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Useful Suggestions 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.
Perhaps more so than any other business, location is very important when it comes to the selection of 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. In certain circumstances, these could decimate your income!
It’s certainly true to say that gasoline sales by themselves may not represent a significant margin potential, so to value a gas station when you’re looking to buy a business, you may often rely on ancillary sales and other products or services. If the location you are looking at is not so advanced in these respects, consider the potential. For example, what about installing a convenience store or finding another organization to handle it for you on a licensing basis. 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. If a simpler establishment is of interest to you, for example maybe due to its potential, you might expect to pay just one or even two times the owner benefits.
Be careful when you look at the business financials, refer to your supplier contracts and have a good conversation with the landlord in advance. 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? Make sure that you observe the busier time periods, counting traffic and people, so you can gauge the potential accurately and know how to create a good offer.
Richard Parker is the President and founder of the prestigious Diomo Corporation – The Business Buyer Resource Center. His celebrated materials, seminars and consulting have encouraged thousands of aspiring business buyers from around the World to pursue their dream to buy a business.
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