Currently, gas stations and their corresponding convenience stores are some of the most profitable businesses in the United States. Across the country, there are over 100,000 gas station/convenience stores which bring a cumulative of over $400 billion revenue each year.
Since the country literally runs on gas where people have to commute to different places and goods also have to be ferried to different states, the gas station business is one whose future is quite certain. Below are some reasons for the popularity of gas stations as investment options.
Why gas stations are a popular investment
- Gasoline sales in the United States are on a constant increase. Statistics show that between 2019 and 2018, these sales have seen an increase from 380 to 620 million.
- The nature of the gas station business makes it easy to operate. This is because the prices of gasoline are fixed and are regulated by the market. The sale of fuels will therefore occupy only a portion of the management, leaving adequate time to focus on and grow the convenience store.
- Gas stations are also flexible, allowing the opening of other businesses such as repair shops, car wash, and convenience stores to generate more income.
- Gas stations are a relatively secure business. This is because for now and in the foreseeable future, gas remains a highly demanded product that people will require on a regular basis.
- Another advantage of gas stations is that they do not demand any special skills. Unless you decide to open a repair shop or other ventures requiring skills, the usual activities will only require someone who can offer moderate customer service. Therefore, the labor costs associated with the station will be low, and it will be easy to conduct training for the station manager or attendants.
If you are an aspiring investor, then gas stations are a great option if located and run properly. They can be a reliable source of some healthy profits. If you have the right capital and expertise, then starting a gas station should be a viable alternative for you. Alternatively, if you wish to avoid the headache and the high start-up costs, buying an already existing gas station is a good option. So how do you go about it?
The first step is identifying the gas station you are interested in. Luckily, you do not have to go through the hustle of visiting stations to ask the owners if they are interested in selling. Start your search by looking at online marketplaces so that you can get a sense of what is out there. From there you will be able to narrow your search.
After deciding on the franchise or individual gas station you wish to buy, the next step is to conduct an evaluation of the station to see if it meets some simple standards for profitability. Below are some things you should check to determine the viability of a gas station.
Factors to Consider Before Buying a Gas Station
Location of the Gas Station
Although other factors such as the management and maintenance of the station determined the sales made, the most important factor is its location. Be sure to opt for a location that is frequented such as near highways, residential areas, social amenities and infrastructure, etc.
The Condition of the Gas Pumps and Fuel Tank
Like all other equipment in constant use, fuel tanks and gas pumps are liable to wear over time. Before you settle on a given station or price, be sure to check the condition of these to avoid hidden costs. If you are buying from a franchise that is established, it should be easy to get the records as the pumps and tanks are monitored regularly.
The Condition and Inventory of the Convenience Store
Most of the sales and profits from the station will come from the convenience store. You should, therefore, check the machines and other equipment to know whether they are in good working condition or whether repairs or replacements are necessary. You should also gain information on the vendors you will need to be in touch with to restock inventory.
The Finances of the Previous Owner
Check the monthly and yearly records of the business. These should give you a picture of how lucrative the business is, show you the trends in gains and dips, and help you gauge if the investment if worthwhile.
The Required Renovations
Be sure to find out whether there are periodic renovations whose deadlines should be met, whether there are problems such as leaks that should be attended to or any other areas requiring fixing. These will enable you to negotiate for a price that puts into account all these.
Relevant Local Laws
Local laws of some regions may limit the products to be sold at the convenience store. For instance, San Francisco has bans on flavored e-cigarettes. Before buying the station, find out about these laws and figure out whether or not they will hinder your profits.
With the guide above, you can start your investment journey into one of the safest financial options. Be sure to avoid common pitfalls that could result in you getting a gas station that will not be able to match your expected returns.
By Bruce Hakutizwi, Director of North America for BusinessesForSale.com, the world’s largest online marketplace for buying and selling small and medium size businesses.
I am Bruce Hakutizwi, Director of North America for BusinessesForSale.com, the world's largest online marketplace for buying and selling small and medium-sized businesses. With a deep understanding of the business landscape, particularly in the realm of gas stations and convenience stores, I bring firsthand expertise and a wealth of knowledge in the field of business investment.
Gas stations and their accompanying convenience stores have emerged as some of the most lucrative businesses in the United States, contributing over $400 billion in revenue annually from a network of more than 100,000 establishments. The popularity of gas stations as investment options can be attributed to several key factors, each rooted in a solid foundation of industry insights.
1. Increasing Gasoline Sales: Gasoline sales in the United States have been consistently rising, with statistics indicating a notable increase from 380 to 620 million between 2018 and 2019.
2. Operational Ease: The nature of the gas station business lends itself to easy operation. Fixed and regulated gasoline prices allow for streamlined management, leaving ample time to focus on growing the accompanying convenience store. Flexibility in operations, including the addition of repair shops, car washes, and other ventures, further enhances income potential.
3. Business Security: Gas stations prove to be relatively secure investments due to the ongoing and foreseeable demand for gas as a staple product. This stability makes them attractive to investors seeking reliable sources of income.
4. Low Skill Requirements: Gas stations do not demand specialized skills for regular operations, translating to lower labor costs. Unless additional ventures requiring specific skills are introduced, basic customer service skills are sufficient for station attendants and managers.
Now, let's delve into the considerations outlined in the article for those interested in investing in a gas station:
Factors to Consider Before Buying a Gas Station:
1. Location: The critical factor influencing sales is the location of the gas station. Proximity to highways, residential areas, social amenities, and infrastructure plays a crucial role.
2. Condition of Equipment: Regularly used equipment such as fuel tanks and gas pumps should be assessed for wear and tear to avoid unexpected costs.
3. Convenience Store Inventory: Since a significant portion of profits comes from the convenience store, it's essential to evaluate the condition of machines and equipment, as well as establish contacts with vendors for restocking.
4. Financial Records: Examining the monthly and yearly records of the business provides insights into its profitability, trends, and overall financial health.
5. Required Renovations: Awareness of any necessary renovations, maintenance deadlines, or existing issues allows for negotiation based on these considerations.
6. Local Laws: Understanding local laws, especially those pertaining to products sold at convenience stores, is crucial to avoid potential legal hindrances to profits.
Armed with this comprehensive guide, aspiring investors can navigate the process of acquiring and managing a gas station successfully, minimizing common pitfalls and optimizing returns. Whether starting a new venture or purchasing an existing gas station, strategic evaluation and adherence to these considerations are key to a successful investment journey.
