Donnie Hoover

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. In the past, there wasn’t so much pressure to cut down on oil sales or to be selective in our energy use, due to carbon emissions and consequent global warming effects. 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. While the value of the location may appear to be obvious, you must consult the local authorities before you go too far into your process to determine whether any significant road construction projects may be in the pipeline, or if there are critical environmental issues to address such as upgrading storage tanks, or past litigation for infractions. 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? Is it possible that you could build a very good quality car wash on the property and achieve revenues this way?

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 can be made up of salary, profits, any perks, while adjusted for interest, depreciation and any other capital expenditure that you might have 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.

Pore over your business financials, your supplier contracts and make sure that you have adequate discussions with any landlord involved. Many deals trip up at the landlord/tenant stage, as the landlord often takes it upon him or herself to try and ensure that the incoming new owner is up to the job of making the business a success!

Keenly observe what is going on at the gas station during the process of observation. You should be especially wary if the owner appears to be working “hands on” for long 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 author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation – The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business.