What is gas station business?
A typical gas station has two main parts -Gasoline or fuel and then there is the Conv. store where we sell from soda pop, candy, milk and snack foods. Most typical conv. stores carries around 2000 items or SKU, you can think of them as a mini grocery stores but with fuel
If you are new to this, you may ask why I should get into this line of business, well the answer is simple, it is a true recession proof business, and after 2008 every gas station business owner will agree that even though the business slowed down but never just went away, instead it came back stronger. Regardless if people have jobs or not, they still need fuel for their cars, if some of them are smokers, they still need their cigarettes, soda, candy for their kids well you get the picture, we provide some of the very basic necessities to our community.
Another reason is the risk of failing is much lower compare to most other retail businesses, again it goes back to what you are selling, and you are selling the basic necessities for our daily life. Fuel for your car is neither a luxury, nor the gallon of milk for your kids. Not every retail shop sells basic necessities; think about a pizza shop, a clothing store or a sporting goods store, none of which are considered basic necessities.
Now that we established it is good line of business to get into let’s talk briefly about how to get into them. It is a vast topic and I will touch on some major points but if you need more in depth information, you should read through all my blog posts and listen to my Podcast on iTunes. You can also check out my book on Amazon “How to Start, Run and Grow a Successful Gas Station Business“.
Now there are 3 ways to start or get into a gas station or convenience store business,
One way is to buy an existing business,
2nd is lease an existing business or the 3rd way is you can build a new gas station and start that way, though if you are new to this business, I will strongly recommend you not try this 3rd option.
Depending on your budget, leasing is usually the most cost effective way to get into this business; this is how I got started in this business. Leasing also gives you greater flexibility to get out of it in the event if you decide this is not for you.
If you are in the market to buy such a business there are few things you have to decide first
Do you want a gas station or a convenience store?
if you want to buy a gas station, should you worry about what brand of fuel it carries, I get asked this question quiet often what brand should I buy and how important is branding.
Even though the question sounds simple enough but the answer is not so simple. the best answer is it depends, well it depends on many factors such as your geographic location, the locality and neighborhood that business is located in and what are the dominant brands in that area. Some brands are stronger in some cities and states than others, for example BP brand is always been the strongest brands in Ohio, one big reason is BP is based out of Cleveland, Ohio. So if you are in Ohio I would say if you can start a BP branded store you will have strong credit card base to support your business.
But if you are buying a Conv. store than the most important factor is what neighborhood is that business located at, typically conv. stores without fuel only thrives in densely populated inner city locations. But there are always exceptions to every rule, so just keep that in mind.
Getting into a business such as this takes a big long term commitment, there is certainly a decision making process we all go through but most importantly the question you should ask yourself first is “am I cut out to do this”, Before you answer find out what it take to be a successful gas station business owner.
Dedication, attention to detail, love for numbers, repeating the process and being a people’s person are what most successful business owners possess
If your answer is yes then you are on your way to a good start to a better and brighter future for you and your family.
Next let’s talk money, a common question I get asked a lot is how much does it cost to get into a gas station business, the answer once again is ….it depends, well yes it does, a gas station in NYC with real estate may cost you as high as 3-7 millions dollars when a similar type station may cost only 1.5 million in a small city of Alabama, Mississippi or Tennessee. Same goes for leasing; it can be very high in some parts of the country when not so expensive in other parts. It all boils down to the basic economics of supply and demand, where demand is high since supply is limited the price will be higher.
On the other hand leasing a similar store can cost much less then when you buy it with real estate, so if you are on a limited budget, your goal would be find a good station that is for lease.
A typical lease deal often requires that you pay for goodwill; goodwill is an amount you pay to seller for the opportunity that he or she is transferring to you so you can make money from operating the business. On top of the goodwill money, you also have to pay for the entire inventory aka the merchandise that is in the store. There are some additional expenses such as security deposits, first months; rent and such.
If you are wondering whether you can get a bank to finance your deal, then the answer is yes, provided you have good credit, enough collateral, tax returns showing solid income for previous years along with good business plan than yes there are plenty of loan options available out there. But just remember banks typically only finance when you buy with real estate and not a leased property as there is nothing tangible for them to hold on to in the event you default.
I hope I was able to provide some basics and an inside look of Gas station business for everyone that is new to this business and looking to find more information before they decide if this is a right business for them or not.
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