Valuable Ideas On Buying A Profitable Gas Station Convenience Store
In times gone by a gas station has often been seen as a very lively investment, certainly when gasoline was a relatively stable commodity and the price was low, especially in the USA. Not so long ago there seemed to be little pressure to cut back on oil sales or to cut down on our energy use and carbon emissions due to global warming. As time has gone by we can see that conspicuous energy consumption is no longer permissible and the run-up in gas prices in recent years has turned our focus toward hybrid or electric vehicles. Having said that, our society will continue to rely on gas powered vehicles for our transportation in the future and the typical gas station will develop into a destination for a variety of other products and services.
This business type is very reliant on its location, which you must bear in mind when looking for a gas station for sale. You might think that the value of the location is obvious, but if you talk to local authorities before you go too far, you will be able to see if events such as road construction would factor into your equation, or whether certain environmental issues need to be addressed including storage tank upgrades, or if there have been past issues with litigation. If you’re not careful, your income potential could be decimated!
There may not be a significant margin when it comes to a unit of gasoline sales, so often the value of a gas station when you buy a business will include ancillaries and other products or services. If the location you are looking at is not so advanced in these respects, consider the potential. Could you enlarge or install a convenience store, or license it out to another organization to handle it for you? Could you place a first-class car wash operation on property and benefit from revenues here?
If you want to buy gas station business assets correctly, you should note from the beginning that an operation which could be classified as full-service, in other words gas, car wash and c-store, could command up to three times the owner benefits. Owner benefits are referred to as salary, profits plus any perks, adjusted for depreciation, interest and any capital expenditure you may be forced to make. A smaller or simpler establishment may be of interest to you, due to the additional potential and in this case you might only expect to pay one or maybe two times the owner benefit.
Pore over your business financials, your supplier contracts and make sure that you have adequate discussions with any landlord involved. Be careful when talking to the landlord, as they may often try to ensure that the incoming new owner is fully able to make the business a success, before doing anything!
During the process of observation, you must be very aware as you observe what is going on at the gas station. Be careful if you see the owner working “hands-on” for considerable periods of time. If many of his family members are seen putting in a lot of effort, they may be working below market rates, being paid under the table or maybe not at all; what if you had to recruit paid staff to do their jobs? Observe key periods of time during the week and get good traffic and headcounts, so you can extrapolate the potential well as you prepare a potential offer.
Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream to buy a business.
