate, while, in many cases, one entity owns the property and still a completely different landlord owns the land. Or, there may not be any property involved at all in the sale, but you certainly have to pay attention to lease terms, transferability and expiration. Still, there are others that include convenience stores, car washes, or repair centers.
So lesson number one is to determine exactly what is included in the sale.
Franchise Gas Station or Independent Retailer?
You can buy a gas station that operates under the brand of one of the major oil companies or you can operate as an independent.
With a franchise, you are obligated to purchase that company’s gasoline, participate in their promotions, and adhere to their franchise policies. More and more of these locations are turning over to direct ownership by the oil companies directly; however, there are still plenty of good ones available.
One of the most compelling reasons to operate a franchised location is that the franchisor is on the hook for any environmental issues.
An independent station is not obligated to any supply source, although most enter into longer-term supply contracts with local gas distributors to gain some pricing advantages.
In regards to environmental issues, the independent owner faces the entire exposure for any environmental issues – and they can become incredibly expensive.
Here’s a great article to learn more about buying a gas station franchise or independent.
Looming Threats:
There are several things you need to be aware of and investigate before you forge ahead with the purchase of a particular gas station. Here are two of the most common and compelling ones:
Road Work – In general, major roadways undergo construction every ten years or so. Check the records at city hall for past work, and speak with the local building department to see if any significant work is scheduled. Keep in mind that if they redo the roads that provide access to the gas station, you could be out of business for up to a year or more.
Environmental Issues – The laws vary from state to state but nearly all have adopted a mandatory double-lined tank policy. The compliance years vary, but costs can run into hundreds of thousands of dollars, not to mention the loss of business during construction.
Additionally, you must investigate any lingering environmental litigation that the current owner may be involved with because, regardless of the structure of the sale, the new owner may be on the hook as well.
The Ideal Gas Station for Sale – What to Look for Specifically
It would be great to buy a gas station that does not require a huge amount of improvement unless you literally “steal the business”. Some of the key ingredients you want in place include:
Location – Immediate access right off the interstate or on a high-traffic roadway with little competition is clearly the ultimate setup.
Attractiveness – A welcoming look, updated signage, canopies over the pumps, and a clean mini-mart add tremendous value and increase customer counts in more competitive locations. Although you can add these attributes after you buy the gas station, having them in place really gives you a running start.
Large Convenience Store – Studies indicate that the larger the convenience store, the more volume generated; thus, the greater amount of profit. This is simple math, really, but what is interesting is that customers will be more attracted to a larger facility if given the choice between competing stations in the same area.
Crime – Gas stations are easy targets for crime. Unless you want to stay up at night worrying about the safety of your employees, or own a business where you must be “shotgun ready”, choose a better neighborhood. At the very least, investigate the crime records to see how many past incidents there have been so you know what you are getting into. Better lighting, large windows, and surveillance cameras are quick fixes and proven deterrents, so look for these components or investigate the costs to add them. It will be worth every penny.
Something to Think About
While owning a gas station can provide you with a solid, stable business, there are many moving parts that need to be addressed when you are investigating the purchase of a gas station. It is important that you take the time to investigate all of these issues so that you buy a gas station that will prove to be a rewarding long-term investment.
While there are many positive attributes to owning a gas station, there are a similar number of negatives. Despite what many inexperienced people believe, a gas station is not an ideal absentee-owned business. In fact, it generally requires a hard-working hands-on owner. There are employee challenges, and you will also find that most gas station owners are less than perfect in maintaining their books and records, adding to the challenge of accurately valuing the business and paying a fair price.
Don’t leave anything to chance. Take your time, do your research, and educate yourself before you buy a gas station. By doing so, you will dramatically increase your chances of success.
Note: We have a guide devoted entirely to buying a gas station/convenience store. You can learn more at: www.howtobuyagasstation.com
This article represents a fraction of what you’ll learn on this topic in How To Buy A Good Business At A Great Price© - the most widely used reference resource and strategy guide for anyone thinking about buying a business. Read a detailed listing of what you'll learn.